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Entrepreneurship / Business

The Business Model Canvas

During my life I have experienced lots of various lessons about business and business plans. Some of them were very interesting, some of them are not, but they all had one thing in common… they were very theoretical. Business plan seemed as a formal document, which is used to support loan application rather than the business itself.

I knew business plan was supposed to change as the situation of the plan changes, but that means rewriting the “story” after rethinking it. This makes it really static. Rethinking and changing the business happens independently on it and I believe in many cases business plans are laying on the bottom of the shelf. There is always something more important and urgent to do than rewriting documents. Most small enterprises don’t even have a written business plan.

I wonder how it usually works in small enterprises run by entrepreneurs… Someone has an idea and decides to risk everything they have and pursue it. To write a good business plan is probably the last thing on their mind – they try to survive and make the business work. To achieve this, the entrepreneur talks with many people, explains what is on his mind to the interested parties…

The Business Model Canvas can help to visualise, translate and express the original idea of the business. In a way all businesses create their own reality and the business model canvas helps the entrepreneurs collaborate with their partners and explain their ideas. The partners and any interested parties can see the idea, understand and comment.

The Business Model Canvas has nine departments and it is up to the entrepreneur to fill them up, change and set up their relationships.

Value Proposition is in the heart of the canvas and describes the core of the business, the benefit for the customer. The customer segments are the people appreciating the value proposition and. The entrepreneur/company need to establish customer relationship in order to keep old customers, gain new ones and boost sales. Will the business provide personal assistance, self service, create communities or will it be automated? How will the value proposition get to the customers? What channels can the entrepreneur use? E-shop, facebook, fairs, shops, delivery service – will a third party be used to deliver the product or service? It is also necessary to estimate revenue streams, where will the money come from; will it be assets sale, lending, renting, leasing, usage fee, subscription, licensing or advertising?

Then it is time to think of the production side of the idea as well, what will be the key activities, which the entrepreneur/company must provide, these should be the activities most important for the delivered core value, the ones the entrepreneur does not want to outsource. Assets necessary to deliver the value proposition are called key resources. Key partners are necessary to reduce risk and uncertainties and acquire resources. Partnership has a significant strategic importance and influences the scale of the business and planning. The success of the project is also dependant on cost structure and profitability.

Even though there are some criticisms of the Business Model Canvas, in my opinion it is a creative and straight forward way of capturing business ideas and turning them into plans in the beginning. It is simple to change the ideas along with the dynamic environment and ever changing customers’ needs. The Business Model Canvas enables entrepreneurs to transform an idea into a plan. Testing, modifying and making it true are the steps that follow and possibly lead to another idea or modifications… It feels like never ending spiral.

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