How To Create A Business Model Canvas

By Xtensio (This post includes a free tool.)

A well-developed business model canvas will help streamline planning, development, and execution across your business.  It should align everyone’s objectives and eliminate inconsistencies between the various people who contribute to your business objectives. Use Xtensio’s free template to create your own without needing a professional designer!

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Xtensio’s FREE Business Model Canvas Template and Editable Examples

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Key Partners

The first building block of your business model is to identify the key partners you need to conduct your business. Who would you like to have as your partners, suppliers, or collaborators on your business idea? It is helpful to target specific examples but it’s also helpful to have general lines of businesses you want to focus on.

Key Activities

What actions or activities do your value proposition require you to make? Identify the key steps you need to take in order for your business to deliver on its promises and make sure development rolls out smoothly. For a product-driven business, a key activity may be learning about users and how to build a better product. For an infrastructure business, it would be important to maintain that infrastructure and research ways to increase efficiency.

Key Resources

Ask yourself what strategic assets do you need to launch and operate your business? Take advantage of these proven frameworks to identify your key resources and find your differentiating factor among your competitors. For product-driven businesses, key resources include specialized talent in critical areas of expertise, like professional graphic designers and developers, and intellectual property. For scope-driven businesses or businesses that create synergy around a particular Customer Segment, it is important that key resources include knowledge about your target audience and a standard set of procedures for interaction and assistance with the group. For infrastructure-driven businesses, strategic assets could include the physical or virtual infrastructure involved with the business.

Fun Fact: A 2009 study conducted by IBM Institute for Business Value revealed that 7 out of 10 companies are engaging in “business-model innovation,” and an incredible 98% are modifying their business models to some extent. So even if you already have an existing business model, it’s beneficial to reevaluate it.

business model canvas unique value proposition

Unique Value Proposition

What is your business promising to its audience, and how does your product or service stand out? Carefully consider what is unique about your value proposition and why customers would prefer your product or service to alternative options. Then rank your propositions in relation to the needs of your customers. This will help you determine which value proposition is the highest priority and align your vision with your customers’ needs.

Your UVP statement should:

  • Quickly and clearly convey the value of your service or product
  • Explain how your product or service is better than the competition
  • Talk about the benefits and features that define your product or service
  • Avoid superlatives such as “the best” or “world-class”. Instead, include talking points that are carefully defined and factually correct

Go Deeper: Forbes suggests creating your UVP within the context of the 3Ds:

  • Discontinuous innovations – offer transformative benefits over the status quo by looking at a problem differently
  • Defensible technology – offer intellectual property that can be protected to create an unfair competitive advantage
  • Disruptive business models – yield value and cost rewards that help catalyze the growth of your business
Business Model Canvas

Customer Relationship

First, determine how customers will interact with your business. Do you connect with your customers on the internet, do your customers have a relationship with a personal contact, or will you interact via customer service calls? After establishing the type of relationship, it is important to write down guidelines for creating, maintaining, and growing your customer base.

Distribution Channels

What are the most effective mediums to reach your audience? What are the channels you use to communicate, sell, or provide service for customers? Make a list of the different channels that you plan on building a relationship with customers. Remember to think through the lens of the “customer journey.” The channels with which you grab a customer’s attention will be different from the way you onboard or support them.

Customer Segments

In order to understand your customers, you need to understand several facets of your target segment. Is your customer segment a single or multi-sided market? Then you can move deeper to analyze who your individual customers are. Use our user persona template to create an in-depth analysis of your customer segments. With personas, you can investigate the problems and needs of your customers and use these insights to refine your business model.

Use personas to gain insight into your customer segments by

  • Collecting and displaying information about your customers’ background, lifestyle, and behavioral practices
  • Exploring the needs and desires of your customer and what they are using your product or service for
  • Documenting the user journey

Bonus Tip: Use Google Analytics to quickly find consumer demographics.Collect data such as bounce rate, daily visits, visit duration, and any additional relevant information.

Business Model Canvas

Cost Structure

Now that you’ve worked through the Key Activities, you have a better understanding of the actions your business needs to take. It’s time to carefully consider how your Key Activities drive costs and analyze if these costs are aligned with your value propositions. It is also important to consider the type of costs that your business will be incurring. Are these costs fixed or variable? When scaling your business, will costs be linear or fixed?

Revenue Streams

Take a careful look at your different customer segments and value propositions and mentally map out the patterns that may occur. For example, Persona 1 may engage with Value Proposition 1 and 2 or Persona 2 may engage with Value Proposition 2 and 3. Carefully look at where your business is driving revenue and whether it aligns with your value propositions.

Bonus Resource! George Washington University emphasizes the necessity of analyzing your answers to the business model before moving on to cost structure, pricing and quantity, and revenue models. They integrate a payment flow diagram and pricing strategy into their process in this slideshare.

Additional Resources

Remember, with Xtensio you can collaborate with anyone, anywhere in the world, and all of your folios are completely flexible — create it with the ease of a web builder, drag and drop building blocks. Share it like a web page, present it like a slideshow or download it as a PDF/PNG.  Additionally, if you want to take a look at your business through a lean startup lens, you can use our lean canvas. And be sure to utilize our user personas to thoroughly investigate your customer segments.

Lean canvas template
User persona template
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