If you’re an aspiring entrepreneur, chances are you’re learning from hundreds of sources to write a business plan: A thick document with numerous sections detailing your executive summary, business description, marketing strategies, competitive analysis, development plan, operations and management plan, and financial factors for the next five years.
Related: Free SWOT Analysis Template
Trouble is, by working with information gathered before you start and with untested assumptions, it could be ages before you realise initial errors. By which time you may be out of business.
About business model canvas
The lean canvas is an action- and entrepreneur-oriented model rather than a plan. It helps capture what is most uncertain or the riskiest assumptions and tests them.
By generating what’s called a ‘validated learning loop,’ of build > measure > learn for your hypothesis, the timeframe for iterations is smaller and you create a working model faster than with a business plan.
Why this approach?
Based on the Lean Start-up approach, one of the biggest wastes is building something that nobody wants or is prepared to pay for.
Rather set up experiments, validate them and learn from them, and implement changes until you land on a successful model. Don’t be surprised if the working model is vastly different to your original idea.
1. Key partners
Describe the network of suppliers and partners that make the business model work.
Real world example: LinkedIn
- Equinix (for data centre facilities)
- Content providers
2. Key activities
What are the most important activities that the company must do to make the business model work?
- Platform development
3. Key resources
What assets do you have under your control for delivering on your value proposition?
- LinkedIn Platform
4. Cost structure
What are the major categories of costs that you incur to make your business model work? Describe each major cost category.
- Web hosting
- Marketing and sales
- Product development
- General and administrative
5. Value proposition
What do you provide to customers? Describe the bundle of products and/or services that provide value to customers.
- Manage professional identity and build professional network
- Identify and reach the right talent
- Reach the target audience
- Access to LinkedIn database content via APIs and widgets
6. Revenue streams
How for you generate revenue from each customer grouping? Describe your different revenue streams.
- Free offerings and premium subscriptions
- Hiring solutions
- Marketing solutions
7. Customer relationships
How do you foster and maintain relationships with customers?
- Same-side network effects
- Cross-side network effects
How do you currently deliver products or services to customers?
- LinkedIn website and mobile apps
- Field sales
9. Customer segments
Which groups of customers do you currently serve? Briefly describe each different customer group.
- Internet users
- Advertisers and marketers