The phrase “proper planning prevents poor performance” is highly applicable to businesses of all sizes.
Whether you are an entrepreneur starting a new business from scratch or a blue chip multinational corporation, it’s critical that you have a well-documented plan in place.
Your plan needs to outlines the strategies, tactics and resulting actions that will enable you to hit a set of defined objectives.
In this article, we talk about the importance of having a business plan and why a Business Model Canvas provides a simple way for you to put your plans together.
Here’s what we cover:
- Why a business plan is important
- What is a Business Model Canvas?
- Benefits of the Business Model Canvas
- Creating a Business Model Canvas
- Final thoughts on the Business Model Canvas
Why a business plan is important
A business plan should lay the foundations for success.
It can be vital for securing funding and should be a living document that evolves with the business and the environmental factors that will impact operations and performance.
However, one of the most prevalent reasons for organisations not having a fully documented business plan is the time it takes to create and the sheer volume of information that is required.
This is where the Business Model Canvas can benefit your organisation.
What is a Business Model Canvas?
Put simply, the Business Model Canvas is a one page business plan.
Initially developed by Swiss business theorist, author and consultant Alexander Osterwalder, this strategic planning tool is used by many organisations across the globe.
Essentially, it uses a template that can help your business simplify its planning in a highly visual way.
It can help you create a business plan that:
- Builds from your value proposition
- Outlines how your activities need to align to achieve your objectives
- Illustrates the potential trade offs that may be required to meet goals.
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Benefits of the Business Model Canvas
There are many advantages to using the Business Model Canvas as a planning tool to supplement a full business plan.
Its use isn’t restricted to creating the entire plan for a company either.
A study by business strategy company Strategyzer found that 21% of the time, it is used to develop a new product or service.
Here are three benefits you’ll get by using the Business Model Canvas for planning:
It’s obviously a lot faster to compile a plan on a single sheet than it is a lengthy written document.
Additionally, using the Business Model Canvas to plan potential strategies can also allow you to quickly test the viability of an approach.
The simplicity of the model allows you to focus on what’s really going to drive performance and not get too bogged down with non-essential activities.
It also helps different teams and departments easily understand how your company operates, and where their work fits in to the overall model and strategy.
Furthermore, it can also be adapted for businesses that don’t have revenue as the primary goal.
As you’ll soon discover, the key elements of a business that are included in the Business Model Canvas are either the responsibility of separate teams or require people from different teams to work together to be a success.
Therefore, a planning session that brings the various teams together in a focused way can help ensure that everyone is aligned on achieving the overarching business objectives.
Creating a Business Model Canvas
As we’ve shown, using this simple business plan format can be a quick and collaborative process.
Therefore, when creating one, it may be easier to get the relevant people in your business together for a planning session, which shouldn’t last as long as some planning meetings do.
(Or if you’re running your business by yourself, this is something you can do alone.)
Given the simple visual layout of the Business Model Canvas, a good way to run the session would be to either use a large printout of the template, draw it out on a whiteboard or project it on to a screen.
You can then use Post-it notes or something similar that allows you to quickly add, move, change or remove ideas and information for each section.
Our handy infographic guide, which can be found below (click on it for a pdf version), provides more information about how you should go about filling the template in.
However, in the session, you should have people who have the knowledge and can provide information on the following areas:
- Key partners: These are the partners required so you can do business.
- Key activities: Here’s what your business does every day in order to succeed.
- Key resources: This covers the people, knowledge and money required to successfully run your business.
- Value proposition: Highlight your products and services, and how they’ll benefit your customers.
- Customer relationships: Detail how you’ll maintain relationships with your customers.
- Channels: This part covers how people will hear about your business.
- Customer segments: Talk about your different customer groups here.
- Cost structure: Cover your key costs here; do this by looking at your resources and activities.
- Revenue streams: This covers how your business will make money, and where it’ll come from.
Final thoughts on the Business Model Canvas
The Business Model Canvas is a great way to put a simple but effective plan together for your company.
And having a plan on one page means you can quickly view what’s needed for your business to run.
However, don’t forget that you should still have a full business plan in place, especially if you are looking to secure funding.
But the Business Model Canvas can supplement that to help you and your business be a success.
Editor’s note: This article was first published in February 2018 and has been updated for relevance.
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