Many people who want to start a business are currently working through a thirty-page business plan template: market analysis, SWOT, five-year projections. Most abandon it around page six.
This difficulty is understandable. The full plan has its place, and some lenders will require one. It is not, however, the right first tool. When the idea is still loosely defined, you need a tool you can complete over a coffee, take in at a glance and start over without hesitation.
That tool is the Business Model Canvas. It is the tool we rely on most in the business launch program we teach, and one of the most useful available to a new business.
What is the Business Model Canvas?
Alexander Osterwalder and Yves Pigneur published it in their book Business Model Generation in 2010. It is a single page with nine boxes. It is free to use, and Strategyzer, the company Osterwalder founded, provides a clear explanation and a printable version on their Business Model Canvas page.
The nine boxes are as follows:
- Customer segments. The customers you serve.
- Value propositions. The problem you solve for them, or what you improve.
- Channels. How they find you and how you deliver.
- Customer relationships. The type of contact they expect: self-serve, personal, community.
- Revenue streams. How money comes in, and how often.
- Key resources. What you need to have: equipment, skills, a licence, a van.
- Key activities. What you need to do, week after week.
- Key partnerships. Those you depend on: suppliers, other businesses, sometimes a landlord.
- Cost structure. What it all costs you.
The right side of the sheet represents the market; the left side, the organization needed to serve it. The value proposition, in the centre, connects the two.
How should you fill in the canvas, and in what order?
Use a pencil, or sticky notes, as Osterwalder recommends and as we recommend as well. Whatever you write first will be inaccurate in some way, and it should be easy to change.
Always start with customer segments and value propositions. If those two boxes are unclear, the rest of the canvas has no real value. You cannot choose a channel without knowing who you want to reach, nor set a price without knowing what problem you solve.
Then complete the right side (channels, relationships, revenue), followed by the left side (resources, activities, partners, costs). Costs come last, since by that point you have listed everything that generates them.
An example
Consider someone who wants to start a mobile bike repair service in a mid-sized town. The example is fictional and serves only to illustrate the process.
Customer segments: commuters who ride to work every day and families with several bikes. Value proposition: the bike is repaired in the customer's driveway, with no need to haul it across town. Channels: a simple website, a Facebook page, flyers at the grocery store, word of mouth. Relationship: personal, by text message. Revenue: per repair, plus a spring tune-up package.
Left side. Resources: a van, tools, a parts inventory. Activities: repairs, driving, booking, ordering parts. Partners: a parts distributor, and perhaps a local bike shop that does not want to handle small repairs. Costs: van, gas, insurance, parts, phone, the owner's time.
Once everything is on a single page, the questions become clear. How many repairs a day are possible if half the day is spent driving? Does the spring package offset a slower November? That is precisely the purpose of the exercise.
How can you use the canvas to find the weakest box?
This step is often skipped: the canvas is filled in, then pinned to the wall.
The canvas becomes truly useful when you examine it and ask which box you are least certain about. There is always one. It is often revenue, because a price is written down that no one has yet paid. Sometimes it is channels: "social media" is not a channel plan.
Circle that box: it defines your next test. If revenue is the weak point, try to sell ten units at that price. If it is channels, invest a small amount to reach your segment and measure the real cost of acquiring one customer. For many small businesses, the answer lies in how customers find them online, which is why we spend so much time on go-to-market strategy before any discussion of logos.
Then update the canvas, date it and keep the previous version. After a few months, you have a series of versions showing how the idea actually evolved, which is worth more than any single sheet.
Should you choose the Business Model Canvas or the Lean Canvas?
You will also encounter the Lean Canvas, Ash Maurya's version. It replaces some boxes with problem, solution, key metrics and unfair advantage. It is designed for startups still working to define their problem, and it serves that purpose well.
For a small local business, we usually prefer the original. A plumber, a café or a small online shop generally knows the problem it solves. What has not been thought through is partners, costs and how customers will find them, and the original canvas requires these questions to be addressed.
In practice, what matters is choosing one and using it. The difference between the two matters far less than completing one seriously.
When should you move on to a business plan?
The canvas does not replace a business plan; it helps you get there while avoiding wasted pages.
When the canvas changes little from one version to the next and you have tested your weakest box at least once, you are ready to write the full version. You will then find that most of the work is already done: the market section comes from your segments, the marketing section from your channels and relationships, and your financial forecasts start from revenue and costs.
That is a far stronger starting point than page one of a thirty-page template.