business model canvas vs traditional business plan

Business Plan vs Business Model Canvas Explained

6 min. read

Updated December 15, 2023

It might be stating the obvious, but planning and preparation are keys to success in business.

After all, entrepreneurs put in hard work to develop their product, understand the market they plan to serve, assess their competitive landscape and funding needs, and much more.

Successful business owners also take time to document their strategies for guiding the growth of their companies. They use these strategies to take advantage of new opportunities and pivot away from threats.

Two common frameworks for documenting strategies – the business model canvas and the business plan – are also among the easiest to get confused.

Though they can complement each other, a business model canvas and a business plan are different in ways worth understanding for any entrepreneur who’s refining their business concept and strategy.

Let’s start by digging deeper into what a business model canvas is. 

• What is a business model canvas?

You may have heard the term “business model” before. Every company has one. 

Your business model is just a description of how your business will generate revenue. In other words, it’s a snapshot of the ways your business will be profitable.

Writing a business plan is one way of explaining a company’s business model. The business model canvas takes a different approach.

A business model canvas is a one-page template that explains your business model and provides an overview of your:

• Relationships with key partners
• Financial structure
• And more…

While the business model is a statement of fact, the business model canvas is a strategic process—a method for either documenting or determining your business model.

It’s meant to be quickly and easily updated as a business better understands what it needs to be successful over time. This makes it especially useful for startups and newer businesses that are still trying to determine their business model.

You can think of a business model canvas as a condensed, summarized, and simplified version of a business plan. It’s a great way to quickly document an idea and get started on the planning process.

The business plan is a way to expand on the ideas from the canvas and flesh out more details on strategy and implementation.

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Components of a Business Model Canvas

The simplest way to think about your business model canvas is to map it out visually. A business model canvas covers nine key areas:

• Value proposition : A company’s unique offering in the market and why it will be successful.
• Key activities: The actions that a company takes to achieve its value proposition.
• Customer segments : The types of people or businesses that are likely to want a company’s products or services.
• Channels : How a company reaches customers through marketing and distribution efforts.
• Customer relationships: How a company interacts with customers and maintains important relationships.
• Revenue streams: The ways in which a company makes money.
• Key resources: The assets such as property, equipment and staffing that a company needs to perform its key activities.
• Key partners: The relationships with suppliers, vendors, customers and other stakeholders a company must maintain in order to be successful.
• Cost structure: The major drivers of company expenses that will need to be tracked and managed.

[Want an even simpler alternative? Try downloading our free one-page plan template and start building your plan in less than 30 minutes.]

To get a better sense of how a business model canvas documents business strategy, consider a company like Netflix. The streaming company’s business model is based on generating subscription revenue through its content library and exclusive content.

If Netflix executives were to create a business model canvas, it would map out how the company leverages key resources, partnerships, and activities to achieve its value proposition and drive profitability. The business model is the destination.

The great thing about a business model canvas is that you can quickly document business ideas and see how a business might work at a high level. As you do more research, you’ll quickly refine your canvas until you have a business idea you think will work.

From there, you expand into a full business plan.

• What is a business plan?

If a business model canvas captures what a company looks like when it’s operating successfully, then a business plan is a more detailed version along with a company’s blueprint for getting there.

Think of your business plan as a process of laying out your goals and your strategies for achieving them.

The business plan is more detailed, and changes over time. It examines each aspect of your business, from operations to marketing and financials.

The plan often includes forward-looking forecasts of a company’s projected financial performance. These are always educated guesses. But these forecasts can also be used as a management tool for any growing business.

Comparing actual results to the forecast can be a valuable reality check, telling a business if they’re on track to meet their goals or if they need to adjust their plan.

A business plan is also a must for companies hoping to receive a bank loan , SBA loan , or other form of outside investment . Anyone putting up funds to help you grow will want to see you’ve done your homework.

So a business plan is how you not only prepare yourself, but also show your audience that you’re prepared.

Components of a business plan

While there are several different types of business plans meant for different uses, well-written plans will cover these common areas:

• Executive summary : A brief (1-2 pages) overview of your business.
• Products and services : Detailed descriptions of what you’re selling and how it fills a need in the market.
• Market analysis : Assessing the size of your market, and information about your customers such as demographics (age, income level) and psychographics (interests, values).
• Competitive analysis : Documenting existing businesses and solutions your target customers are finding in the market.
• Marketing and sales plan : Your strategies for positioning your product or service in the market, and developing a customer base.  
• Operations plan : Describing how you will run the business from day to day, including how you will manage inventory, equipment, and staff.
• Organization and management team: Detailing the legal structure of the business, as well as key members, their backgrounds and qualifications.
• Financial Plans : Business financials that measure a company’s performance and health, including profit & loss statements, cash flow statements and balance sheets. Effective financial plans also include forward-looking sales forecasts and expense budgets.

How a business plan and business model canvas inform business strategy

Avoid the trap of using the two terms interchangeably. As we’ve shown, the two have different focuses and purposes. 

The business model canvas (or our one-page plan template ) is a great starting point for mapping out your initial strategy. Both are easy to iterate on as you test ideas and determine what’s feasible.

Once you have a clearer sense of your idea, you can expand the canvas or one-page plan into a business plan that digs into details like your operations plan, marketing strategy, and financial forecast.

When you understand how – and when – to use each, you can speed up the entire planning process. That’s because the business model canvas lays out the foundation of your venture’s feasibility and potential, while the business plan provides a roadmap for getting there.

The work of business planning is about connecting the dots between the potential and the process.

See why 1.2 million entrepreneurs have written their business plans with LivePlan

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

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• How both inform your strategy

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Business Model Canvas vs. Traditional Business Plans: Choosing the Right Framework

In the ever-evolving landscape of entrepreneurship, the choice between a Business Model Canvas and a Traditional Business Plan can be pivotal. Each framework offers distinct advantages and caters to different needs, making it essential for aspiring entrepreneurs to understand their differences and select the most suitable one for their venture. In this comprehensive guide, we’ll delve into the intricacies of both approaches, highlighting their pros and cons to help you make an informed decision.

Understanding the Business Model Canvas

The Business Model Canvas, developed by Alexander Osterwalder and Yves Pigneur, is a visual tool that provides a holistic view of a business model. It consists of nine building blocks, including key partners, key activities, value proposition, customer relationships, customer segments, channels, cost structure, revenue streams, and resources. This framework emphasizes simplicity, flexibility, and agility, making it ideal for startups and innovative ventures.

Here’s an overview of each building block:

• This block identifies the different groups of customers or market segments that your business serves. Customers can be segmented based on demographics, psychographics, behavior, or other criteria. Understanding your customer segments helps you tailor your products, services, and marketing efforts to meet their specific needs.
• The value proposition describes the unique value that your business offers to its customers. It articulates the benefits and solutions that address customer pain points or fulfill their desires. Your value proposition should clearly communicate why customers should choose your products or services over alternatives offered by competitors.
• Channels represent the various ways in which your business reaches and interacts with customers to deliver value. This can include distribution channels, sales channels, marketing channels, and customer service channels. The choice of channels depends on your target market, product characteristics, and customer preferences.
• This block outlines the types of relationships your business establishes and maintains with its customers. Customer relationships can range from transactional to long-term partnerships and can be built on factors such as personalization, self-service, community engagement, or dedicated support.
• Revenue streams represent the sources of revenue generated by your business model. This can include one-time sales, recurring subscriptions, licensing fees, advertising revenue, or other monetization methods. Understanding your revenue streams is essential for optimizing pricing strategies and maximizing profitability.

Pros of Business Model Canvas

The business model canvas offers several advantages for entrepreneurs and businesses:.

• Visual Representation: The Canvas provides a visual representation of the business model, making it easier to understand and communicate complex ideas. It condenses key elements of a business model onto a single page, allowing stakeholders to grasp the entire concept at a glance.
• Holistic View: By considering nine key building blocks, the Canvas encourages a holistic view of the business model. It prompts entrepreneurs to think about all aspects of their business, including customer segments, value proposition, revenue streams, and cost structure, ensuring that no critical elements are overlooked.
• Flexibility: The Canvas is highly adaptable and can be customized to fit the specific needs and circumstances of different businesses and industries. It accommodates a wide range of business models, from startups to established enterprises, and can be easily modified as the business evolves over time.
• Iterative Process: Using the Canvas facilitates an iterative process of business model development and refinement. Entrepreneurs can experiment with different ideas, test hypotheses, and make adjustments to their business model based on feedback and insights, leading to more robust and effective strategies.
• Collaborative Tool: The Canvas fosters collaboration among team members, stakeholders, and partners by providing a common framework for discussion and decision-making. It enables multidisciplinary teams to work together to analyze, brainstorm, and develop innovative business models collaboratively.
• Strategic Alignment: The Canvas helps align various components of the business model with overall strategic objectives and goals. It ensures that all elements of the business model are aligned with the company’s mission, vision, and values, enhancing coherence and consistency in strategy execution.
• Risk Reduction: By systematically evaluating different aspects of the business model, the Canvas helps identify potential risks and vulnerabilities early in the planning process. Entrepreneurs can proactively address risks and develop mitigation strategies to minimize negative impacts on the business.

Cons of Business Model Canvas

While the business model canvas offers many benefits, it also has some limitations and potential drawbacks:.

• Simplicity vs. Complexity: While the Canvas provides a simplified overview of the business model, some businesses may find it too simplistic for their needs. Complex business models with multiple revenue streams, customer segments, or value propositions may not be fully captured or adequately represented on the Canvas.
• Limited Detail: The Canvas does not delve deeply into each component of the business model, which can lead to oversimplification or omission of critical details. Entrepreneurs may need to supplement the Canvas with additional documentation or analysis to fully understand and develop their business model.
• Static Nature: The Canvas provides a snapshot of the business model at a specific point in time, but it may not capture the dynamic nature of business environments and evolving market conditions. Business models are subject to change over time, and the Canvas may become outdated if not regularly reviewed and updated.
• Lack of Guidance: While the Canvas provides a framework for organizing key elements of the business model, it does not offer explicit guidance on how to develop or implement each component. Entrepreneurs may require additional resources, expertise, or support to effectively translate the Canvas into actionable strategies and initiatives.
• Risk of Oversimplification: There is a risk that the Canvas may oversimplify complex business challenges or overlook nuances and interdependencies among different elements of the business model. Entrepreneurs should exercise caution and critical thinking when using the Canvas to ensure that important considerations are not overlooked.
• Difficulty in Quantification: The Canvas focuses on qualitative aspects of the business model, such as value proposition and customer segments, which may make it challenging to quantify or measure certain components. This can limit the ability to conduct rigorous analysis or make data-driven decisions based on the Canvas alone.

Exploring Traditional Business Plans

Traditional Business Plans are comprehensive documents that outline all aspects of a business, including executive summary, company description, market analysis, organizational structure, marketing strategy, operations plan, financial projections, and appendices. This format is well-established and often required by investors and financial institutions for funding purposes.

Here are some key aspects and considerations of traditional business plans:

• Comprehensive Documentation: Unlike the concise and visual nature of the Business Model Canvas, traditional business plans typically involve more extensive documentation. They include sections such as an executive summary, company description, market analysis, organization and management structure, product or service offerings, marketing and sales strategies, operational plans, and financial projections.
• In-depth Market Analysis: Traditional business plans often include a thorough analysis of the target market, industry trends, competitive landscape, and customer demographics. This analysis may involve primary research, such as surveys and interviews, as well as secondary research using industry reports, market data, and competitor analysis.
• Detailed Financial Projections: Business plans typically feature detailed financial projections, including income statements, cash flow forecasts, and balance sheets. These projections estimate the company’s financial performance over several years, taking into account revenue streams, expenses, capital expenditures, and funding requirements. Financial projections are often supported by assumptions and sensitivity analysis to assess the impact of various scenarios on financial outcomes.
• Risk Assessment and Mitigation Strategies: Traditional business plans include a thorough assessment of potential risks and challenges that may affect the business’s success. This involves identifying internal and external risks, such as market volatility, regulatory changes, competitive pressures, or operational issues. Business plans also outline strategies for mitigating these risks and contingency plans to address unforeseen circumstances.

Pros of Traditional Business Plans

Traditional business plans offer several advantages for entrepreneurs and businesses:.

• Comprehensive Strategic Planning: Traditional business plans provide a structured framework for comprehensive strategic planning. They cover all aspects of the business, including market analysis, competitive landscape, operational strategies, and financial projections, helping entrepreneurs develop a thorough understanding of their business concept and its potential for success.
• Detailed Financial Projections: Business plans include detailed financial projections, such as income statements, cash flow forecasts, and balance sheets. These projections help entrepreneurs assess the financial feasibility of their business idea, estimate funding requirements, and demonstrate the potential return on investment to investors and lenders.
• Investor Attraction: Traditional business plans serve as a valuable tool for attracting investors, lenders, and other stakeholders. They provide a detailed overview of the business opportunity, market potential, competitive advantages, and growth strategies, helping entrepreneurs communicate their vision and secure funding for their venture.
• Risk Assessment and Mitigation: Business plans include a thorough analysis of potential risks and challenges that may impact the business’s success. Entrepreneurs identify risks related to market dynamics, competition, regulatory compliance, operational issues, and financial constraints, and develop strategies to mitigate these risks effectively.
• Strategic Guidance: Business plans offer strategic guidance and direction for entrepreneurs, outlining the company’s goals, objectives, and milestones. They provide a roadmap for achieving long-term success, guiding decision-making, resource allocation, and performance monitoring as the business grows and evolves.
• Operational Efficiency: By documenting operational processes, workflows, and organizational structure, business plans help entrepreneurs establish efficient and effective operations. They outline key activities, responsibilities, and timelines, ensuring that all stakeholders are aligned and coordinated in executing the business strategy.

Cons of Traditional Business Plans

While traditional business plans offer several advantages, they also have some limitations and potential drawbacks:.

• Time and Resource Intensive: Developing a traditional business plan requires a significant investment of time, effort, and resources. Entrepreneurs must gather market research, analyze data, create financial projections, and document detailed strategies, which can be time-consuming and detract from other critical tasks.
• Rigid and Inflexible: Traditional business plans can be rigid and inflexible, making it challenging to adapt to changing market conditions, emerging trends, or unexpected challenges. Entrepreneurs may find it difficult to revise or update their business plans in response to new information or feedback, leading to outdated or irrelevant strategies.
• Limited Predictive Accuracy: Financial projections and market forecasts included in traditional business plans are based on assumptions and estimates, which may not accurately predict future outcomes. External factors such as economic conditions, consumer behavior, and competitive actions can impact business performance, rendering initial projections inaccurate or obsolete.
• Focus on Documentation Over Action: The process of creating a traditional business plan may prioritize documentation and formality over action and execution. Entrepreneurs may become overly fixated on developing the perfect plan, rather than taking tangible steps to test their business concept, acquire customers, and generate revenue.
• Not Suitable for All Businesses: Traditional business plans may not be suitable for all types of businesses, particularly startups or small businesses operating in dynamic or rapidly evolving industries. These businesses may require more agile and iterative approaches to planning and strategy development.
• Overemphasis on Funding: While business plans are often used to attract investment from investors and lenders, they may place too much emphasis on fundraising as the primary goal. Entrepreneurs may lose sight of other important aspects of business development, such as product development, customer acquisition, and market validation.

Choosing the Right Framework

Consider your stage of development.

Considering your stage of development is crucial when selecting the right framework for business planning.

Here’s how different stages may influence your choice:

• At this stage, you’re exploring business ideas and testing their feasibility. Lean methodologies like the Lean Startup approach or the Business Model Canvas are often preferred. These frameworks emphasize rapid experimentation, customer validation, and iterative refinement of business concepts. They allow you to quickly test assumptions, identify market opportunities, and pivot as needed based on feedback.
• In the startup stage, you’re working to establish your business and acquire your first customers. Lean methodologies remain valuable, helping you refine your value proposition, validate your business model, and achieve product-market fit. As you begin to scale, you may also need to develop a more detailed business plan to attract investors, secure financing, and plan for growth.
• As your business grows, you may need to shift towards more traditional business planning frameworks. A traditional business plan with detailed financial projections and market analysis becomes essential for securing investment, scaling operations, and managing complexity. However, lean methodologies can still be valuable for maintaining agility, fostering innovation, and adapting to changing market conditions.
• In the maturity stage, your business has achieved stability and is focused on sustaining its success over the long term. Traditional business planning frameworks continue to be important for strategic decision-making, resource allocation, and performance monitoring. However, you may also benefit from incorporating elements of lean methodologies to drive continuous improvement, foster a culture of innovation, and stay competitive in the marketplace.

Evaluate Your Objectives and Audience

Evaluating your objectives and audience is critical when choosing a business planning framework.

Here’s how to align your objectives and audience with the right framework:

• Clarity of Purpose: Determine the primary purpose of your business planning efforts. Are you looking to validate a business idea, secure funding, develop a growth strategy, or improve operational efficiency?
• Outcome Expectations: Clarify the desired outcomes of your business planning process. Do you need a detailed roadmap, financial projections, market analysis, or actionable insights for decision-making?
• Flexibility vs. Structure: Consider the level of flexibility and structure you require. Are you open to experimentation and iteration, or do you need a more systematic and comprehensive approach?
• Investors and Lenders: If you’re seeking funding from investors or lenders, they may expect to see a traditional business plan with detailed financial projections, market analysis, and risk assessments. They want to understand the potential return on investment and the viability of your business model.
• Internal Stakeholders: Your team members and internal stakeholders may benefit from a framework that provides clarity on goals, strategies, and operational plans. They need actionable insights and alignment to execute effectively.
• Customers and Partners: External stakeholders, such as customers and partners, may prefer a more concise and visual framework that clearly communicates your value proposition and market positioning. They want to understand how your offerings meet their needs and differentiate from competitors.

Once you’ve evaluated your objectives and audience, you can select a business planning framework that best meets your needs:

• Lean Methodologies (e.g., Lean Startup, Business Model Canvas): These frameworks are ideal for entrepreneurs focused on experimentation, customer validation, and agility. They provide flexibility and encourage rapid iteration based on feedback from stakeholders. They are suitable for early-stage startups or businesses exploring new opportunities.
• Traditional Business Plans: Traditional business plans are suited for entrepreneurs seeking funding, developing long-term strategies, or operating in established industries. They offer comprehensive documentation, detailed financial projections, and in-depth market analysis. They are appropriate for businesses at various stages of development, particularly those aiming for growth or expansion.
• Hybrid Approaches: You may also choose to combine elements of different frameworks to create a customized approach that aligns with your objectives and audience. For example, you could start with a lean methodology to test assumptions and validate your business model, then transition to a traditional business plan as you seek funding or scale operations.

In the debate between Business Model Canvas and Traditional Business Plans, there is no one-size-fits-all answer. Both frameworks offer unique advantages and cater to different entrepreneurial needs and objectives. As you embark on your entrepreneurial journey, take the time to evaluate your business model, stage of development, and audience preferences to determine the most suitable framework for your venture. Whether you choose the simplicity and agility of the Business Model Canvas or the depth and structure of a Traditional Business Plan, remember that the ultimate goal is to create a roadmap for success and sustainable growth.

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A Better Way to Think About Your Business Model

• Alexander Osterwalder

How Nespresso used a simple business model canvas to change face of the coffee industry.

The business model canvas — as opposed to the traditional, intricate business plan — helps organizations conduct structured, tangible, and strategic conversations around new businesses or existing ones. Leading global companies like GE, P&G, and Nestlé use the canvas to manage strategy or create new growth engines, while start-ups use it in their search for the right business model. The canvas’s main objective is to help companies move beyond product-centric thinking and towards business model thinking.

• Alexander Osterwalder is cofounder of Strategyzer.com , a company that builds practical tools for business strategy and innovation. Together with Yves Pigneur, he invented the Business Model Canvas and co-authored the international bestsellers  Business Model Generation  and  Value Proposition Design .

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Business Plan vs. Business Model Canvas: What’s the Difference?

The main difference between Business Plan and Business Model Canvas is that a business plan is like a detailed story about your business, while a business model canvas is a simple visual chart.

Before we move to more differences, let’s first understand Business Plan and Business Model Canvas:

• Business Plan : A business plan is like a roadmap that shows how a business will work and grow. It includes goals, strategies, and how money will be used.
• Business Model Canvas : A business model canvas is a simple chart that shows how a business creates, delivers, and captures value. It helps understand how all the pieces of a business fit together.

Now, let’s get to Business Plan vs Business Model Canvas:

Major differences between Business Plan and Business Model Canvas

So, these are the main differences between the entities.

• Budgeting vs. Financial Planning
• Brief vs. Debrief
• Branding vs. Marketing

You can see other “differences between…” posts by clicking here .

If you have a related query, kindly feel free to let me know in the comments below.

Business Model Canvas: Explained with Examples

Got a new business idea, but don’t know how to put it to work? Want to improve your existing business model? Overwhelmed by writing your business plan? There is a one-page technique that can provide you the solution you are looking for, and that’s the business model canvas.

In this guide, you’ll have the Business Model Canvas explained, along with steps on how to create one. All business model canvas examples in the post can be edited online.

What is a Business Model Canvas

A business model is simply a plan describing how a business intends to make money. It explains who your customer base is and how you deliver value to them and the related details of financing. And the business model canvas lets you define these different components on a single page.   

The Business Model Canvas is a strategic management tool that lets you visualize and assess your business idea or concept. It’s a one-page document containing nine boxes that represent different fundamental elements of a business.  

The business model canvas beats the traditional business plan that spans across several pages, by offering a much easier way to understand the different core elements of a business.

The right side of the canvas focuses on the customer or the market (external factors that are not under your control) while the left side of the canvas focuses on the business (internal factors that are mostly under your control). In the middle, you get the value propositions that represent the exchange of value between your business and your customers.

The business model canvas was originally developed by Alex Osterwalder and Yves Pigneur and introduced in their book ‘ Business Model Generation ’ as a visual framework for planning, developing and testing the business model(s) of an organization.

What Are the Benefits of Using a Business Model Canvas

Why do you need a business model canvas? The answer is simple. The business model canvas offers several benefits for businesses and entrepreneurs. It is a valuable tool and provides a visual and structured approach to designing, analyzing, optimizing, and communicating your business model.

• The business model canvas provides a comprehensive overview of a business model’s essential aspects. The BMC provides a quick outline of the business model and is devoid of unnecessary details compared to the traditional business plan.
• The comprehensive overview also ensures that the team considers all required components of their business model and can identify gaps or areas for improvement.
• The BMC allows the team to have a holistic and shared understanding of the business model while enabling them to align and collaborate effectively.
• The visual nature of the business model canvas makes it easier to refer to and understand by anyone. The business model canvas combines all vital business model elements in a single, easy-to-understand canvas.
• The BMC can be considered a strategic analysis tool as it enables you to examine a business model’s strengths, weaknesses, opportunities, and challenges.
• It’s easier to edit and can be easily shared with employees and stakeholders.
• The BMC is a flexible and adaptable tool that can be updated and revised as the business evolves. Keep your business agile and responsive to market changes and customer needs.
• The business model canvas can be used by large corporations and startups with just a few employees.
• The business model canvas effectively facilitates discussions among team members, investors, partners, customers, and other stakeholders. It clarifies how different aspects of the business are related and ensures a shared understanding of the business model.
• You can use a BMC template to facilitate discussions and guide brainstorming brainstorming sessions to generate insights and ideas to refine the business model and make strategic decisions.
• The BMC is action-oriented, encouraging businesses to identify activities and initiatives to improve their business model to drive business growth.
• A business model canvas provides a structured approach for businesses to explore possibilities and experiment with new ideas. This encourages creativity and innovation, which in turn encourages team members to think outside the box.

How to Make a Business Model Canvas

Here’s a step-by-step guide on how to create a business canvas model.

Step 1: Gather your team and the required material Bring a team or a group of people from your company together to collaborate. It is better to bring in a diverse group to cover all aspects.

While you can create a business model canvas with whiteboards, sticky notes, and markers, using an online platform like Creately will ensure that your work can be accessed from anywhere, anytime. Create a workspace in Creately and provide editing/reviewing permission to start.

Step 2: Set the context Clearly define the purpose and the scope of what you want to map out and visualize in the business model canvas. Narrow down the business or idea you want to analyze with the team and its context.

Step 3: Draw the canvas Divide the workspace into nine equal sections to represent the nine building blocks of the business model canvas.

Step 4: Identify the key building blocks Label each section as customer segment, value proposition, channels, customer relationships, revenue streams, key resources, key activities, and cost structure.

Step 5: Fill in the canvas Work with your team to fill in each section of the canvas with relevant information. You can use data, keywords, diagrams, and more to represent ideas and concepts.

Step 6: Analyze and iterate Once your team has filled in the business model canvas, analyze the relationships to identify strengths, weaknesses, opportunities, and challenges. Discuss improvements and make adjustments as necessary.

Step 7: Finalize Finalize and use the model as a visual reference to communicate and align your business model with stakeholders. You can also use the model to make informed and strategic decisions and guide your business.

What are the Key Building Blocks of the Business Model Canvas?

There are nine building blocks in the business model canvas and they are:

Customer Segments

Customer relationships, revenue streams, key activities, key resources, key partners, cost structure.

• Value Proposition

When filling out a Business Model Canvas, you will brainstorm and conduct research on each of these elements. The data you collect can be placed in each relevant section of the canvas. So have a business model canvas ready when you start the exercise.  

Let’s look into what the 9 components of the BMC are in more detail.

These are the groups of people or companies that you are trying to target and sell your product or service to.

Segmenting your customers based on similarities such as geographical area, gender, age, behaviors, interests, etc. gives you the opportunity to better serve their needs, specifically by customizing the solution you are providing them.

After a thorough analysis of your customer segments, you can determine who you should serve and ignore. Then create customer personas for each of the selected customer segments.

There are different customer segments a business model can target and they are;

• Mass market: A business model that focuses on mass markets doesn’t group its customers into segments. Instead, it focuses on the general population or a large group of people with similar needs. For example, a product like a phone.  
• Niche market: Here the focus is centered on a specific group of people with unique needs and traits. Here the value propositions, distribution channels, and customer relationships should be customized to meet their specific requirements. An example would be buyers of sports shoes.
• Segmented: Based on slightly different needs, there could be different groups within the main customer segment. Accordingly, you can create different value propositions, distribution channels, etc. to meet the different needs of these segments.
• Diversified: A diversified market segment includes customers with very different needs.
• Multi-sided markets: this includes interdependent customer segments. For example, a credit card company caters to both their credit card holders as well as merchants who accept those cards.

Use STP Model templates for segmenting your market and developing ideal marketing campaigns

Visualize, assess, and update your business model. Collaborate on brainstorming with your team on your next business model innovation.

In this section, you need to establish the type of relationship you will have with each of your customer segments or how you will interact with them throughout their journey with your company.

There are several types of customer relationships

• Personal assistance: you interact with the customer in person or by email, through phone call or other means.
• Dedicated personal assistance: you assign a dedicated customer representative to an individual customer.  
• Self-service: here you maintain no relationship with the customer, but provides what the customer needs to help themselves.
• Automated services: this includes automated processes or machinery that helps customers perform services themselves.
• Communities: these include online communities where customers can help each other solve their own problems with regard to the product or service.
• Co-creation: here the company allows the customer to get involved in the designing or development of the product. For example, YouTube has given its users the opportunity to create content for its audience.

You can understand the kind of relationship your customer has with your company through a customer journey map . It will help you identify the different stages your customers go through when interacting with your company. And it will help you make sense of how to acquire, retain and grow your customers.

This block is to describe how your company will communicate with and reach out to your customers. Channels are the touchpoints that let your customers connect with your company.

Channels play a role in raising awareness of your product or service among customers and delivering your value propositions to them. Channels can also be used to allow customers the avenue to buy products or services and offer post-purchase support.

There are two types of channels

• Owned channels: company website, social media sites, in-house sales, etc.
• Partner channels: partner-owned websites, wholesale distribution, retail, etc.

Revenues streams are the sources from which a company generates money by selling their product or service to the customers. And in this block, you should describe how you will earn revenue from your value propositions.  

A revenue stream can belong to one of the following revenue models,

• Transaction-based revenue: made from customers who make a one-time payment
• Recurring revenue: made from ongoing payments for continuing services or post-sale services

There are several ways you can generate revenue from

• Asset sales: by selling the rights of ownership for a product to a buyer
• Usage fee: by charging the customer for the use of its product or service
• Subscription fee: by charging the customer for using its product regularly and consistently
• Lending/ leasing/ renting: the customer pays to get exclusive rights to use an asset for a fixed period of time
• Licensing: customer pays to get permission to use the company’s intellectual property
• Brokerage fees: revenue generated by acting as an intermediary between two or more parties
• Advertising: by charging the customer to advertise a product, service or brand using company platforms

What are the activities/ tasks that need to be completed to fulfill your business purpose? In this section, you should list down all the key activities you need to do to make your business model work.

These key activities should focus on fulfilling its value proposition, reaching customer segments and maintaining customer relationships, and generating revenue.

There are 3 categories of key activities;

• Production: designing, manufacturing and delivering a product in significant quantities and/ or of superior quality.
• Problem-solving: finding new solutions to individual problems faced by customers.
• Platform/ network: Creating and maintaining platforms. For example, Microsoft provides a reliable operating system to support third-party software products.

This is where you list down which key resources or the main inputs you need to carry out your key activities in order to create your value proposition.

There are several types of key resources and they are

• Human (employees)
• Financial (cash, lines of credit, etc.)
• Intellectual (brand, patents, IP, copyright)
• Physical (equipment, inventory, buildings)

Key partners are the external companies or suppliers that will help you carry out your key activities. These partnerships are forged in oder to reduce risks and acquire resources.

Types of partnerships are

• Strategic alliance: partnership between non-competitors
• Coopetition: strategic partnership between partners
• Joint ventures: partners developing a new business
• Buyer-supplier relationships: ensure reliable supplies

In this block, you identify all the costs associated with operating your business model.

You’ll need to focus on evaluating the cost of creating and delivering your value propositions, creating revenue streams, and maintaining customer relationships. And this will be easier to do so once you have defined your key resources, activities, and partners.  

Businesses can either be cost-driven (focuses on minimizing costs whenever possible) and value-driven (focuses on providing maximum value to the customer).

Value Propositions

This is the building block that is at the heart of the business model canvas. And it represents your unique solution (product or service) for a problem faced by a customer segment, or that creates value for the customer segment.

A value proposition should be unique or should be different from that of your competitors. If you are offering a new product, it should be innovative and disruptive. And if you are offering a product that already exists in the market, it should stand out with new features and attributes.

Value propositions can be either quantitative (price and speed of service) or qualitative (customer experience or design).

What to Avoid When Creating a Business Model Canvas

One thing to remember when creating a business model canvas is that it is a concise and focused document. It is designed to capture key elements of a business model and, as such, should not include detailed information. Some of the items to avoid include,

• Detailed financial projections such as revenue forecasts, cost breakdowns, and financial ratios. Revenue streams and cost structure should be represented at a high level, providing an overview rather than detailed projections.
• Detailed operational processes such as standard operating procedures of a business. The BMC focuses on the strategic and conceptual aspects.
• Comprehensive marketing or sales strategies. The business model canvas does not provide space for comprehensive marketing or sales strategies. These should be included in marketing or sales plans, which allow you to expand into more details.
• Legal or regulatory details such as intellectual property, licensing agreements, or compliance requirements. As these require more detailed and specialized attention, they are better suited to be addressed in separate legal or regulatory documents.
• Long-term strategic goals or vision statements. While the canvas helps to align the business model with the overall strategy, it should focus on the immediate and tangible aspects.
• Irrelevant or unnecessary information that does not directly relate to the business model. Including extra or unnecessary information can clutter the BMC and make it less effective in communicating the core elements.

What Are Your Thoughts on the Business Model Canvas?

Once you have completed your business model canvas, you can share it with your organization and stakeholders and get their feedback as well. The business model canvas is a living document, therefore after completing it you need to revisit and ensure that it is relevant, updated and accurate.

What best practices do you follow when creating a business model canvas? Do share your tips with us in the comments section below.

Join over thousands of organizations that use Creately to brainstorm, plan, analyze, and execute their projects successfully.

FAQs About the Business Model Canvas

• Use clear and concise language
• Use visual-aids
• Customize for your audience
• Highlight key insights
• Be open to feedback and discussion

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Amanda Athuraliya is the communication specialist/content writer at Creately, online diagramming and collaboration tool. She is an avid reader, a budding writer and a passionate researcher who loves to write about all kinds of topics.

Business Plan vs Business Model Canvas

• Paul Foster
• April 29, 2013

Why do most business owners create a business plan?   The vast majority reluctantly prepare one as a requirement to get financing.

Is a business plan a good management tool?   I don’t think so.

I will agree that preparing a business plan can help a business owner think strategically about their business. A business plan will also provide some structure as it requires a business owner to document their current assumptions and guesses about the future of their business.

Compared to ‘doing nothing’, the business plan process is valuable.  But I think the Business Model Canvas developed by Alexander Osterwalder is an option worthy of consideration for existing small business owners. The Business Model Canvas was developed to be used in conjunction with the Lean Startup methods that are described very well in Steve Blank’s Harvard Business Review article I mentioned last week.

Here are the reasons why I think the Business Model Canvas is a better fit for existing small business owners rather than a business plan:

1)     It’s more visual – Most business owners I know think visually. Planning their strategy seems to work better moving sticky notes around a wall than writing out a ten page document.

2)     It’s more dynamic – The business plan is a static document, but the business model canvas evolves as the business owner experiences the world around them.

3)     It’s about actions as well as thinking – The activity of ‘validating’ the static guesses is more about actions and experiences than just thinking. While thinking is important, I find the following statement to be more applicable: “You can’t think your way into a new way of acting, but you can act your way into a new way of thinking.” The experiential learning obtained from ‘getting out of the building’ and validating assumptions is key.

4)     It’s about key activities more than results – A business plan usually includes a projected income statement.  Income Statements report the results after the activity of business takes place.  Business owners need to focus on activities in order to get better results.

Since the Business Model Canvas is not a common tool in the business owners’ toolbox, you probably haven’t seen one in action.  It’s a pretty good guess that your business plan hasn’t seen much action lately either!  My guess is that a more visual, more dynamic, more action focused and more activity driven tool would be valuable to business owners.

In true Lean Startup fashion, as of today, I am accepting that my above statement is just a guess or hypothesis only in my mind. Now should I write that statement down into my business plan and file it away or should I go out and validate my hypothesis with some real small business owner customers?

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How does a business plan differ from a business model canvas?

Business plans and business model canvas are two key decision making tools that entrepreneurs need to know (and use!). Despite sounding similar, however, they do differ significantly and shouldn't be confused.

This in-depth guide covers all you need to know about the two documents, including what they contain, their similarities and differences and the tools you can use to create either of them.

Ready? Let’s get started!

In this guide:

What is a business plan?

What is the business model canvas, business plan vs. business model canvas: what do they have in common.

• Business plan vs. business model canvas: what are the differences?

What tools can you use to write a business plan?

What tools can you use to write a business model canvas.

A business plan is a document providing detailed information about your business and its objectives for the years to come (usually 3-5 years).

To keep it short and simple, a business plan consists of two parts: 

• A financial forecast which provides information about the expected growth and profitability of your business, your potential funding requirements, and cash flow projections.
• A written part which provides the context and details needed to assess the relevance of the forecast: company overview, description of products and services, market analysis, strategy, operations, etc.

Formal business plans are usually written: to secure financing, to get buy-in from stakeholders (board members, investors, business partners) on the plan of action for the coming years, to convince suppliers to do business with the company, or to communicate the company's vision to staff members.

Financial savvy businesses regularly track their actual financial performance against the forecast included in their business plan and re-assess their progress against what was planned, and update their plans as needed.

Need a convincing business plan?

The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.

In simple terms, a business model is how a company makes money, and the business model canvas is a tool to help entrepreneurs find a coherent business model for their business (or for new products or services).

A business model can be broken down into two parts:

• The first part deals with what a business is about. This relates to what the business sells - and all the activities that go into creating this. That means research, designing, raw material sourcing and costs, production, and testing. 
• The second part is concerned with selling what the business is about - the product or service it has invested in. These activities include everything from marketing to distribution and the sale transaction process. 

The business model canvas can be used to visualize a business model idea. It is a visual chart that includes simple, yet effective graphical illustrations that highlight every aspect of the potential business' operations.

It outlines the infrastructure, value proposition, and customers, including the target market, customer relations and marketing approach, revenue streams, and profit margins.

The business model canvas helps stakeholders brainstorm business model ideas. For example, they can come up with multiple business models and test them against each other to see which ones are viable and which ones aren’t.

As a result, this tool is only useful for those looking to start a business, launch a new product, or change their business model.

Since we’ve covered business goals and strategies in relation to both a business plan and a business model canvas, it stands to reason that there are at least some similarities between the two. 

In essence, both relate to the way a business functions and there is some overlap between the two. Some of the similarities between the two include:

Outlining business strategy

Both a business plan and a business model canvas outline key strategies that the business intends to use in day-to-day operations.

This includes key aspects such as how a business might create and distribute a product or service and identify corresponding revenue streams.

Decision-making tools

Since both tools help formulate some aspects of business strategy, they are useful in the decision-making process. 

With key business processes highlighted, and ultimate goals set out from the onset, decision-makers within the business have an easier time determining what their next steps should be. 

As such, these tools are used to help stakeholders make more accurate choices when tasked with making decisions. Therefore, businesses that utilise these tools are likely to have successful outcomes.

Indefinite methods

Neither a business plan nor a canvas offers any guarantees. Instead, they are tools that help test out and present your business idea to other stakeholders or managers.

Just because you’ve used these tools, it doesn’t mean that your business idea will pan out or your forecast will go as predicted.

In all likelihood, mapping out your strategy on a business model canvas may help you realize your business idea isn’t destined to be a success. 

An idea can seem good in an abstract form, but when you’re forced to consider all its intricacies, you may understand it won’t work. The good thing about business plans and models is that they can help you determine the viability of your idea before you go through with it.  

Business plan vs. business model canvas plan: what are the differences?

There are major key differences between business plans and business model canvasses. 

Let’s take a look at them in more detail!

Different scopes

As mentioned previously, a business model canvas is a strategic tool that helps find the best busines model for a business or product/service idea.

The business plan can only be drawn once you know what business model will be used. The role of the business plan is then to show how much it will cost to launch the business or product, and how much money it could make, and what it will take in terms of concrete resources (people, equipment, etc.).

Different length

The business model canvas is meant to fit on a single piece of paper ("the canvas").

A business plan, however, goes into much more detail. You can expect a typical business plan to be somewhere between 15 to 30 pages.

Different audiences

A business model canvas can be used to bounce off ideas, iron things out, and create a definite model for the business to follow. As such, it is primarily used by the internal team, typically the business founders and others involved in starting the business (or a product team in a large organization). 

A business plan is used internaly - by the management team and the board, and sometimes shared with the wider staff - but it’s not limited to this audience. It is also used with external stakeholders, like banks or investors in order to secure financing. And sometimes suppliers who need it to create their impression of the business’s potential for success before getting involved. 

One-off vs. recurring use

Typically, business model canvases are used prior to starting a business or when a change is needed to the existing business model. 

It is a tool used to visually represent the business idea before it comes to fruition. This means that the idea can be tested practically to decide whether it is viable or not.

Business plans go further, rather than being simple one-off go/no-go decision making tools, business plans are used continously and maintained up to date.

One key concern is knowing whether or not the company is on track to deliver what it planned in its business plan. To do so, managers compare the actual financials to what was planned in the forecast. And then re-plan if needed.

Business plans are also used to make key operational decisions. For example: should you hire a team of marketers or outsource to an agency? To make an informed decision, entrepreneurs can model both scenarios and decide based on the most promissing forecast.

Similarly, business plan are used to anticipate key risks. For example: what happens if sales are 20% below expectations?

As you can see business plan are fairly different from canvasses.

Need inspiration for your business plan?

The Business Plan Shop has dozens of business plan templates that you can use to get a clear idea of what a complete business plan looks like.

In this section, we will review three solutions for writing a professional business plan:

• Using Word and Excel
• Hiring a consultant to write your business plan 
• Utilizing an online business plan software

Create your business plan using Word or Excel

Writing a business plan using Word and Excel is not the best option.

First of all, this option is only recommended if you have a degree in finance or accounting and expertise in financial modelling. You are likely to make mistakes otherwise, and as a result banks or investors are unlikely to trust the accuracy of your financial forecast.

Using Word to draft the plan also means starting from scratch and formatting the document yourself once written - a process that is quite tedious. There are also no instructions or examples to guide you through what to write in each section.

Hire a consultant to write your business plan

This option is only feasible if you have the required finances - you probably need to budget at least £1.5k ($2.0k) for a complete business plan, more if you need to make changes after the initial version (which happens frequently after the initial meetings with lenders).

Despite the expensive price tag that comes with it, outsourcing your business plan to a consultant can be a good idea. Consultants are experienced in writing business plans and adept at creating financial forecasts without errors. Furthermore, outsourcing to a consultant saves you time and allows you to focus on the day-to-day operations of your business.

Use an online business plan software for your business plan

Another alternative is to use online business plan software .

There are several advantages to using specialized software:

• You are guided through the writing process by detailed instructions and examples for each part of the plan
• You can be inspired by already written business plan templates
• You can easily make your financial forecast by letting the software take care of the financial calculations for you without errors
• You get a professional document, formatted and ready to be sent to your bank
• The software will enable you to easily track your actual financial performance against your forecast and update your forecast as time goes by

If you're interested in using this type of solution, you can try our software for free by signing up here .

To get started, you need the canvas itself which can be downloaded here .

Once you have the canvas you can either print multiple copies of it to compare alternative business models on paper, or draw it on a white board to brainstorm with your team.

We hope this guide helped you get a clear understanding of how the business model canvas differs from a business plan, and when you one or the other. Don't hesitate to contact our team if you have any questions regarding business planning.

Also on The Business Plan Shop

• Practical example of a business plan outline
• Business Model vs. Business Plan?

Know someone struggling with their business plan? Share this article and give them a nudge in the right direction!

Founder & CEO at The Business Plan Shop Ltd

Guillaume Le Brouster is a seasoned entrepreneur and financier.

Guillaume has been an entrepreneur for more than a decade and has first-hand experience of starting, running, and growing a successful business.

Prior to being a business owner, Guillaume worked in investment banking and private equity, where he spent most of his time creating complex financial forecasts, writing business plans, and analysing financial statements to make financing and investment decisions.

Guillaume holds a Master's Degree in Finance from ESCP Business School and a Bachelor of Science in Business & Management from Paris Dauphine University.

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How to Build a Product Roadmap Based on a Business Model Canvas

Could you list all of the key building blocks you need to develop, manage, maintain, market, and sell a product on a single sheet of paper? With the business model canvas, you can! Using the business model canvas approach is a great way to force yourself to focus on the most strategically important elements of your product. As the name suggests, the typical use case for this tool is to outline the fundamental building blocks of a business, but it also can work really well for a product.

Today we’ll show you how the business model canvas works and how you can use it to come up with a high-level product strategy.

What is a Business Model Canvas?

As you can see from the sample example below (thanks, Strategyzer.com), a business model canvas is a one-page summary describing the high-level strategic details needed to get a business (or product) successfully to market.

The categories or buckets contained in a canvas can be customized. But most will look similar to the one here—covering such key areas as:

• The product’s value propositions (what it does and promises)
• Customer segments (who it’s for)
• Key activities (the steps the team must complete to make it successful)
• Key resources (what personnel, tools, and budget the team will have access to)
• Channels (how the organization will market and sell it)
• Customer relationships (how the team will support and work with its customer base)
• Key partners (how third parties will fit into the plan)
• Cost structure (what it costs to build the product as well as how to sell and support it)
• Revenue streams (how the product will make money)

If you think about it, that’s a fairly comprehensive set of building blocks you’ll need to think through for your product before you begin developing it. There will certainly be additional factors that’ll affect your strategy, but if you can fill in these high-level details—which, as you can see, should fit comfortably on a single page—you’ll have a useful strategic guide for developing your product roadmap.

Why Should I Use a Business Model Canvas to Develop a Product Roadmap?

Okay, but why? What’s the benefit of building a business model canvas (or the, even more, stripped-down variation, the lean canvas) to guide my product roadmap ?

There are plenty of reasons. But simply put, you can think of a business model canvas as a mission statement for your product roadmap. It’s a handy reference you can refer to, to make sure your roadmap always reflects all the strategic elements needed for your product’s success.

Tweet This: “Think of a business model canvas as a mission statement for your product roadmap.”

Our co-founder Jim Semick has a couple of great short videos explaining the business model canvas concept, which you can check out in the player below.

As Jim explains, here are a few of the benefits of using a business model canvas to think through product strategies:

1. You can use a business model canvas to roadmap quickly.

You can use this canvas approach in just a few hours (and as Jim says, you can even do it with sticky-notes).

This way, rather than trying to write out every detail about your product plan beforehand, you can just document the highlights—and then you can get rolling translating the canvas into your product roadmap.

2. A business model canvas will be more agile.

One problem with the old structure of documenting a business model—the traditional business plan—was that it was almost always inaccurate as soon as the author finished drafting it.

These meaty plans included detailed cost estimates, revenue projections going years into the future, and long-term plans for growing the staff. How could any of that remain accurate for long?

In product terms, you can think of the business plan as resembling an MRD (Market Requirements Document). It’s long, detailed, and probably mostly untrue by the time it’s done.

But because you can put a canvas together so quickly, it will much more accurately reflect your strategic thinking and your company’s current reality. And if things change, it’ll be easier than a long and detailed plan to adjust. This brings us to Jim’s third benefit…

3. Business model canvas roadmaps allow you to pivot as needed.

If you build a business model canvas to guide your business roadmap , and something happens that forces you to re-prioritize or pivot your product , it will be a lot easier to update this short, high-level document than it would be if you had some monster MRD or business plan to tear apart and edit.

With a one-page business model canvas acting as the strategic undergirding for your roadmap, you’ll always be able to quickly spot any items or plans that need updating whenever priorities change or new realities demand that you adjust your approach.

How Can I Use A Business Model Canvas to Guide My Product Roadmap?

The alexa example.

Let’s talk through a hypothetical example, using Amazon’s Echo device (“Alexa”) as our guide.

Imagine that as they were talking through what belonged in the “Revenue Streams” bucket of the business model canvas, Amazon’s Echo team came up with three sources of revenue to start with:

1) Selling Echo devices.

2) Using the device to sell other stuff as customers ask it to connect to the Amazon marketplace. (“Alexa, please add laundry detergent pods to my shopping cart.”)

3) Licensing Echo’s proprietary speech-recognition technology to other businesses.

Now, if the Echo product team put these on their business model canvas, they’d know that they need to make room for budget, time, and resources on their product roadmap for all of these revenue streams.

Another Hypothetical Example of the Business Model Canvas: Channels

Or think about the Channels bucket in the business model canvas. If your team was building out a canvas, maybe you’d have several ideas for reaching customers:

1) The in-house sales team. 2) Affiliate partners. 3) Word-of-mouth advertising from users.

It’s easy to write. But how are you going to translate that “word-of-mouth” strategy into an actual plan?

Maybe you’ll need to budget time and resources for developing things right into your product that make it easier for users to share their experiences with friends, such as a handy tool to help them tweet about it. Maybe you’ll even want to include an “Invite a friend” feature that lets users easier send a trial license to friends, or a couponing feature that offers some reward to a user who brings in two more users.

The point is, your business model canvas can serve as a great strategic reminder of the things you’ve determined are important enough to make it onto your product roadmap .

So you can always look back and see immediately—it’s just one page, after all—if you’re still working on all of the essential elements of your product, or if you’ve inadvertently strayed from them and gotten lost in the wrong details.

That’s why we’re big proponents of the business model canvas approach to guiding your product roadmap .

Do you have an opinion about using the business model canvas approach for developing and documenting your product’s strategy? Feel free to share them in the comments section.

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Business Model Canvas Explained: Definition, Pros, Cons, and Building Blocks

So, here's the thing. We all know that we need structure to work effectively, but where do we start with so many options available? One tool worth considering is the Business Model Canvas (BMC) . Used effectively, it can give solid structure to your planning. 

In this article we will examine how the model works and a few ways to use it effectively. Then, we will describe its best practices and some recommendations on getting started. Finally, we will explore possible alternatives. 

Ready to get to know all about the BMC? Let's begin.

The Business Model Canvas, explained

The Business Model Canvas is a strategic management tool that helps businesses visualize and analyze their business models. It consists of 9 fundamental building blocks that describe the core aspects of a company's value proposition, infrastructure, customers, and finances (more on that later, we promise). 

By using it, organizations can gain a deeper understanding of their overall business model , identify areas for improvement, and develop new strategies for growth. One of the key benefits of the BMC format is that it's very visual. Used adequately, it allows organizations to create a display of their business model in alignment with strategic business objectives and the overall value proposition.

The nine BMC building blocks were initially presented in 2005 by Alexander Osterwalder. They were based on his Ph.D. work on business model ontology, supervised by Yves Pigneur. Since its release, the authors have developed other related tools, such as the Culture Map and the Value Proposition Canvas, which have helped the BMC tool to evolve and added value to it.

Business Model Canvas examples

Some examples of the BMC include:

• Strategy planning
• Business planning
• Business modeling

Lean Canvas vs. Business Model Canvas

Both the Lean and Business Model Canvas enable you to capture your entire model on a single page. The primary difference between them is that the Lean Canvas focuses mainly on solving a particular problem. The Business Canvas Model, on the other hand, is more sales orientated and usually focuses on selling products or services. 

Advantages and disadvantages of the Business Model Canvas

Even though the BMC offers a series of features in order to effectively visualize and analyze your organization's business model, there are also some possible drawbacks to be aware of – and avoid. 

To start on the right note, the benefits of the Business Model Canvas include:

• A clear and comprehensive business model overview in a single visual format. This makes it easier to understand, articulate, and communicate.
• Strong collaboration and breaking down silos. Using the BMC approach incentives people to work as one team, as it involves all stakeholders, and enables them to actively participate in developing, improving, and refining the business model.
• Colleagues constantly progressing with feedback (to borrow from an ITIL principle). The BMC approach allows for a fast and efficient testing of different business model configurations, speeding up the innovation process and reducing the time to market.
• A structured and systematic approach to analyzing and designing business models, which helps identify areas for improvement and innovation.
• A flexible approach that enables innovation instead of limiting it. The framework can be adapted to different types of businesses, industries, and customer groups.

However, if you choose to work with this management tool, you need to consider its potential disadvantages :

• Using the BMC approach effectively can be challenging without prior knowledge of business modeling concepts and terminology. You will need to put the work in and do some pre-reading to get the most out of it.
• Because it's so visual, it may oversimplify the complexity of a business model, making it more challenging to articulate some of the aspects of the organization's operations and performance. This makes it unsuitable for highly-specialized or complex businesses.
• Because it's a framework rather than a prescriptive standard that must be strictly adhered to, it doesn't provide detailed guidance on implementing or executing the business model, which can lead to difficulties in translating the canvas into action.
• It can rely on assumptions and hypotheses, which may not always be accurate or relevant for real-world situations.

The 9 building blocks of a Business Canvas Model

The Business Model Canvas is organized in nine  building blocks that represent a business model's key elements. These building blocks are:

• Value Proposition - The unique value the business provides to its customers and how it differentiates itself from competitors. In other words, it’s what sets your business apart, what makes it special, and what value it brings.
• Customer Segments - The different groups of customers the business targets with its products or services. This building block looks at your most important customers.
• Customer Relationships - The business' relationships with its customers and how it interacts with them. This is a fundamental building block as not only does it help you build and maintain a relationship, it also enables you to map out the cost and deliverables needed to continue to improve that relationship.
• Channels - T he different channels that the business uses to reach and interact with customers, including physical and digital channels.
• Key Partnerships - The relationships and collaborations that the business has with its suppliers, vendors, and other external partners.
• Key Activities - The key activities that the business must perform to deliver its value proposition and operate successfully. This building block helps you to define your most mission-critical actions and prioritize them accordingly.
• Key Resources - The key resources the business requires to operate, including human resources, physical assets, and intellectual property. This can also include relationships, distribution channels, and virtual assets.
• Revenue Streams - The different sources of revenue that the business generates from its customers, including one-time sales, recurring revenue, and other revenue streams. This building block also helps determine how each stream contributes to the business profit.
• Cost Structure - The various costs that the business incurs to operate, including fixed costs, variable costs, and other expenses. It also helps you identify your most expensive assets and activities to make effective financial plans for the future.

How to build a Business Model Canvas in 14 steps

The Business Model Canvas is flexible – no one size fits all. But for our money, there are 14 steps to effectively build it.

Step 1: Define the purpose 

The first step is to define the purpose of the Business Model Canvas. Where are you now, and where do you want to be? What do you hope to achieve? Who is the target audience? Have you double-checked to ensure what you want to achieve is in line with the strategic objectives of the rest of the business?

Step 2: Identify the nine building blocks

Identify the nine building blocks of the BMC, review each in relation to your business, and understand their purpose.

Step 3: Define the Value Proposition

What will add value? Start by defining the unique value that your business offers to customers. This will be the foundation of your canvas.

Step 4: Identify your Customer Segments 

Define the different groups of customers your business targets and their specific needs and preferences so you can focus and direct your efforts accordingly.

Step 5: Define Customer Relationships 

Identify your business' relationships with its customers and how it interacts with them. You can also use this step to identify your most important relationships so you can focus more effort on maintaining and improving them.

Step 6: Determine the Channels

Identify your business's channels to reach and interact with its customers, including physical and digital channels. From a service desk perspective, this could be offering a tier 0 channel with self-service or AI-enabled support capabilities before providing tier 1 and level 2 channels which offer a more people-centric user experience .

Step 7: Define Key Partnerships

Identify your business's relationships and collaborations with its suppliers, vendors, and other external partners. Remember, it's not just relationships with customers and stakeholders that matter, your suppliers are part of your team, so manage those relationships appropriately.

Step 8: Identify Key Activities

Define the key activities that your business must perform to deliver its value proposition and operate successfully.

Step 9: Determine Key Resources

Identify the key resources that your business requires to operate, including people, knowledge and wisdom, financial assets, and IT assets.

Step 10: Determine Revenue Streams 

Identify the different sources of revenue that your business generates from its customers. If you have a finance team,  work with them to identify current revenue streams and plan for future ones.

Step 11: Determine Cost Structure

Work with your finance team to identify the various costs that your business incurs to operate, CAPEX, and OPEX costs. 

Step 12: Build the Canvas

Once you have defined all of the building blocks, you can start creating the canvas to visualize what you are planning to accomplish.

Step 13: Review and refine

The BMC isn't a one-and-done approach. Review your model and seek feedback from your stakeholders to correct the course when needed.

Step 14: Keep going! 

In the words of Walt Disney, "Keep moving forward." Build and refine your model over time to reflect current and future activities more accurately. 

How to complete a Business Model Canvas

No one likes a blank page, do they? The difficult part is always getting started, but I promise, if you follow these steps, you'll be off to a great start: 

• Start with the Value Proposition - Before you do anything else, fill in the Value Proposition block in the center of the canvas. This should describe the unique value that your business provides to customers and how it differentiates itself from competitors. Focus on getting this point right because value is everything in terms of the BMC.
• Add in your enablers - This will include your key activities, customer segments, relationships (both customer and supplier relationships) assets, key activities, and channels.
• Add in your financials - Put in your revenue dreams and your cost models to make your BCM more transparent and ensure there are no hidden costs.
• Progress iteratively with feedback - Once you have filled in all the building blocks, review your canvas, iterate, and redefine  as needed. Seek input from stakeholders and make adjustments.
• Give the gift of clarity - Remember, this is a visual model, so don't get too stuck on the details or use too much jargon. The effect you're looking for is clear, concise, and visual.
• Relationships matter - We are talking about the relationship between each building block, so ensure they are correctly represented in your diagram.

Six alternatives to the Business Model Canvas

While the Business Model Canvas is a popular tool for developing and communicating a business model, other options are available too. Some alternatives include:

• Lean Canvas - This tool is similar to the BMC but focuses on startups and small businesses. It includes fewer blocks and focuses on validating hypotheses and testing assumptions quickly.
• SWOT Analysis - This tool helps to identify a business's strengths, weaknesses, opportunities, and threats. This can be a valuable tool for assessing the current state of a company and identifying areas for improvement.
• Business Model Innovation - This involves developing a new business model that is different from the traditional one used in the industry. It can be done through creative thinking, exploring new technologies, or adopting a new approach to customer relationships.
• Blue Ocean Strategy - This framework helps businesses to create new markets and uncontested market space. It involves identifying and focusing on areas of innovation that competitors have not explored.
• Value Proposition Canvas - This tool helps businesses to define and communicate their value proposition to customers. It focuses on the customer's needs, desired outcomes, challenges, and how the company can better meet those needs than its competitors.

Key takeaways

The Business Model Canvas or BMC is a strategic management tool that helps businesses visualize, design, and analyze their business models. Some of its common applications include business planning, value propositions, and modeling.

If you want to give it a shot to plan your organization’s strategy, make sure that you have your BCM template ready with the nine key elements that need to be completed. And don’t forget to follow through our six tips on how to get started!

  Frequently Asked Questions

How do you make a good business model canvas .

To make a good Business Model Canvas, clearly define the unique value proposition of your business and ensure that the key building blocks of the canvas (such as channels, revenue streams, and cost structure) are aligned with the overall strategic objectives of the business. Review and improve the canvas as needed to continue improving and aligning with business needs.

What are the four types of business models? 

The four types of business models are product, service, platform, and sub-subscription-based.

What are the three sections of the Business Model Canvas? 

Value Propositions, enablers, and financial planning.

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A complete Guide on Business Model vs Business Plan

• August 19, 2020
• Entrepreneurship Venture Capital Funding

Introduction

Business Model and Business plan are interrelated to each other. Lets see a brief difference between business model vs business plan. Business Model acts as a centre for the business plan .

A business model is a framework used to design and depicts how a business might create and capture value. The business plan is a document explaining how a business might become profitable.

A business model is made to be tested while a business plan’s primary goal is to gain investments. If I talk about stages, designing a business model comes first, then we create a plan.

This plan describes strategies involved to build the business and match the plan with the business model.

In this blog, I will start with the difference then some key considerations involving why we should opt, how to write, and some examples of business models and business plans.

We would also be covering components of the business model that can be used while designing a business model canvas. The business model canvas is a tool which helps you to understand a business model in a clear and structured way.

What are the main differences between the business model and the business plan?

Most entrepreneurs start with a strong vision to work on a perfect ideal plan. Instead of chasing an ideal plan, begin with a written description. This description should include who you are, what your ideas are, and why you are in that particular business.

Let’s take an example: If you are selling jewellery online, e-commerce is your business model. Your business plan is to sell jewellery.

Business Plans can be long and time-consuming. So, we need to format the plan properly. A business plan is a document containing detailed future projections such as tactics, goals to cover.

Business Models are structured proposals of a business containing an outline that is easy and less time-consuming. A one-page business model explains how an organization is working with the main idea.

This makes a business model fast, concise, and portable. I will discuss the critical difference from two perspectives:

• External resources including stakeholders, investors, and other parties
• Internal resources including top management, owners, and shareholders

External Resources: Business model vs Business Plan?

If you want to attract investors and grow your business through external resources, a detailed plan is needed. This allows investors to understand the several parts of your business.

If I talk about the main ingredient of a business plan is a set of projections for three-five years. The interests of investors depend on whether your business model is scalable or not.

While investors will also want to know what kind of business model you want to build. The main idea is to show your business future projections and to address the kind of resources needed to get there through a business plan.

So, for external subjects to know about your business and invest in it, the business plan is the best tool.

Internal Resources: Business plan vs Business model?

To understand your business, a business model is one of the most effective. For instance, in a start-up phase, the business model canvas and the lean startup canvas are the most suited.

Each of those tools will help you to build a different kind of business. If you want to understand or design a business model that can help you grow, the business model frameworks are the most suited, vs business plan.

According to   Alan Gleeson , who is the General Manager of Palo Alto Software, Ltd recently answered the difference between business model & business plan in a guest post on TechCrunch : –

“It is worth clarifying the business model vs business plan. A business plan details the business opportunity in a document whereas a business model represents a one-page visual representation or a simple verbal description”.

So if you are a technology-based startup who is looking to raise venture capital, then your business plan should focus on the Venture Capital with a PowerPoint slide deck and an executive summary.

However, if you are a coffee shop looking for a modest investment then the information should include a simple business plan.

Modern business planning is agile, flexible, concise, and more about goal setting than bound physical documents.

This planning process brings numerous benefits for the entrepreneur, such as an ability to look at the operations, to ensure internal focus and cash flow management.

• Business Model Canvas vs Business Plan

Business Model Canvas and Business Plans are useful for an organization to grow. It depends on which stage of the project your company is working in.

Let us discuss the difference between the two and when they should be prepared for the growth of the business.

Business Model Canvas and Business Plan serve a very different purpose. If you are still checking and testing out different ways to roll out your business, BMC is the right place to start.

But, if you are looking for a loan from a bank or an investment for your business, a BMC is inadequate. Rather you should have a business plan. Business Model Canvas helps you, the founder, to figure out the business model and design it accordingly.

Business Plan is for an external stakeholder to analyze your business. The Business Model Canvas functions as a guide. It helps in quick communication between the owners of the business and its stakeholders.

So, let’s take an example of a startup business to understand it clearly. In the startup world, everything is highly changeable. Your business model or target audience can be changed in a month after you started.

And, can you imagine, you spent 3-5 weeks to write a full Business Plan & now you need to rewrite it again because some of the core points have changed? So, for a Startup business model canvas is highly preferred.

If you’re working on a project for more than one year and you’re thinking of asking for funding to an investor, you should work hard to write a great business plan, including an investor pitch.

• Business Model
• Purpose of Business Model

Business Models are necessary for the smooth functioning of every organization. They help in maintaining a close relationship with the customer.

Business Models focus on customer feedback that includes the problems and needs of the customers once the product or service is distributed to them.

How to write a Business Model?

A good Business Model describes the marketing, operations, and distribution strategies of a company. It also includes the analysis of the organizational structure and amending them to sustain a competitive edge.

1. Operational Outline- Design a pictorial view of business operations on a flip chart with circles and labels.

Define the interrelation between them to promote sales, distribute products, target customers, and revenue generation for your team as shown below.

2. Formatting Business Model – Format your business model on a template. You can include the details about different types of customers and how your products and services are valuable to them.

Prepare the total cost incurred for production, employees, and material. Further, prepare a  list of suppliers and partners involved in your business.

3. Operational Business Model – Adopt the “Bricks and Mortar” Business Model to attract local customers who want to choose the products and services provided by your store.

If the customers are from different geographical regions, then target the audience through the Internet. Also, plan to utilize company resources and maintain business profits. Focus on getting new customers and potential risks or threats to the business.

4. Additional Add up Values – Recognize the different methods for serving your customers with products and services. Maintain customer relations based on various segments and target potential customers.

Business Model Example

Let us discuss the different Business Model Examples in different segments.

1. Advertising- Advertising model includes content creation and displaying it in the visual form of advertisement to the readers and viewers. Examples are YouTube, New York Times.

2. Affiliate- Affiliate model uses links embedded in the content through the internet. Examples are TopTenReviews.com, TheWireCutter.com.

3. Brokerage- Brokerage models are mainly used by real estate agencies that involve brokerage transaction fees levied either to the buyer or seller or both by the brokers. Examples are century 21, Orbitz.

4. Crowd sourcing- A large number of people are contributing content for your site in exchange for access to other content. Examples are YouTube, Dell.

5. Freemium- Freemium provides free primary services and charges for premium services. Examples are LinkedIn, Mail chimp.

6. Franchise- Franchise is selling a methodology for starting and running a business. Examples are McDonald’s, Allstate.

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Components of business model  canvas.

There are different components and elements of a business model. These are known as the main building blocks of a business which provides information regarding customers, finance, infrastructure & offers related to business.

1. Customer Segments- It defines the customer according to the segment based on the products and services offered to them.

2. Value Propositions- These add up the value to the products and services offered to the customer based on their performance, brand status, design, costing, accessibility, and newness.

3. Distribution Channels – They act as a medium between the customer and the organization. A quick, easy, and the most efficient channel is always for the distribution of products and services.

4. Customer Relationships- It helps in maintaining customer relationships according to segments to achieve financial success and stability.

5. Revenue Streams – This strategy provides a way in which a company can engage its customers to buy its products and services.

6. Key Resources- Key resources such as human, financial, intellectual, and physical provide value to the customers.

7. Key Activities – Relevant Key activities are necessary for every business as they help in maintaining revenue streams to make an efficient business model.

8. Partnerships- Partnerships with high-quality suppliers and partners reduce the risks to maintain efficient and streamlined operations.

9. Cost Structure – Cost structure is the total cost that will be incurred for the establishment of a particular business.

Business Model Canvas  

Business Model Canvas is a pictorial representation that provides a brief idea about your proposed business. They also include a visualizing description of business models and their values.

Business Model Canvas comprises all business components such as customer segments, value proposition, revenue streams, channels, Customer relationships, Key resources and activities, Partners, and Structure of Cost.

Business Plan

Purpose of the business plan.

The main purpose of a business plan is to focus on achieving business goals, secure outside financing, mapping growth, and including the right talent for the organization.

It acts as a blueprint for expanding and running a business in the right direction at every step. It also prepares for the future with clarity about the goals and achievements.

Every company should adopt a business plan as it acts as a decision-making tool by formatting the business goals and its intended audience.

How to write a business plan?  

Business Plan provides a road map for the growth and success of every business. It also helps to find investors and business partners. It  includes some components as

1. Executive Summary- It is the brief of the business plan that includes mission and statement, primary information, products and services, location, and employees.

2. Company Description- This includes detailed information about a company such as customers, business problems, nature of products, and services catered.

3. Market Analysis- It helps in understanding the target market, its trends, the potential for growth in the existing market.

4. Organization and Management- This depicts the organizational chart with vision and mission regarding the department and functioning of the company.

5. Marketing and Sales- Marketing involves different marketing strategies required in the business while the sales are responsible for covering the return on investments.

6. Funding Requests- Funding requests can be online or in a substantial manner.

7. Appendix and Glossary- Every business should provide appendix and glossary for the supporting documents and references to the data.

• Business Plan Examples

Let us discuss some business plan examples in the different sections of the business.

• Construction and Engineering
• Travel and Transport sector
• Hotels and Hospitality
• Children’s Education
• Computers and the Internet
• Consulting, Health, and Beauty
• Food and Farming, Medical and Healthcare
• Personal Services, Non-Profit Organizations
• Manufacturing and Online business.

For instance, let us consider a business plan for the Manufacturing sector. The manufacturing is mainly adopted by the companies who want to start new manufacturing, production, or fabrication business.

This plan helps in knowing the business profile and description, detailed investor information, risk factors involved. It also includes products, and services to be used, market research, sales and marketing strategies, operations, and financial analysis.

Types of Business Plan  

There are various business plans adopted by organizations depending on their nature of business.

1. Startup Business Plan- It is for the enterprises that want to start their business. This mainly includes market evaluations, products and services provided, financial analysis, and projected management team.

2. Internal Business Plan- These plans describe the operational costs and profitability, the company’s actual position, marketing, hiring, and technical costs.

3. Strategic Business Plan- This plan includes the company’s goals in the form of implementation schedule, objectives, and critical success factors and how to achieve them.

4. Feasibility Business Plan- It consists of the description of products and services, required capital, and target demographics.

5. Operations Business Plan- They are part of internal plans that include the company’s main operations with employee responsibilities.

6. Growth Business Plan- This plan provides an in-depth description of the proposed growth plan and investment for its potential investors.

So, the difference between a Business Model and a Business Plan is that they are both parts of an effective Strategic Planning process. A business model is all about VALUE!

What value are you creating, whom are you creating this value for, how are you delivering this value to said target?A great business plan is contingent on RESOURCES – time, infrastructure, manpower, technology, competences & capital.

They both help a business to grow. Using the right one means that your company can have a clearer process and better products and services.

As I said above, the business model is like a destination, and the planning is how you will reach your destination. So, let me add that the planning I recommend isn’t just a map or a route; it’s a GPS, real-time traffic and weather information.

And in that analogy, the business model is the destination. Hence, having an effective Strategic Plan is a powerful business advantage that dramatically increases the odds of success.

Alcor private equity and Venture capital firm  also empowers founders and businesses to grow their companies at all stages.

• Business model canvas
• Business Model Examples
• Business Model vs Business Plan
• business plan
• Components of Business Model
• Difference between business model and business plan
• global investors
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• How to Write a Business Model?
• How to write a business Plan?
• Pre-screening
• Purpose of Business Plan
• Risk Assessment
• Types of Business Plans
• Venture Capital Funding
• What is a Business Model Canvas
• What is a Business Plan

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Mastering the Business Model Canvas: From Concept to Application

Module 1 - introduction to business model canvas.

• What best defines a business model?
• Why did business modeling evolve from traditional business plans to tools like the BMC?
• Why is visualization important in business modeling?
• Who developed the Business Model Canvas?
• Which of the following is NOT a component of the Business Model Canvas?
• What is a primary benefit of using the Business Model Canvas?
• How does the Business Model Canvas compare to traditional business plans?
• Advantages of the BMC
• In which of these industries has the BMC been particularly effective?
• Which statement accurately reflects a limitation of the Business Model Canvas?
• BMC Applications in Various Industries
• The Business Model Canvas is known for its:
• Topic IBS - test on website

Participants 11

BMC vs. Traditional Business Plans

Steve Johnston November 17, 2023

Dynamic and Flexible Approach:

Traditional business plans, while thorough, often lack the agility needed in the modern business landscape. They can be time-consuming to create and may quickly become outdated. In contrast, the BMC is concise and focuses on the key aspects of a business model, making it easier to update and modify. Its visual format allows for a clearer understanding of how different elements of a business model are interconnected.

Quick Adaptation to Market Changes:

The Business Model Canvas (BMC) emerged as a response to the limitations of traditional business plans. Unlike the lengthy and often rigid traditional plans, the BMC offers a dynamic and flexible framework that adapts swiftly to changing market conditions. This adaptability is crucial in today’s fast-paced business world where companies must pivot quickly in response to new opportunities or threats.

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What Is a Business Model?

Understanding business models, evaluating successful business models, how to create a business model.

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The Bottom Line

Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

The term business model refers to a company's plan for making a profit . It identifies the products or services the business plans to sell, its identified target market , and any anticipated expenses . Business models are important for both new and established businesses. They help new, developing companies attract investment, recruit talent, and motivate management and staff.

Established businesses should regularly update their business model or they'll fail to anticipate trends and challenges ahead. Business models also help investors evaluate companies that interest them and employees understand the future of a company they may aspire to join.

Key Takeaways

• A business model is a company's core strategy for profitably doing business.
• Models generally include information like products or services the business plans to sell, target markets, and any anticipated expenses.
• There are dozens of types of business models including retailers, manufacturers, fee-for-service, or freemium providers.
• The two levers of a business model are pricing and costs.
• When evaluating a business model as an investor, consider whether the product being offered matches a true need in the market.

Investopedia / Laura Porter

A business model is a high-level plan for profitably operating a business in a specific marketplace. A primary component of the business model is the value proposition . This is a description of the goods or services that a company offers and why they are desirable to customers or clients, ideally stated in a way that differentiates the product or service from its competitors.

A new enterprise's business model should also cover projected startup costs and financing sources, the target customer base for the business, marketing strategy , a review of the competition, and projections of revenues and expenses. The plan may also define opportunities in which the business can partner with other established companies. For example, the business model for an advertising business may identify benefits from an arrangement for referrals to and from a printing company.

Successful businesses have business models that allow them to fulfill client needs at a competitive price and a sustainable cost. Over time, many businesses revise their business models from time to time to reflect changing business environments and market demands .

When evaluating a company as a possible investment, the investor should find out exactly how it makes its money. This means looking through the company's business model. Admittedly, the business model may not tell you everything about a company's prospects. But the investor who understands the business model can make better sense of the financial data.

A common mistake many companies make when they create their business models is to underestimate the costs of funding the business until it becomes profitable. Counting costs to the introduction of a product is not enough. A company has to keep the business running until its revenues exceed its expenses.

One way analysts and investors evaluate the success of a business model is by looking at the company's gross profit . Gross profit is a company's total revenue minus the cost of goods sold (COGS). Comparing a company's gross profit to that of its main competitor or its industry sheds light on the efficiency and effectiveness of its business model. Gross profit alone can be misleading, however. Analysts also want to see cash flow or net income . That is gross profit minus operating expenses and is an indication of just how much real profit the business is generating.

The two primary levers of a company's business model are pricing and costs. A company can raise prices, and it can find inventory at reduced costs. Both actions increase gross profit. Many analysts consider gross profit to be more important in evaluating a business plan. A good gross profit suggests a sound business plan. If expenses are out of control, the management team could be at fault, and the problems are correctable. As this suggests, many analysts believe that companies that run on the best business models can run themselves.

When evaluating a company as a possible investment, find out exactly how it makes its money (not just what it sells but how it sells it). That's the company's business model.

Types of Business Models

There are as many types of business models as there are types of business. For instance, direct sales, franchising , advertising-based, and brick-and-mortar stores are all examples of traditional business models. There are hybrid models as well, such as businesses that combine internet retail with brick-and-mortar stores or with sporting organizations like the NBA .

Below are some common types of business models; note that the examples given may fall into multiple categories.

One of the more common business models most people interact with regularly is the retailer model. A retailer is the last entity along a supply chain. They often buy finished goods from manufacturers or distributors and interface directly with customers.

Example: Costco Wholesale

Manufacturer

A manufacturer is responsible for sourcing raw materials and producing finished products by leveraging internal labor, machinery, and equipment. A manufacturer may make custom goods or highly replicated, mass produced products. A manufacturer can also sell goods to distributors, retailers, or directly to customers.

Example: Ford Motor Company

Fee-for-Service

Instead of selling products, fee-for-service business models are centered around labor and providing services. A fee-for-service business model may charge by an hourly rate or a fixed cost for a specific agreement. Fee-for-service companies are often specialized, offering insight that may not be common knowledge or may require specific training.

Example: DLA Piper LLP

Subscription

Subscription-based business models strive to attract clients in the hopes of luring them into long-time, loyal patrons. This is done by offering a product that requires ongoing payment, usually in return for a fixed duration of benefit. Though largely offered by digital companies for access to software, subscription business models are also popular for physical goods such as monthly reoccurring agriculture/produce subscription box deliveries.

Example: Spotify

Freemium business models attract customers by introducing them to basic, limited-scope products. Then, with the client using their service, the company attempts to convert them to a more premium, advance product that requires payment. Although a customer may theoretically stay on freemium forever, a company tries to show the benefit of what becoming an upgraded member can hold.

Example: LinkedIn/LinkedIn Premium

Some companies can reside within multiple business model types at the same time for the same product. For example, Spotify (a subscription-based model) also offers a free version and a premium version.

If a company is concerned about the cost of attracting a single customer, it may attempt to bundle products to sell multiple goods to a single client. Bundling capitalizes on existing customers by attempting to sell them different products. This can be incentivized by offering pricing discounts for buying multiple products.

Example: AT&T

Marketplace

Marketplaces are somewhat straight-forward: in exchange for hosting a platform for business to be conducted, the marketplace receives compensation. Although transactions could occur without a marketplace, this business model attempts to make transacting easier, safer, and faster.

Example: eBay

Affiliate business models are based on marketing and the broad reach of a specific entity or person's platform. Companies pay an entity to promote a good, and that entity often receives compensation in exchange for their promotion. That compensation may be a fixed payment, a percentage of sales derived from their promotion, or both.

Example: social media influencers such as Lele Pons, Zach King, or Chiara Ferragni.

Razor Blade

Aptly named after the product that invented the model, this business model aims to sell a durable product below cost to then generate high-margin sales of a disposable component of that product. Also referred to as the "razor and blade model", razor blade companies may give away expensive blade handles with the premise that consumers need to continually buy razor blades in the long run.

Example: HP (printers and ink)

"Tying" is an illegal razor blade model strategy that requires the purchase of an unrelated good prior to being able to buy a different (and often required) good. For example, imagine Gillette released a line of lotion and required all customers to buy three bottles before they were allowed to purchase disposable razor blades.

Reverse Razor Blade

Instead of relying on high-margin companion products, a reverse razor blade business model tries to sell a high-margin product upfront. Then, to use the product, low or free companion products are provided. This model aims to promote that upfront sale, as further use of the product is not highly profitable.

Example: Apple (iPhones + applications)

The franchise business model leverages existing business plans to expand and reproduce a company at a different location. Often food, hardware, or fitness companies, franchisers work with incoming franchisees to finance the business, promote the new location, and oversee operations. In return, the franchisor receives a percentage of earnings from the franchisee.

Example: Domino's Pizza

Pay-As-You-Go

Instead of charging a fixed fee, some companies may implement a pay-as-you-go business model where the amount charged depends on how much of the product or service was used. The company may charge a fixed fee for offering the service in addition to an amount that changes each month based on what was consumed.

Example: Utility companies

A brokerage business model connects buyers and sellers without directly selling a good themselves. Brokerage companies often receive a percentage of the amount paid when a deal is finalized. Most common in real estate, brokers are also prominent in construction/development or freight.

Example: ReMax

There is no "one size fits all" when making a business model. Different professionals may suggest taking different steps when creating a business and planning your business model. Here are some broad steps one can take to create their plan:

• Identify your audience. Most business model plans will start with either defining the problem or identifying your audience and target market . A strong business model will understand who you are trying to target so you can craft your product, messaging, and approach to connecting with that audience.
• Define the problem. In addition to understanding your audience, you must know what problem you are trying to solve. A hardware company sells products for home repairs. A restaurant feeds the community. Without a problem or a need, your business may struggle to find its footing if there isn't a demand for your services or products.
• Understand your offerings. With your audience and problem in mind, consider what you are able to offer. What products are you interested in selling, and how does your expertise match that product? In this stage of the business model, the product is tweaked to adapt to what the market needs and what you're able to provide.
• Document your needs. With your product selected, consider the hurdles your company will face. This includes product-specific challenges as well as operational difficulties. Make sure to document each of these needs to assess whether you are ready to launch in the future.
• Find key partners. Most businesses will leverage other partners in driving company success. For example, a wedding planner may forge relationships with venues, caterers, florists, and tailors to enhance their offering. For manufacturers, consider who will provide your materials and how critical your relationship with that provider will be.
• Set monetization solutions. Until now, we haven't talked about how your company will make money. A business model isn't complete until it identifies how it will make money. This includes selecting the strategy or strategies above in determining your business model type. This might have been a type you had in mind but after reviewing your clients needs, a different type might now make more sense.
• Test your model. When your full plan is in place, perform test surveys or soft launches. Ask how people would feel paying your prices for your services. Offer discounts to new customers in exchange for reviews and feedback. You can always adjust your business model, but you should always consider leveraging direct feedback from the market when doing so.

Instead of reinventing the wheel, consider what competing companies are doing and how you can position yourself in the market. You may be able to easily spot gaps in the business model of others.

Criticism of Business Models

Joan Magretta, the former editor of the Harvard Business Review, suggests there are two critical factors in sizing up business models. When business models don't work, she states, it's because the story doesn't make sense and/or the numbers just don't add up to profits. The airline industry is a good place to look to find a business model that stopped making sense. It includes companies that have suffered heavy losses and even bankruptcy .

For years, major carriers such as American Airlines, Delta, and Continental built their businesses around a hub-and-spoke structure , in which all flights were routed through a handful of major airports. By ensuring that most seats were filled most of the time, the business model produced big profits.

However, a competing business model arose that made the strength of the major carriers a burden. Carriers like Southwest and JetBlue shuttled planes between smaller airports at a lower cost. They avoided some of the operational inefficiencies of the hub-and-spoke model while forcing labor costs down. That allowed them to cut prices, increasing demand for short flights between cities.

As these newer competitors drew more customers away, the old carriers were left to support their large, extended networks with fewer passengers. The problem became even worse when traffic fell sharply following the September 11 terrorist attacks in 2001 . To fill seats, these airlines had to offer more discounts at even deeper levels. The hub-and-spoke business model no longer made sense.

Example of Business Models

Consider the vast portfolio of Microsoft. Over the past several decades, the company has expanded its product line across digital services, software, gaming, and more. Various business models, all within Microsoft, include but are not limited to:

• Productivity and Business Processes: Microsoft offers subscriptions to Office products and LinkedIn. These subscriptions may be based off product usage (i.e. the amount of data being uploaded to SharePoint).
• Intelligent Cloud: Microsoft offers server products and cloud services for a subscription. This also provide services and consulting.
• More Personal Computing: Microsoft sells physically manufactured products such as Surface, PC components, and Xbox hardware. Residual Xbox sales include content, services, subscriptions, royalties, and advertising revenue.

A business model is a strategic plan of how a company will make money. The model describes the way a business will take its product, offer it to the market, and drive sales. A business model determines what products make sense for a company to sell, how it wants to promote its products, what type of people it should try to cater to, and what revenue streams it may expect.

What Is an Example of a Business Model?

Best Buy, Target, and Walmart are some of the largest examples of retail companies. These companies acquire goods from manufacturers or distributors to sell directly to the public. Retailers interface with their clients and sell goods, though retails may or may not make the actual goods they sell.

What Are the Main Types of Business Models?

Retailers and manufacturers are among the primary types of business models. Manufacturers product their own goods and may or may not sell them directly to the public. Meanwhile, retails buy goods to later resell to the public.

How Do I Build a Business Model?

There are many steps to building a business model, and there is no single consistent process among business experts. In general, a business model should identify your customers, understand the problem you are trying to solve, select a business model type to determine how your clients will buy your product, and determine the ways your company will make money. It is also important to periodically review your business model; once you've launched, feel free to evaluate your plan and adjust your target audience, product line, or pricing as needed.

A company isn't just an entity that sells goods. It's an ecosystem that must have a plan in plan on who to sell to, what to sell, what to charge, and what value it is creating. A business model describes what an organization does to systematically create long-term value for its customers. After building a business model, a company should have stronger direction on how it wants to operate and what its financial future appears to be.

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• Can a Lean Canvas Replace a Traditional Business Plan?

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More than many other MBA students and graduates, entrepreneurs love possibilities. And only within roughly the past 15 years have new kinds of business plan possibilities captured the imagination of entrepreneurs. Some of these planning approaches—which embody radical departures from the process of drafting traditional business plans—appear to be gaining momentum.

What entrepreneur wouldn’t love to dispense with the lengthy and often tedious process of spending months drafting a traditional business plan—a document that Stanford entrepreneurship professor Steve Blank characterizes as one that “investors make you write that they don’t read.”

Business plans customarily include five years’ worth of financial forecasts and 12 to 18 months’ worth of new product marketing plans. That’s a hefty volume of speculation entrepreneurs often need to estimate under extremely uncertain conditions that can render accuracy virtually impossible.

Moreover, what entrepreneur wouldn’t love to replace their typical 40-page-plus business plan with a single-page document—if for no other reason than investors could no longer dodge meeting requests through spurious excuses that they “haven’t yet found time to read” a document they expected in the first place?

A one-page document of this kind may not satisfy every potential investor at every financing stage. But many investors will consider a document like this to be more than adequate. Read on for an analysis of one viable alternative to traditional business plans.

How Lean Startups Encouraged Lean Business Plans

One newer business planning approach for startups aligns with the now-common “lean” startup principles that earlier in this decade gained popularity in Silicon Valley and form the topics of some recent business books we’ve showcased here on BSchools . Lean methodologies such as agile development grew out of struggles in the software industry to manage product creation cycles that had become unmanageable because they now had to operate continuously in response to changes prompted by aggressive competitive threats. In particular, the agile approach saves time and resources by building new products through iterative, incremental steps that produce only the most essential functionality.

This classic Harvard Business Review article by Blank, “Why the Lean Start-Up Changes Everything,” explains how concepts borrowed from lean methodologies influenced a rethinking of traditional business plans. For example, in contrast to generally accepted business plan development methods, the lean approach encourages entrepreneurs to only conduct minimal research.

Instead, lean methods encourage entrepreneurs to talk directly with potential initial customers. That way, they gain a more accurate and complete understanding of the needs of such early adopters, as well as the opportunity to build relationships with likely first customers.

Lean methodology also encourages the faster development of minimum viable product prototypes, or MVPs, that don’t require substantial development time or budgets because they only offer the most critical features. If the MVP doesn’t win validation from customer reviewers, the lean approach applauds “pivoting.” Currently, in vogue in Silicon Valley, that term denotes quick course corrections based on revised initial assumptions that better suit customer needs.

In other words, the approach rewards chasing customers and markets instead of funding. If entrepreneurs receive enough validation from their customer reviewer panel, the arguments in favor of funding start to seem so overwhelmingly compelling to investors that access to startup capital ceases to pose such a challenging obstacle. Accelerated launch schedules and rapid scaling then flow naturally as an outcome of this process.

The Lean Canvas Framework: Advantages Over a Traditional Business Plan

First conceptualized by business model expert and author Ash Maurya in 2010, the platform for this approach comprises a framework known as “ lean canvas .” As Blank notes, this diagram depicts how a firm creates value. The canvas compares key characteristics of both the product and the market through an analysis of essential elements known as “building blocks.” Nine building blocks are used to describe every conceivable business model, whether the model belongs to Apple, Amazon, or Starbucks. The same nine components also allow for the design of any new business model imaginable.

Building Block Topics: Focused Essentials

The building blocks compare in some ways with the more general sections of a traditional business plan, such as the latter’s Opportunity, Execution, Company Overview, Executive Team, and Financial Forecasts sections.

However, that’s where the similarities end. For one thing, the topics of the building blocks comprise more focused and targeted essentials , which we interpret in these ways:

• The Problem – The marketplace obstacles or challenges that the new product, service, or venture plans to address.
• The Solution – The action mechanisms or methods through which the new product, service, or venture will solve the marketplace challenges.
• Key Metrics – These are performance indications that measure progress, such as market share against competitors, or an individual product’s contribution margin towards the overall profitability of a product line or division.
• Unique Selling or Value Proposition – The exclusive competitive advantages that the product, service, or venture offers and entices customers to buy despite competing alternatives in the marketplace.
• Unfair Advantages – The overwhelming advantages the product, service, or venture exerts in the marketplace that competitors cannot match or surpass in the short run.
• Channels – Maurya specifies a very different definition than those typically appearing in MBA marketing management textbooks for this building block. He defines channels simply as “paths to customers, whether inbound or outbound.” This is a broader interpretation than the means that exist through which the business can distribute the product or solution. These channels include intermediaries like distributors of physical goods in brick-and-mortar marketplaces. Channels also include search engine optimization (or SEO) and other techniques that enable customers to find sellers online.
• Customer Segments – These are specific categories of customers to which the business appeals, or “targets.”
• Cost Structure – The costs the business must pay in order to bring the product or service to market, like the costs of direct materials and labor in manufacturing processes, or for online businesses, computer server leasing within data centers.
• Revenue Streams – The earnings cash flows, expressed over time, from specific products or services.

Emphasizing “Big Picture” Relationships Among Building Blocks

Furthermore, unlike the narrative format of a business plan, the diagram displays all these elements side-by-side on a page, poster, or computer screen—that is, within a single visual framework. That way, the canvas offers a substantial advantage because it emphasizes the big-picture synergies and interrelationships among the building blocks in a way that a traditional business plan narrative cannot.

Swiss startup strategy expert Alexander Osterwalder said , “the combination between great products and a great business model is going to keep you ahead [of] competition in the coming decade.” So what you really want to understand is how all these pieces fit together and what the best business model could be for your idea.

Adapting Business Models

Also, unlike a business plan, the canvas allows one to experiment with and adapt existing business models for new purposes. For example, Osterwalder points out that the business model of Nestle’s Nespresso coffee system, which prominently features high-end retail “boutiques,” is nothing but a recycling of Apple’s Apple Store retail concept. Because both companies built their own stores to create high-end consumer brands, the stylized depictions of their business models on lean canvases display similar diagrams. Visually representing the models in such ways enables model designers to more easily recognize the advantages and drawbacks of repurposing a venerable model to serve the innovative purposes of a new startup.

How the Lean Canvas Expedites Drafting and Revisions

When finalized, the one-page format is faster and simpler for entrepreneurs to write than a lengthy and complex business plan which could take months to draft and revise. And when printed, the canvas becomes a one-page document that investors are much more likely to read. Moreover, instead of a PowerPoint slide deck, the canvas can also form the foundation for entrepreneurs’ succinct investor pitches.

Business Model Competitions

Because the lean methodology provides in many ways a superior means of presenting the business model narrative that appears within most typical business plans, increasing numbers of entrepreneurs and investors began to rally around the lean business model methodology. This movement led to the staging of business model competitions requiring contestants to apply the lean business model framework during their presentations before judging panels. Some events, like the International Business Model Competition , offer prize pools as large as $200,000.

But What About the Numbers? Extensions to the Lean Canvas Model

In January 2018, Maurya acknowledged a deficiency in the lean canvas framework. He conceded that the lean canvas framework alone could not replace more complete business plans for stakeholders who required financial forecasts and product introduction roadmaps.

Maurya’s team then introduced two diagrams that complement the lean business model framework. Similar in principle to the lean canvas, the first, which he named the “ customer factory blueprint ,” applies only seven key metrics “to replace all the numbers in a typical financial forecast spreadsheet.”

The customer factory blueprint specifies a “minimum success criteria,” or MSC. Other metrics include:

• Revenue (the pricing model)
• Retention (the drivers of repeat purchases)
• Acquisition (how the firm identifies new customers)
• Activation (the initial value experience)
• Referrals (the drivers that encourage customers to tell others about the product or firm)
• The annual growth rate

Maurya calls the second diagram the “ traction roadmap ,” or TR. The TR’s purpose is to illustrate a product roll-out’s objectives and milestones to stakeholders. Some milestones might assess the fit between the problem and the solution, or the fit between the product and the market; others might indicate when the firm’s objective shifts to rapid scaling after testing has assured the management team of the product’s marketplace success.

It might seem too early to tell whether these two complementary quantitative tools will win acceptance comparable to the lean canvas framework. However, one effect seems apparent. These two additional frameworks help remove some of the remaining roadblocks to the widespread adoption of the lean canvas methodology as a replacement for traditional business plans.

Douglas Mark

While a partner in a San Francisco marketing and design firm, for over 20 years Douglas Mark wrote online and print content for the world’s biggest brands , including United Airlines, Union Bank, Ziff Davis, Sebastiani, and AT&T. Since his first magazine article appeared in MacUser in 1995, he’s also written on finance and graduate business education in addition to mobile online devices, apps, and technology. Doug graduated in the top 1 percent of his class with a business administration degree from the University of Illinois and studied computer science at Stanford University.

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A Simpler and Better Alternative to the Business Model Canvas Template

Posted november 3, 2022 by noah parsons.

If you’re looking to quickly document your business idea, but don’t want to take the time to develop a complete business plan, you’ve probably come across the Business Model Canvas. The Business Model Canvas was developed to solve the two key problems with business plans—they take too long to write and are difficult to update.

However, the Business Model Canvas introduces its own problems and can often give you an incomplete picture of your business. That’s why we’ve developed a one-page business plan template. It can help you spend even less time creating a flexible, much more useful snapshot of your business roadmap.

So, which planning format should you use? Let’s explore the pros and cons of the Business Model Canvas and introduce you to the basics of the one-page plan to help you decide.

What is the Business Model Canvas?

If you’re new to the Business Model Canvas, here’s a quick definition:

The Business Model Canvas is a one-page overview of a business’s strategy and business model. It’s intended to be used by startups and founders who are trying to identify a business model that will work for their business. The Business Model Canvas is intended to provide all of the structure of a business plan, without the inconsistencies and vagaries of “back of the napkin” business idea sketches.

Here’s what the Business Model Canvas template looks like:

Pros of the Business Model Canvas

The core purpose of the Business Model Canvas is to demystify the business planning process. It removes the need for a traditional, text-heavy business plan, in favor of a single-page outline that can help you and outside parties better explore your business idea. Here are a few key benefits that come with this template.

Visualize your plan

The structure of the Business Model Canvas ditches a linear structure in favor of a cell-based template. This is done to encourage you to build connections between every element of your business from the start. Rather than writing out disjointed expenses, value propositions, and potential customers — you work through them side-by-side and can easily reference previous sections as you develop them.

Faster to create

Now, you do have limited space to leverage with the Business Model Canvas. That’s really the point, as this is meant to be a faster and easier plan to create. Even the size of each cell is designed purposefully. 

For example, the problem takes up a larger section of the page, but your solution and metrics are each half the size. This tells you, without detailed instruction, that you need to take a deep and extended dive into potential issues and explore as many current alternatives as possible. But your solution and data measurements should be streamlined and purposeful in relation to those issues that you’ve uncovered.

Documents your business model

The layout of the Business Model Canvas is also useful for you, your team, and any third parties to visualize your business model . It showcases the framework of your business and helps connect the dots between business components, without needing to have intricate knowledge. It’s a useful visual to kick off any discussions about elements of your business and an easy visual to work with during pitch or strategy discussions.

Cons of the Business Model Canvas

Unfortunately, the Business Model Canvas template doesn’t work for everyone.

As my team and I have worked with entrepreneurs over the years (and we’ve worked with thousands), we’ve consistently found that the Business Model Canvas can be difficult to understand without substantial training. It’s also difficult to read, especially for people who aren’t familiar with the format. 

It’s difficult to adapt into a full business plan

There will likely come a time when you need to pitch to investors or seek out funding. At that point, lenders and investors may expect to see a traditional business plan that provides greater detail regarding the functions and financials of your business. A one-page Business Model Canvas may be beneficial to provide as an introduction to your business — but you’ll need to back it up with a full exploration of milestones, startup and operational costs, potential revenue streams, marketing activities, and financial forecasts.

By starting with a Business Model Canvas, you’ll potentially need to start over when developing a full business plan. This is due to the formatting and simplified sections of the Canvas. Yes, they are beneficial to use when exploring an idea, but difficult to expand on when actually executing them.

No room for validation

Regardless of what your business does, it’s critical that it’s solving a real problem for customers. If your products and services don’t fill a need, customers will never walk in the door. Known as validation, it’s an element that is lacking within the building block style of the Business Model Canvas.

Yes, this one-page setup helps you connect disparate pieces of your business plan, but it can also encourage you to make those connections when they don’t exist. For example, you may have outlined a problem and a few current solutions. Based on the structure of the Canvas, you work through your own solution, value proposition, and potential marketing channels. Then you start trying to tackle your customer segments and realize that you’re struggling to actually define them.

Rather than arriving at this issue earlier, and setting out to validate if your idea is attractive to anyone, you’re suddenly met with the need to find a target market that has the problem. This leads to the next issue with the Business Model Canvas.

No focus on product/market fit

The core issue is that the Business Model Canvas doesn’t focus on making sure a business is solving a real problem for their customers. People like to call this “ product/market fit .” In other words, customers (the market) don’t have a reason why they need the product the business is selling.

In our experience, if a company can’t find a good product/market fit, it will almost certainly fail.

Why is the lack of product/market fit such a killer for businesses? Well, when a customer is shopping for something, they’re looking to solve a problem or fill a need. A good business offers products and services that help people solve their problems and fulfill their desires.

For example, Mailchimp helps customers easily send email newsletters. A hair salon helps people achieve the style that they’re looking for. Restaurants give people not only the kind of food they’re looking for, but a specific experience—think upscale dining, or a hip and trendy bakery.

If a business doesn’t solve a real problem for potential customers, it’s going to have a very hard time attracting customers. Just think for a moment, do you shop for things that you don’t need or want?

It’s not that a business needs to solve a completely unique problem. In fact, competition is actually a good thing . But, businesses do need to have a unique take on a customer’s problem. 

Unfortunately, the Business Model Canvas doesn’t directly address product/market fit even though it’s such a critical issue.

Our solution — a one-page business plan

Instead of forcing the Business Model Canvas to solve the problem of product/market fit, we took a new approach and created an alternative to the Business Model Canvas Template. We call it a one-page business plan and it’s a core part of growth planning , a better way to plan and grow a business.

If you want to get started right away, download the one-page business plan template now. Or, read on to learn about what we changed and how to use the template.

What is a one-page business plan?

The one-page business plan format takes the best of the Business Model Canvas template and makes it easier to use and easier to read. It can be completed in under an hour and delivers three things that entrepreneurs need in their planning process: 

1. Focus 

Instead of developing a lengthy, traditional business plan, the one-page plan requires entrepreneurs to focus on the key drivers of their business and find a strategy that will truly bring success.

2. Simplicity

Anyone can start using the one-page business plan template without any training or business background. And, anyone can easily read it and understand it.

3. Flexibility

Successful planning is all about revising your ideas as you try and learn new things. The one-page business plan template is easy to update and tweak as you go.

What is in the one-page plan?

The one-page plan has 12 elements, including: 

• Identity: A one-sentence overview of your business.
• Problem: What problem are you solving for your customers?
• Solution: What’s your solution to the problem? Describe your products and services here.
• Target Markets: Who are your customers?
• Competition: Who are your competitors and what alternative solutions do your customers currently buy and use?
• Sales Channels: How will you sell your products and services to your customers? 
• Marketing Activities: What are the key activities or approaches that you’re going to use to reach your customers? What’s your pricing or cost structure?
• Revenue Streams: How are you going to make money? 
• Expenses: What are your key expenses when you’re running your business?
• Milestones: What is your roadmap to test and start your business?
• Team: What are the key roles that you need in your business to be successful?
• Partners & Key Resources: Do you need to work with other businesses to make your business work?

Together, these elements provide a comprehensive overview of a business and its strategy. A one-page business plan focuses up-front on finding product/market fit by helping entrepreneurs identify the key problem they’re solving for their customers and how their solution fills their customers’ needs.

Here’s what it looks like:

With the one-page business plan, we kept the concept of “value proposition” because we think it’s important to have a one-line overview of what you do. This is somewhat similar to a tagline that explains what you do in as simple and concise a way as possible.

But, instead of focusing on “customer relationships,” as the Business Model Canvas does, we replaced it with sections to describe your “problem worth solving” and your “solution.” Since making sure you have a solid understanding of your customers’ needs and the problems they have is so critical to business success, including these sections as the foundation of the one-page business plan makes sense.

The one-page business plan also pairs the problem and solution boxes with sections to describe the target market and competition . These four sections together form the core of your business idea: What you’re doing, who you’re doing it for, and what the competition looks like.

How to use your one-page business plan

When you sit down to write your one-page business plan, I encourage you to move through it quickly. Try and finish your first draft in under 30 minutes. Write bullet points instead of sentences. Then take a step back and see if it makes sense. 

Share your one-page business plan with key partners, friends, and family and see if it makes sense to them. If you need to make changes, it’s fast and easy since you’re just editing a single page. If you need more step-by-step guidance, we have a series of articles that will walk you through the process.

When you’ve completed your one-page business plan, you now have the building blocks for a more detailed business plan —if you need one.

At this stage, however, your one-page business plan is really just a set of assumptions—it’s your best guess at who your customers are and what they want. We’ll just call this early version of your one-page plan your “guess.”

Now, you need to go out into the world and actually talk to your potential customers and make sure your “guess” is correct—sometimes this is called idea validation . Do your potential customers have the problem or need that you think they have? What do they think of your solution? Will they be willing to pay you?

In this article on market research , I go into more detail about how to actually talk to your potential customers.

As you talk to people, come back to your one-page business plan and review and revise it. After a couple of rounds of this, you’ll have a plan for a business that has a good chance of success. It’s a good idea to get a business plan review meeting on your calendar each month, so you’re always reviewing and changing your plan as you go.

Download a one-page business plan template— a better alternative to the Business Model Canvas

You can download the one-page business plan template here for free. Project it on a whiteboard and fill it in, or just print it out and work on it from there. You can also use sticky notes to add your ideas instead of filling them in just with a pen or pencil. 

Or check out LivePlan’s Pitch feature . It really is the fastest way to get started. Plus, you can share a private link to it with key stakeholders, or export it to PowerPoint to easily present it to investors or other stakeholders. 

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Business Model Vs Business Plan: What’s The Difference

Sculpting success in the realm of commerce hinges on two critical blueprints:  the business model and the business plan . As if peering through a dual-lens, one unveils the anatomy of value creation, while the other charts a course for achieving it. This isn’t about mere documents; it’s the lifeblood of strategic foresight and operational vision.

Here’s the crux: although they waltz together in strategic symbiosis, these entities each spin a unique narrative of your venture’s voyage. One sketches the architecture of your enterprise, laying bare the revenue streams and value proposition.

The other, a meticulous roadmap, presents meticulous market analysis, financial projections, and the operational plan set to navigate the turbulent tides of commerce.

By journey’s end, you’ll not just differentiate between the two but harness their combined power.

Delve into concepts like competitive advantage, customer segmentation, and scalability. Decode the mesmerizing narrative behind a robust strategic planning foundation. Sales forecasting, funding requirements, investor pitch decks.

The differences between business model vs business plan

The business model is the foundation of a company, while the business plan is the structure. So, a business model is the main idea of the business together with the description of how it is working.

The business plan goes into detail to show how this idea could work. A business model can also be considered the mechanism that a company has to generate profits. At the same time, the business plan also does its part in being the way a company can present its strategy. It is also used to show the financial performance that is expected for the near future.

Comparing how business models and business plans work to help you in different ways is important. A business model can help you be sure that the company is making money. It helps to identify services that customers value. It also shows the reciprocation of funds for the activity that a business renders to its customers.

Any business can have different ways of generating income, but the goals of the business model should aim to simplify the money process. It does this by focusing on the large income generators.

So, we now understood that a basic business model is a gateway to show how an organization is functioning. A business plan is a document that shows the strategy of an organization together with the expected performance details.

We can find the details of a company when we check its business plan. What it does is offer more info about the business model. It does this by explaining the teams needed to meet the demand of the business model. It explains the equipment needed, as well as resources that need to be obtained to start creating. Explaining the marketing goals , and how the business is going to attract and retain more customers over the competition , will be part of the model.

Another interesting thing when it comes to comparing business models and business plans is that they cannot function without each other. Just remember this, the business model is going to be the center of the business plan.

Business plan

When comparing using a business model versus a business plan, we also need to understand each one better to draw some final conclusions. One of the first goals of a company could be to define its business model.

The business plan is going to be the detailed part that includes all the information and steps like Mayple’s marketing plan template, organization, products or services, sales plan, business proposal for investors , and so on. Some useful questions that you can use when developing your business plan are:

• What do we have now?
• What do we want to have in the future?
• What do we need in order to be there?

Business Model

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Project management

Lean Canvas vs Business Model Canvas: Which Should You Choose?

Marta Skowron

UI/UX Designer

15 April 2020

To choose between lean canvas vs. business model canvas, you need to know the difference between them.

Both lean and business model canvas are visual representations of the reality in which your business operates. But, unlike the traditional business plan, they are sketches. You need to update them as you grow your business and learn. 

The lean and business model canvas allows you to capture your business model on a single page. The main difference between them is that lean canvas zeroes in on solving a problem. Meanwhile, the business model canvas centers around selling a specific product.

In the post below, we explain this difference in more detail. After reading, you should be able to decide between lean canvas vs. business model canvas.

What is a business model canvas?

Source: Wikimedia Commons

Business model canvas is a visual template that helps entrepreneurs document an existing business model or develop a new one. Alexander Osterwalder created it in 2005, based on his academic work on business model ontology.

The business model canvas was designed with startups in mind. It quickly became an alternative to the traditional business plan which wasn’t agile enough to accommodate newly emerging companies.

The revolutionary thing about the business model canvas was that it allowed entrepreneurs to capture a business model on a single page. This made business planning simpler and more structured.

The 9 elements of the business model canvas, with examples from Google:

Key partners , e.g. Adsense network partners

Key activities , e.g. manage massive IT infrastructure

Key resources , e.g. IT infrastructure, intellectual resources

Value Propositions , e.g. free search engine, targeted ads

Customer Relationships, e.g. dedicated sales for large accounts

Customer segments , e.g. internet users, developers

Channels , e.g. global sales and support team

Cost structure , e.g. sales & marketing costs, admin costs

Revenue streams , e.g. ad revenues

Advantages of the business model canvas:

Defines key activities that generate value and revenue for the business.

Encourages strategic relationships with clients and partners.

Enables testing of an existing business model against the market.

Disadvantages of the business model canvas:

It doesn’t accommodate businesses in very early stages of development.

Enables risky assumptions within the business model, without offering a clear way to verify them.

Focuses on the end-shape of the business without defining the strategy to get there.

What is a lean canvas?

The lean canvas is a variation of the business model canvas for lean startups. It was created by Ash Maurya who became concerned with risky assumptions enabled by the business model canvas.

In his own words: “M y approach to making the canvas actionable was capturing that which was most uncertain, or more accurately, that which was most risky. ”

Operating under high uncertainty is the main challenge for most startups. The lean canvas helps to solve this problem by framing business ideas as hypotheses at first. Additionally, it encourages focusing on the problem as the starting point for building a business.

This allows entrepreneurs to stay vigilant and adjust their business model as they grow, learn and iterate the product.

The 9 elements of the lean canvas, with examples from the Uber London

Problem, e.g. difficult to find a cab when you need it

Solution, e.g. guaranteed fast pick-up from your location

Key metrics, e.g. apps installed, journeys booked

Unique value proposition, e.g. taxi service, but cheaper, easier and safer

Unfair advantage, e.g. high brand awareness

Channels, e.g. friend referrals

Customer segments, e.g. young, internet-savvy Londoners and tourists

Cost structure, e.g. marketing, PR

Revenue streams, e.g. 25% of fare based on route and idle time.

Advantages of the lean canvas

It focuses on understanding the problem that the business is trying to solve.

Restrains the “solutions” box, encouraging simple and easily testable ideas.

Proposes key metrics to evaluate whether the business is moving in the right direction.

Accounts for uncertain conditions, assumptions, and incomplete data.

Disadvantages of the lean canvas

Overemphasizes the internal focus without accounting for the surrounding ecosystem.

Limits strategic thinking (as Ethan Mollick put it, by “focusing on what customers want today, rather than trying to see ahead into the future.”).

Lacks the “Resources” box which may lead to unrealistic product ideas.

The differences between lean canvas vs business model canvas

When Ash Maurya adapted the business model canvas for lean startups, he spotted four boxes that, according to him, weren’t crucial for startup founders. He replaced them with those that made more sense for lean startups.

Adding the “Problem” and removing the “Key Partners” box

Charles Kettering once said that “a problem well stated is a problem half-solved.” Ash Maurya also believes that identifying the problem should be the starting point for any business.

Many startups fail not because they can’t deliver the product, but because they misunderstand the problem they’re solving. The lean canvas makes sure the problem identification is a crucial step in the process.

Meanwhile, Maurya decided to take out the “Key partners” box. Even though he recognizes the need to create business partnerships, he says that “when you are an unknown startup with an untested product, pursuing key partnerships from day one can be a form of waste.”

With the lean approach, looking for partners comes later. The first concern is understanding the problem.

Adding the “Solutions” and removing the “Key Activities” box

The “Solutions” box in the lean canvas is small on purpose. This is aligned with the lean startup approach to MVP: developing a simple solution and checking if it works.

Incorporating “Solutions” (in plural!) in the lean canvas prevents entrepreneurs from blindly following their first idea. Having it as a part of the lean canvas makes it subject to verification - just like any other part of the business model.

At the same time, the “Key Activities” box from the original business model canvas was removed. That’s because key activities should derive from the “Solutions,” after they have been tested and validated through the MVP.

“Key metrics” instead of “Key Resources”

Key metrics were introduced to the lean canvas to give business owners a way to tell whether they’re on the right track. 

Initially, startups may be drowning in all kinds of data and numbers. It’s important to discern which of them are important and indicative of growth. Using the wrong (or too many) metrics as signs of growth can lead to enormous waste.

Noah Kagan even said: “A startup can only focus on one metric. So you have to decide what that is and ignore everything else.”

Why were the “Key Resources” removed? Ash Maurya argues that in the digital age, new-product development isn’t as resource-demanding as it used to be. On top, some of the key resources can also fall into the “unfair advantage” box.

“Unfair advantage” instead of “Customer Relationships”

An unfair advantage in business is the shield against copycats and plagiarism. It’s the part of the business model that’s so unique and contextual that it’s extremely hard to replicate.

When Ash Maurya added this box to the lean canvas, he was aware that few startups find their unfair advantage straight away. On day one, this box can be blank. But over time, it should inspire business owners to look for their unfair advantage that makes their solutions hard to copy.

This box took the place of “Customer Relationships” in the business model canvas. That’s because startups don’t usually strategize their first relationships with clients. Rather, raw interactions emerge through customer interviews, product tests, and feedback.

Lean canvas vs business model canvas: which should you choose?

Both lean and business model canvas have advantages and disadvantages. Which one you’ll choose depends mostly on the angle from which you approach business.

Lean canvas is a simpler approach, focusing on solving one problem at a time. It can be used even when you’re starting from scratch and helps you brainstorm solutions. It’s a good way to start if you want to identify a problem first - and derive your product from that.

Business model canvas tends to work better when you’ve validated your initial hypotheses and already have a product. If your questions focus on how to make that product more profitable (or improve it in other ways), a business model canvas may be a good solution. It also gives you a more complete picture of your business model.

In other words, you could say that lean canvas focuses more on what of your startup, while the business model canvas digs deeper into the how.

Regardless of which one you choose, remember to update it over time. As your startup and the ecosystem around it change, your task as an entrepreneur is to learn from those changes

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Original text

This article introduces a critical discussion on modernizing entrepreneurial strategies by leveraging the efficiency and agility of the Business Model Canvas (BMC). In an era characterized by rapid innovation and evolving market landscapes, traditional business planning methods often prove cumbersome and time-consuming. However, the BMC offers a compelling alternative, providing entrepreneurs with a concise and dynamic framework to articulate their business models.

A full business plan allows for a deep dive into every aspect of your business, including market analysis, financial projections, operational details, and marketing strategies. This level of detail has been required for securing funding from investors or lenders in the past -- but things are changing.  Some financial institutions and investors are willing to accept BMCs in lieu of a full business plan, especially for early-stage startups and entrepreneurs.

This article delves into the inherent advantages of the BMC, exploring how its simplicity and flexibility empower startups and established businesses alike to navigate complexities, seize opportunities, and drive sustainable growth in today's competitive business environment.

Key Features of the Business Model Canvas:

Concise Overview: The business model canvas provides a quick and concise overview of your business model on a single page. It's ideal for early-stage startups or entrepreneurs who want to quickly capture and communicate their business idea without getting bogged down in extensive details.

Iterative Process: The canvas is a flexible tool that allows for rapid iteration and experimentation. It encourages entrepreneurs to test hypotheses, gather feedback, and refine their business model based on real-world data and insights.

Visual Representation: The visual nature of the canvas makes it easy to understand and communicate complex business concepts. It fosters collaboration and brainstorming among team members and stakeholders.

Focus on Value Propositi n: The canvas emphasizes the value proposition and customer segments, helping entrepreneurs to clearly articulate how their product or service meets customer needs and solves pain points.

Lean Startup Approach: The canvas is aligned with the principles of the lean startup methodology, which emphasizes rapid prototyping, customer validation, and iterative development. It's particularly well-suited for startups operating in fast-paced, uncertain environments.

How to Use a Business Model Canvas:

Here’s a concise, step-by-step guide for how to use a Business Model Canvas.  To help you understand what each step requires, examples of the information needed to fill out each section of the BMC is provided, using a hypothetical company that provides an on-line fitness platform. These examples illustrate how each component of the Business Model Canvas contributes to the overall business model of an online fitness training platform.

Start with a Blank Canvas : Begin with a large sheet of paper or a digital canvas divided into nine key building blocks. These blocks are Customer Segments, Value Propositions, Channels, Customer Relationships, Revenue Streams, Key Resources, Key Activities, Key Partnerships, and Cost Structure.

Identify Customer Segments : Define the different groups of people or organizations that you aim to serve. Consider their demographics, needs, behaviors, and preferences. List each segment in the Customer Segments block.

• Individuals who want to exercise at home
• Fitness enthusiasts looking for personalized workout plans
• Corporate clients seeking employee wellness solutions

Define Value Propositions : Determine the unique value that your product or service offers to each customer segment. Describe the benefits, features, and solutions that address their specific pains or needs. List these value propositions in the corresponding block.

Examples of Value Propositions :

• Customized workout plans tailored to individual fitness goals
• Access to professional trainers through virtual coaching sessions
• Convenience of exercising anytime, anywhere with a flexible schedule

Outline Channels : Identify the various channels through which you will reach and interact with your customers. This could include direct sales, online platforms, distribution partners, or physical stores. List the primary channels in the Channels block.

For example:

• Website and mobile app for online sign-up and access to workouts
• Social media platforms for marketing and engagement
• Partnerships with fitness influencers and health blogs for promotion

Specify Customer Relationships : Describe the types of relationships you will establish and maintain with your customers. This could range from personal assistance to self-service options or automated support systems. List these relationships in the Customer Relationships block.

Examples of Customer Relationships :

• Automated onboarding process with personalized welcome emails
• Regular check-ins and progress tracking through the app
• Option for one-on-one coaching sessions with dedicated trainers

Determine Revenue Streams : Identify the different ways your business will generate revenue from each customer segment. This could include one-time sales, subscription fees, licensing, or advertising revenue. List the primary revenue streams in the Revenue Streams block.

Sample Revenue Streams :

• Subscription fees for access to premium workout plans and features
• One-time purchases of fitness equipment or merchandise
• Revenue sharing from corporate wellness programs

List Key Resources : Identify the key resources your business needs to operate effectively. These could include physical assets, intellectual property, human resources, or financial resources. List these resources in the Key Resources block.

Examples of Key Resources :

• Online platform and mobile app for workout delivery
• Team of fitness trainers and coaches
• Server infrastructure for hosting and data management

Identify Key Activities : Determine the key activities your business must perform to deliver your value proposition, operate your channels, and maintain customer relationships. List these activities in the Key Activities block.

Key Activities examples :

• Developing and updating workout programs and content
• Marketing and advertising to attract new users
• Providing customer support and assistance as needed

Establish Key Partnerships : Identify the key partners and suppliers that will help your business operate effectively. These could include strategic alliances, joint ventures, or outsourcing agreements. List these partnerships in the Key Partnerships block.

Examples of Key Partnerships :

• Collaborations with fitness equipment manufacturers for product promotions
• Affiliate partnerships with nutrition supplement brands
• Joint ventures with corporate wellness providers for integrated solutions

Outline Cost Structure : Identify the costs associated with operating your business model, including fixed costs, variable costs, and economies of scale. List these costs in the Cost Structure block.

Sample Cost Structures :

• Software development and maintenance costs
• Employee salaries and trainer fees
• Marketing and advertising expenses
• Server hosting and infrastructure costs

Iterate and Refine : Once you've filled out the canvas, review and refine each building block based on feedback, research, and validation. Iterate on your business model canvas as you gather more information and insights.

Use as a Strategic Tool : Use the completed Business Model Canvas as a strategic tool to guide decision-making, communicate your business model to stakeholders, and identify areas for innovation and improvement.

Remember, the Business Model Canvas is a dynamic tool that can evolve as your business grows and adapts to changing market conditions. Regularly revisit and update your canvas to ensure it remains relevant and reflective of your business model.

An Easier Way to Prepare Your Business Plan: The Business Model Canvas Preparing a traditional business plan can take months and be an overwhelming activity, but you can make the process much shorter and less stressful by using the Business Model Canvas!

If writing a full business plan seems overwhelming, start with a one-page Business Model Canvas. Developed by Founder and CEO of Strategyzer, Alexander Osterwalder, it can be used to easily document your business concept.

Download this template to fill out the nine squares focusing on the different building blocks of any business:

• Value Proposition
• Customer Segments
• Customer Relationships
• Key Activities
• Key Resources
• Key Partners
• Cost Structure
• Revenue Streams

For help completing the Business Model Canvas Template, contact a SCORE business mentor for guidance

Copyright © 2024 SCORE Association, SCORE.org

Funded, in part, through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.