

Business Planning

Financial Planning Business Plan

The following sections will outline important financial information.

7.1 Important Assumptions

The following table details important financial assumptions.

General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00%
Tax Rate 30.00% 30.00% 30.00%
Other 0 0 0

Need real financials?

We recommend using LivePlan as the easiest way to create automatic financials for your own
business plan.

Create your own business plan

7.2 Break-even Analysis

The Break-even Analysis indicates what will be needed in monthly revenue to reach the break-
even point.
Need actual charts?

We recommend using LivePlan as the easiest way to create graphs for your own business plan.

Create your own business plan

Break-even Analysis
Monthly Revenue Break-even $8,518
Assumptions:
Average Percent Variable Cost 8%
Estimated Monthly Fixed Cost $7,837

7.3 Projected Profit and Loss

The following table will indicate projected profit and loss.

Need actual charts?

We recommend using LivePlan as the easiest way to create graphs for your own business plan.

Create your own business plan

Need actual charts?

We recommend using LivePlan as the easiest way to create graphs for your own business plan.
Create your own business plan

Need actual charts?

We recommend using LivePlan as the easiest way to create graphs for your own business plan.

Create your own business plan

Need actual charts?

We recommend using LivePlan as the easiest way to create graphs for your own business plan.

Create your own business plan

Pro Forma Profit and Loss

Year 1 Year 2 Year 3
Sales $86,891 $128,000 $147,090
Direct Cost of Sales $6,951 $10,240 $11,767
Other Production Expenses $0 $0 $0
Total Cost of Sales $6,951 $10,240 $11,767
Gross Margin $79,940 $117,760 $135,323
Gross Margin % 92.00% 92.00% 92.00%
Expenses
Payroll $63,120 $67,000 $72,000
Sales and Marketing and Other Expenses $1,200 $1,200 $1,200
Depreciation $456 $456 $456
Leased Equipment $0 $0 $0
Utilities $0 $0 $0
Insurance $1,800 $1,800 $1,800
Rent $18,000 $18,000 $18,000
Payroll Taxes $9,468 $10,050 $10,800
Other $0 $0 $0
Total Operating Expenses $94,044 $98,506 $104,256
Profit Before Interest and Taxes ($14,104) $19,254 $31,067
EBITDA ($13,648) $19,710 $31,523
Interest Expense $0 $0 $0
Taxes Incurred $0 $5,776 $9,320
Net Profit ($14,104) $13,478 $21,747
Net Profit/Sales -16.23% 10.53% 14.78%

7.4 Projected Cash Flow

The following chart and table will indicate projected cash flow.
Need actual charts?

We recommend using LivePlan as the easiest way to create graphs for your own business plan.

Create your own business plan

Pro Forma Cash Flow

Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $86,891 $128,000 $147,090
Subtotal Cash from Operations $86,891 $128,000 $147,090
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $0 $0 $0
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $0 $0 $0
Subtotal Cash Received $86,891 $128,000 $147,090
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $63,120 $67,000 $72,000
Bill Payments $34,142 $46,475 $52,409
Subtotal Spent on Operations $97,262 $113,475 $124,409
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $97,262 $113,475 $124,409
Net Cash Flow ($10,371) $14,525 $22,681
Cash Balance $8,429 $22,954 $45,635

7.5 Projected Balance Sheet

The following table will indicate the projected balance sheet.

Pro Forma Balance Sheet

Year 1 Year 2 Year 3
Assets
Current Assets
Cash $8,429 $22,954 $45,635
Other Current Assets $0 $0 $0
Total Current Assets $8,429 $22,954 $45,635
Long-term Assets
Long-term Assets $2,300 $2,300 $2,300
Accumulated Depreciation $456 $912 $1,368
Total Long-term Assets $1,844 $1,388 $932
Total Assets $10,273 $24,342 $46,567
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $3,277 $3,868 $4,347
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $3,277 $3,868 $4,347
Long-term Liabilities $0 $0 $0
Total Liabilities $3,277 $3,868 $4,347
Paid-in Capital $22,000 $22,000 $22,000
Retained Earnings ($900) ($15,004) ($1,526)
Earnings ($14,104) $13,478 $21,747
Total Capital $6,996 $20,474 $42,220
Total Liabilities and Capital $10,273 $24,342 $46,567
Net Worth $6,996 $20,474 $42,220

Need real financials?

We recommend using LivePlan as the easiest way to create automatic financials for your own
business plan.

Create your own business plan

7.6 Business Ratios

The following table outlines some of the more important ratios from the Portfolio Fund
Managing industry. The final column, Industry Profile, details specific ratios based on the
industry as it is classified by the NAICS code, 523920.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 47.31% 14.91% 11.35%
Percent of Total Assets
Other Current Assets 0.00% 0.00% 0.00% 34.12%
Total Current Assets 82.05% 94.30% 98.00% 95.71%
Long-term Assets 17.95% 5.70% 2.00% 4.29%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 31.90% 15.89% 9.33% 32.96%
Long-term Liabilities 0.00% 0.00% 0.00% 17.78%
Total Liabilities 31.90% 15.89% 9.33% 50.74%
Net Worth 68.10% 84.11% 90.67% 49.26%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 92.00% 92.00% 92.00% 56.89%
Selling, General & Administrative Expenses 108.23% 81.47% 77.22% 19.06%
Advertising Expenses 0.00% 0.00% 0.00% 4.69%
Profit Before Interest and Taxes -16.23% 15.04% 21.12% 11.71%
Main Ratios
Current 2.57 5.93 10.50 2.34
Quick 2.57 5.93 10.50 2.11
Total Debt to Total Assets 31.90% 15.89% 9.33% 55.75%
Pre-tax Return on Net Worth -201.61% 94.04% 73.58% 2.50%
Pre-tax Return on Assets -137.29% 79.10% 66.71% 5.64%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin -16.23% 10.53% 14.78% n.a
Return on Equity -201.61% 65.83% 51.51% n.a
Activity Ratios
Accounts Payable Turnover 11.42 12.17 12.17 n.a
Payment Days 27 28 28 n.a
Total Asset Turnover 8.46 5.26 3.16 n.a
Debt Ratios
Debt to Net Worth 0.47 0.19 0.10 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $5,152 $19,086 $41,288 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.12 0.19 0.32 n.a
Current Debt/Total Assets 32% 16% 9% n.a
Acid Test 2.57 5.93 10.50 n.a
Sales/Net Worth 12.42 6.25 3.48 n.a
Dividend Payout 0.00 0.00 0.00 n.a
Page

Your business plan can look as polished and professional as this sample plan. It's fast and easy,
with LivePlan.

LivePlan is incredibly simple and easy to use. The financial sales forecasting tool is very
intuitive and makes writing a business plan more fun.

Plan Outline

 1.0 Executive Summary

 2.0 Company Summary
 3.0 Services
 4.0 Market Analysis Summary
 5.0 Strategy and Implementation Summary
 6.0 Management Summary
 7.0 Financial Plan
o Important Assumptions
o Break-even Analysis
o Projected Profit and Loss
o Projected Cash Flow
o Projected Balance Sheet
o Business Ratios
 Appendix

Create your own business plan

Business planning has never been easier. With 500 complete sample plans, easy financials, and
access anywhere, LivePlan turns your great idea into a great plan for success.

Learn more about LivePlan

Market Research

Market research reports for Security And Commodity Brokers, Dealers, Exchanges, And
Services industry.

Related business plans

 Wedding Consultant Business Plan

 Auto Repair Service Business Plan
 Tutoring Service Business Plan

 More Services Plans

 More Miscellaneous Services Plans
Don't bother with copy & paste.

Bplans members can download this complete sample plan as a Word document for FREE.

 About Us
 Contact Us
 Write for Us
© 1996 - 2016

Company Summary
BUSINESS DESCRIPTION
Cambridge Strategy Group is a North Carolina-based consulting firm that responds to
entrepreneurs' need for practical business and marketing services to turn their innovative ideas
into successful business ventures. Through interaction with a number of aspiring entrepreneurs,
the founders of the Cambridge Strategy Group discovered a ready market of clients who were
eager to take advantage of the founders' skills, understanding, and insight into their businesses.
The Cambridge Strategy Group is exclusively focused on small businesses. Our goal is to own
the idea "small business" or "small business consulting" in the minds of our target market.

COMPANY ANALYSIS
The Cambridge Strategy Group has identified a real business opportunity that has been neglected
by earlier consulting firms due to its complex customer base. Below, we have identified the
opportunities and threats in the environment, as well as our particular strengths and weaknesses
that will enable us to succeed:
OPPORTUNITIES AND THREATS
The Cambridge Strategy Group has analyzed the market and believes that a real opportunity
exists to provide services to small businesses. The following paragraphs describe the
environment in which the company will compete, and the key success factors necessary to
perform well.

Opportunities – The number of new businesses starting each year in the U.S. and specifically in
the Triangle Area of North Carolina create a sizeable market. Many of these businesses are
started by an entrepreneur with a solid idea, but little experience in creating the formal business
strategies or marketing deliverables necessary to turn their idea into a successful business. With
recent IPOs giving back much of their initial valuations, companies are now being forced to
demonstrate profitable business models in order to maintain strong valuations. Venture
capitalists need to focus on making their existing companies successful instead of simply
prospecting for the next great idea. To accomplish this, founders need to effectively define and
communicate their value propositions. Since this is not a core competency for many
entrepreneurs, there is an opportunity to provide this skill set through outsourcing arrangements.
Additionally, founders need experience in sales and marketing to exploit market opportunities
and create early revenue wins. Finally, no business currently exists with dominant mind-share as
a "small business consulting" firm.

Threats – Businesses in the early stages of their life cycles, usually through the Angel funding
stage, tend to have extremely tight budgets. Once the business reaches the venture-funded stage,
it often has more cash to devote to outsourcing of non-core competencies. Barriers to entry in
this market are extremely low. Successful consultants will have to work to earn a few client
successes and then aggressively build a reputation as the "small business consultants." Building a
reputation will require funding. High-profile consulting firms could quickly enter this market. In
order to keep costs low, it is assumed that they would begin out of a major office, leaving the
Triangle Area of North Carolina available. However, low cost of living in the Triangle Area may
facilitate expansion. Establishing area contacts will be critical to hedge against new firms
entering the area.

Production planning is the function of establishing an overall level of output, called the
production plan. The process also includes any other activities needed to satisfy current planned
levels of sales, while meeting the firm's general objectives regarding profit, productivity, lead
times, and customer satisfaction, as expressed in the overall business plan. The managerial
objective of production planning is to develop an integrated game plan where the operations
portion is the production plan. This production plan, then, should link the firm's strategic goals to
operations (the production function) as well as coordinating operations with sales objectives,
resource availability, and financial budgets.

The production-planning process requires the comparison of sales requirements and production
capabilities and the inclusion of budgets, pro forma financial statements, and supporting plans
for materials and workforce requirements, as well as the production plan itself. A primary
purpose of the production plan is to establish production rates that will achieve management's
objective of satisfying customer demand. Demand satisfaction could be accomplished through
the maintaining, raising, or lowering of inventories or backlogs, while keeping the workforce
relatively stable. If the firm has implemented a just-in-time philosophy, the firm would utilize a
chase strategy, which would mean satisfying customer demand while keeping inventories at a
minimum level.

The term production planning is really too limiting since the intent is not to purely produce a
plan for the operations function. Because the plan affects many firm functions, it is normally
prepared with information from marketing and coordinated with the functions of manufacturing,
engineering, finance, materials, and so on. Another term, sales and operations planning, has
recently come into use, more accurately representing the concern with coordinating several
critical activities within the firm.

Production planning establishes the basic objectives for work in each of the major functions. It
should be based on the best tradeoffs for the firm as a whole, weighing sales and marketing
objectives, manufacturing's cost, scheduling and inventory objectives, and the firm's financial
objectives. All these must be integrated with the strategic view of where the company wants to
go.

The production-planning process typically begins with an updated sales forecast covering the
next 6 to 18 months. Any desired increase or decrease in inventory or backlog levels can be
added or subtracted, resulting in the production plan. However, the production plan is not a
forecast of demand. It is planned production, stated on an aggregate basis. An effective
production-planning process will typically utilize explicit time fences for when the aggregate
plan can be changed (increased or decreased). Also, there may be constraints on the degree of
change (amount of increase or decrease).

The production plan also provides direct communication and consistent dialogue between the
operations function and upper management, as well as between operations and the firm's other
functions. As such, the production plan must necessarily be stated in terms that are meaningful to
all within the firm, not just the operations executive. Some firms state the production plan as the
dollar value of total input (monthly, quarterly, etc.). Other firms may break the total output down
by individual factories or major product lines. Still other firms state the plan in terms of total
units for each product line. The key here is that the plan be stated in some homogeneous unit,
commonly understood by all, that is also consistent with that used in other plans.

PRODUCTION SCHEDULING
The production schedule is derived from the production plan; it is a plan that authorized the
operations function to produce a certain quantity of an item within a specified time frame. In a
large firm, the production schedule is drawn in the production planning department, whereas,
within a small firm, a production schedule could originate with a lone production scheduler or
even a line supervisor.

Production scheduling has three primary goals or objectives. The first involves due dates and
avoiding late completion of jobs. The second goal involves throughput times; the firm wants to
minimize the time a job spends in the system, from the opening of a shop order until it is closed
or completed. The third goal concerns the utilization of work centers. Firms usually want to fully
utilize costly equipment and personnel.

Often, there is conflict among the three objectives. Excess capacity makes for better due-date
performance and reduces throughput time but wreaks havoc on utilization. Releasing extra jobs
to the shop can increase the utilization rate and perhaps improve due-date performance but tends
to increase throughput time.

Quite a few sequencing rules (for determining the sequence in which production orders are to be
run in the production schedule) have appeared in research and in practice. Some well-known
ones adapted from Vollmann, Berry, Whybark and Jacobs (2005) are presented in Operations
Scheduling.

THE PRODUCTION PLANNING AND

PRODUCTION SCHEDULING INTERFACE
There are fundamental differences in production planning and production scheduling. Planning
models often utilize aggregate data, cover multiple stages in a medium-range time frame, in an
effort to minimize total costs. Scheduling models use detailed information, usually for a single
stage or facility over a short term horizon, in an effort to complete jobs in a timely manner.
Despite these differences, planning and scheduling often have to be incorporated into a single
framework, share information, and interact extensively with one another. They also may interact
with other models such as forecasting models or facility location models.

It should be noted that a major shift in direction has occurred in recent research on scheduling
methods. Much of what was discussed was developed for job shops. As a result of innovations
such as computer-integrated manufacturing (CIM) and just-in-time (JIT), new processes being
established in today's firms are designed to capture the benefits of repetitive manufacturing and
continuous flow manufacturing. Therefore, much of the new scheduling research concerns new
concepts and techniques for repetitive manufacturing-type operations. In addition, many of
today's firms cannot plan and schedule only within the walls of their own factory as most are an
entity with an overall supply chain. Supply chain management requires the coordination and
integration of operations in all stages of the chain. If successive stages in a supply belong to the
same firm, then these successive stages

Read more: http://www.referenceforbusiness.com/management/Or-Pr/Production-Planning-and-

Scheduling.html#ixzz46xmZufOj

The 20 Minute Business Plan: Business

Model Canvas Made Easy
Table of Contents
  What’s the Business Model Canvas?
 How do I get started?
 What if I want more structure to work through this?
 Step 1 (of 10): Customer Segments
 Step 2 (of 10): Value Propositions
 Step 3 (of 10): Channels
 Step 4 (of 10): Customer Relationships
 Step 5 (of 10): Revenue Streams
 Step 6 (of 10): Key Activities
 Step 7 (of 10): Key Resources
 Step 8 (of 10): Key Partnerships
 Step 9 (of 10): Cost Structure
 Step 10 (of 10): Applications, Analysis & Next Steps
 Using the Google Doc’s/PowerPoint Template
 Using the Omnigraffle Template
 Talk Back

See also ‘Workshop-Business Model Canvas‘

What’s the Business Model Canvas?

If you’re already familiar, you can skip to the next section, ‘How do I get started?’.

The Business Model Canvas (BMC) gives you the structure of a business plan without the
overhead and the improvisation of a ‘back of the napkin’ sketch without the fuzziness (and
coffee rings).
The Canvas has nine elements:

Together these elements provide a pretty coherent view of a business’ key drivers–

1. Customer Segments: Who are the customers? What do they think? See? Feel? Do?
2. Value Propositions: What’s compelling about the proposition? Why do customers buy,
use?
3. Channels: How are these propositions promoted, sold and delivered? Why? Is it
working?
4. Customer Relationships: How do you interact with the customer through their
‘journey’?
5. Revenue Streams: How does the business earn revenue from the value propositions?
6. Key Activities: What uniquely strategic things does the business do to deliver its
proposition?
7. Key Resources: What unique strategic assets must the business have to compete?
8. Key Partnerships: What can the company not do so it can focus on its Key Activities?
9. Cost Structure: What are the business’ major cost drivers? How are they linked to
revenue?
The Canvas is popular with entrepreneurs and intrapreneurs for business model innovation.
Fundamentally, I find it delivers three things:

A. Focus: Stripping away the 40+ pages of ‘stuff’ in a traditional business plan, I’ve seen
users of the BMC improve their clarify and focus on what’s driving the business (and
what’s non-core and getting in the way).
B. Flexibility: It’s alot easier to tweak the model and try things (from a planning
perspective) with something that’s sitting on a single page.
C. Transparency: Your team will have a much easier time understanding your business
model and be much more likely to buy in to your vision when it’s laid out on a single
page.

How do I get started?

The first time you engage with the canvas, I recommend printing it out or projecting it on a
whiteboard and going to town (see below for a PDF). Fill out the elements for your business and
then ask yourself ‘Does this make sense?’ ‘What are the most important linkages and
components of the model?’

If you’re ready to put together something a little more formal (for distribution, presentation, etc.)
here’s a Google App’s template you can copy or download as MSFT PowerPoint:

LINK TO THE DOWNLOADABLE TEMPLATE

If the canvas is working for you, you’ll probably end up editing it a lot and presenting it, so there
are a few options below for documenting your canvas in an editable format:

Canvas Printable Google Stratygizer

Omnigraffle*
Presentation PDF Doc/PowerPoint Web App
Documenting the Documenting a This is a
Brainstorming
Canvas in Google canvas (if you nice tool
Good for… alone or in a
Doc’s or MS Office have a Mac & and very
small group
(PowerPoint) Omnigraffle) robust.
Get it! DOWNLOAD COPY/DOWNLOAD DOWNLOAD LINK
You can take This uses the
This one
any of these presentation app in This one uses
needs a
and project Google Doc’s, which layering to
By the little more
them on to a does a pretty good manage the
way…… set up but
whiteboard job of exporting to canvasLINK TO
has lots of
for group PowerPoint.LINK INSTRUCTIONS
features
sessions TO INSTRUCTIONS

*Omnigraffle a popular diagramming program for the Mac. It has a fairly easy to use layering
environment which you may find handy as you want to tinker with and produce different views
of the canvas. You can try Omnigraffle for free (the basic paid version is $99).
What if I want more structure to work through this?
If you’d like a little more structure, the link below will take you to a related curriculum item that
has workshop slides, prep. items, and agenda.

LINK TO WORKSHOP PAGE

Otherwise, the next sections (10 steps) offer a tutorial on how to use the template. The closing
sections describe how to use the Google Doc’s/PowerPoint and Omnigraffle templates.

Step 1 (of 10): Customer Segments

For purposes of using the canvas you should make sure you can answer these questions:
1. Segment Dimensions
Do you have a single or multi-sided market? If you have a multi-sided market you’ll have at least
as many segments as you have sides. An example of such a market is a media property like
CNN.com: they have readers on the one side and advertisers on the other.
2. Segment Composition
If the segment dimensions are the ‘macro’ analysis of your customer base, then looking within
each segment at individual customer types as ‘Personas’ is the ‘micro’. As with economics, this
is where most of action happens. You should be able to visualize these Personas- what kind of
shoes do they wear? And you should understand what they think, see, feel, and do in your
product area. Be sure to list both buyers and users of your product (many Personas will be both).
For coaching on this, check out: Tutorial- Personas.
3. Problems, Needs, Habits & Current Alternatives
What job are you doing for the customer? What need are you fulfilling? There are no new
behaviors- make sure that you can identify an existing need/problem and identify specific
alternatives that your customer uses today. If you’re not sure, go out and observe, talk to some
representative people. You’ll want to be able to clearly link your Value Propositions back to
these in the next section.

Output: a list of Personas, organized by Customer Segment if you have more than one segment.
I recommend trying to prioritize them- Who would you pitch first if you could only pitch one?
Who next? And so forth…

Notes: If you’re spending a lot of time on this first item, that’s OK (and it’s probably good). The
Canvas is a tool, not a strategy and not all the nine blocks are equal. The pairing of Customer
Segments and Value Propositions is really the ‘independent variable’ that should be driving
everything else in your business model. When I use the Canvas in my Venture Design classes,
we usually spend all of the first session (plus time for field research) on Customer Segments and
Value Propositions.

Step 2 (of 10): Value Propositions

Which of the Problems or Needs that you identified in your Personas are you fulfilling?
What is unique about your Value Propositions and why does your customer prefer them to
their Current Alternatives? You may have a whole lot of these- and that’s fine. When you’re
getting going with this, jot them all done on a whiteboard, index card, Post-It, etc. But then rank
them and you’ll probably want to winnow out all but the most critical. What things do you do
that actually cause a customer to pick you over a competitor or alternative?

For example, at Leonid, an enterprise software company I founded, we thought our largest
customers worked with us because of the cost savings we offered and our knowledge about best
practices. It turned out that was mostly wrong- reducing their time and risk to get new services to
market was the most important. It’s not that the other things weren’t important, but they weren’t
the top Value Proposition. That made a difference on how we sold the product and how we
focused on operationalizing it for customers.

Once you’ve isolated these, try mapping them to the Customer Segments; it will look something
like this:

LINK TO THE DOWNLOADABLE TEMPLATE

This mapping says ‘We have 3 personas. Persona 1 cares about VP 1 & 2. Persona 2 cares about
VP 2; Persona 3 cares about VP3. (One segment only so segments not noted)’.

Output: a prioritized list of Value Propositions and linkages from each Personas to the VP’s
relevant to them.

Notes: Again, this pairing is the key driver for most business models and if you want more on
how to describe and discovery what to put in this part of the canvas, I recommend this: Tutorial-
Personas.

Maybe you feel like you’re in good shape on understanding the customer’s world but you don’t
have any validation on whether the Value Propositions are clicking because this is a new
venture? If you’re not sure, that’s OK and good for you for acknowledging the uncertainty! It’s
the responsible thing to do. The key is to write down those assumptions, prioritize them, and
figure out the quickest and cheapest way to prove or disprove them. That’s what Lean/Startup is
about and there are resources here to help you with that, if you’d like- Tutorial: Lean Startup.

Step 3 (of 10): Channels

Channels includes entities you use to communicate your proposition to your segments, as
well as entities through which you sell product and later service customers (see AIDAOR
journey below). For example, if you sell bulbs for light houses and there’s a website all light
house attendants purchase equipment, that site is a sales Channel. If you use Google AdWords,
that’s a Channel, too (for getting attention). If you use a third party company to service the bulbs
when they break, that’s also a Channel.
Output: a list of important Channels, linked to Personas or Segments if they differ substantially.
Make notes on what steps are relevant for each- promotion, sales, service, etc. See Note this
section for more structure on this.

Notes: Channels and the next item, Customer Relationships, define your interface with the
Customer. It’s important to think all the way through the customer ‘journey’ in specific terms.
For most businesses, the way they get a customer’s attention is different than the way they
onboard them or support them over the long term. For this, I recommend the AIDA.OR
framework (attention-interest-desire-action-onboarding-retention) and storyboarding your way
through it. Here’s a post explaining all that- Storyboarding AIDA(OR). If you don’t want to do
the storyboards, I recommend at least making notes about your customer journey through the
AIDA(OR) steps.

Another consideration is whether your channels will give you enough visibility into the user,
including, for example, a way to follow up with users. Not sure? Document your assumptions
Lean Startup style and figure out how you’ll quickly prove or disprove them.

Step 4 (of 10): Customer Relationships

How does the customer interact with you through the sales and product lifecycle? Do they
have a dedicated personal contact they see? Call? Is all the interaction over the web? Do
they never see you at all but instead talk to a Channel? A few litmus test questions you may want
to ask yourself at this point:
– Can the Value Proposition be delivered to the Customer this way? All the way through from
promotion, to sale, to post-sale service? (See AIDAOR above on this.)
– Can you make the numbers work?
– Is there a premium support product you need to create/test? Many companies, like Apple, have
rejected the false choice of ‘Do we provide phone support or not?’ instead offering personal
support for a reasonable charge.

Output: a description of Customer Relationships, with notes if they differ across Customers
(between Segments or among Personas within a Segment) or across the customer journey.

Notes: If you’re a startup, be sure to document and review critical assumptions here. Also, the
focal items are in a kind of specific order- you should validate your Segments and their
relationship to the Propositions above all else. If this means you provide personal support in the
early days (a ‘concierge test’ in Lean Startup terms) to do discovery and validation of Segments
and Propositions, that’s OK. You can subsequently test the Customer Relationship models.
(Here’s a post on using consulting as a concierge vehicle in B2B if you want more detail:
Consulting as B2B Concierge Vehicle).

Step 5 (of 10): Revenue Streams

I won’t bore you with proclamations about the importance of revenue- you get it. If you
have an existing business, this will be self-evident.

At this point, you should map Segments to Propositions to Revenue Streams. The example below
says ‘Revenue stream 1 is driven by Persona 1′s involvement with Propositions 1 & 2; Revenue
Stream 2 is driven by Persona 2′s involvement with Proposition 2; and Revenue Stream 3 with
Persona 3′s involvement with Proposition 3.’ That’s relatively diverse- yours may be much
simpler and that’s fine.

Output: a list of Revenue Streams, linked (mutually) to Personas (or Segments if the mappings
are the same within a set of Personas) and Value Propositions

Notes: If you have a startup or are re-engineering the business, this is a time to look at where
you’re driving revenue and whether it aligns with the rest of your focal points. Are you charging
on value? Perceived value? They say everyone loves their banker; hates their lawyer. Why is
that? Is there an actionable analog in your business?

Congratulations on making it halfway! At this point, you may want to step back and look
at the picture you’ve created about your Offering and Customers. The next four steps deal
with your ‘Infrastructure’, the plumbing you need to execute:

Step 6 (of 10): Key Activities

These are the crucial things the business needs to do to deliver on its propositions and make
the rest of the business work- for example, if selling through 3rd parties is part of the model,
then activity around channel management is probably pretty important.

For a product-driven business, this probably includes ongoing learning about users and new
techniques to build better product. If you’re focused on doing a bunch of things for a particular
set of customers (ex: comprehensive IT for law offices), this probably includes maintaining
superior expertise on the segment(s) and creating or acquiring products and services that are a
good fit, whatever that entails. For an infrastructure business (ex: electric utility), it probably
includes keeping the infrastructure working reliably and making it more efficient.

You’ll then want to consider how the Key Activities (and/or Key Resources) drive your Value
Propositions:

Outputs: a list of Key Activities linked to your business’ Value Propositions.

Notes: One question this analysis should raise for you is whether or not certain Activities and
Resources are actually core, actually focal to your business, something you’ll want to think
through .

Step 7 (of 10): Key Resources

Key resources are the strategic assets you need in place, and you need in place to a greater
or more targeted degree than your competitors. The Business Model Canvas proposes that
there are three core business types: product, scope, and infrastructure. These tend to have similar
types of Key Resources.

The following diagram describes how Key Activities drive the accrual of Key Resources:

Outputs: a list of Key Resources linked to your business’ Key Activities.

Notes: Product-driven businesses have a differentiated product of some sort. Rovio, the company
that makes the popular app Angry Birds, is such a company. Key Resources in product-driven
businesses are typically key talent in critical areas of expertise and accumulated intellectual
property related to their offering.

Scope-driven businesses create some synergy around a particular Customer Segment. For
example, if you started a business that would take care of all the IT needs for law firms, that
would be a scope-driven business. These businesses typically have key knowledge about their
segment, a repeatable set of processes, and sometimes infrastructure, like service centers.

Infrastructure-driven businesses achieve economies of scale in a specific, highly repeatable area.

Telecommunications is traditionally an infrastructure business. Retailers focused on retail, like
Walgreens or Costco, are primarily infrastructure-driven businesses. The Key Resources for this
type of business are, you guessed it, various types of physical or virtual infrastructure.

Let’s take a single product category: diapers. The Honest Company or another innovating around
compostable or otherwise more environmentally friendly diapers would be a product-driven take
on the category. Procter & Gamble which has a cradle-to-grave strategy for providing consumer
products is a scope-based take; so are various baby-focused retailers. Kimberly-Clark (wood
pulp) or DuPont (chemicals and polymers) are both infrastructure-based takes: diapers is just
another way to sell something they produce at scale with relatively little differentiation.

Step 8 (of 10): Key Partnerships

At this point, hopefully the Canvas has helped you sharpen and articulate your business’
focal points. What Activities and Resources are important but not aligned with what’s
uniquely strategy for you? What’s outside of your business type? Could partners do some of
those? Why? Which?

I recommend mapping Key Partners to Key Activities. If an activity is key, it’s still part of your
business model. This is a way to denote which specific Partners are handling various Key
Activities for you.

Output: a list of Key Partnerships with notes on their relationship to Key Activities.
Step 9 (of 10): Cost Structure
You’ve worked to understand how your Key Activities drive your propositions and hence
your revenue. How do they drive costs? Are those costs well aligned with the key Value
Propositions? Are the costs more fixed or variable as you test different business models? Are
they more linear with your scaling or more fixed? You’ll want to have these in mind as you
tweak your model.

For purposes of linking things together, I’d look at how your Key Activities drive your Cost
Structure:

If there are major cost components that don’t map to a Key Activity, I’d take a closer look at
those costs.

Output: a list of Cost Structure elements with notes on their relationship to Key Activities.

Congratulations- you have a working canvas! The section below offers a few analytical
ideas and suggestions for next steps.

Step 10 (of 10): Applications, Analysis & Next Steps

Core Applications
The most core and obvious applications of the Canvas are to ask:
– Does it make sense?
– Could it be better?
– Does the rest of my team understand and agree? Have additional ideas?
– (rinse and repeat at least quarterly)

Competitiveness
The canvas does a good job of helping you figure out your business, which is a good place to
start. You also want to look at the competitive environment and think about if and how you
have/maintain a long term competitive advantage.

For this, I like Michael Porter’s Five Forces framework (Wikipedia Page; see also Chapter 2 of
‘Starting a Tech Business‘). Try walking through the Five Forces for your company and then
bounce back to your canvas. How does it all hang together?

Next Steps
Every business is a work in progress (sorry, I try to avoid saying things like that but it seemed to
fit here). As you go through the canvas, you may encounter areas that give you trouble. The table
below summarizes a few of the most common that I see in my work as a mentor and coach:

Issue Resources
You’re having I recommend the
trouble material here on
crystallizing your Personas. See also
Customer Chapters 1-3 of
Segments and ‘Starting a Tech
Value Business‘. This
Propositions will help you
create a deep,
actionable
understanding of
your customers.
You’re looking
for a more end-to-
The Venture
end view of how
Design materials
to design the
provide a more
venture- customer
comprehensive
discovery, Lean-
view of how to
style
approach a new
experimentation,
product or
product design,
venture.
product
development.
Startup Sprints is
a popular
program for
You’re looking stepping through
for a systematic a new product
way to organize and/or venture.
your work on the It’s organized
venture over a around agile-style
period of weeks. iterations which
you can size
according to your
pace.
See Chapter 4 of
‘Starting a Tech
Business’. This
You’re not sure will help you
how much think about what
product to build you need to build
(vs. license, from a functional
leverage, etc.) or perspective so
how to put it you can look at
together. the available
technology
objectively and
make strategic
 design decisions.
See Chapter 8 of
‘Starting a Tech
Business’. This
You’re not sure will give you a
where and how to framework to use
partner. in partnership
evaluations and a
supplemental
example.

Using the Google Doc’s/PowerPoint Template

If you’re not familiar with it, Google Doc’s is a web-based office suite, similar to MS Office. If
you have a gmail account, you can access it (no guarantees- that was the case last time I
checked).

First, you’ll want to link to the template file: BUSINESS MODEL CANVAS TEMPLATE IN
GOOGLE DOC’S.

Once you’re accessed the file, you can make make it your own by going to the File menu and
either ‘Make a copy…’, creating a copy in your own Google App’s domain or you can use the
‘Download as…’ option to download it as PowerPoint (and a few other formats).

Probably the most key thing here is that I set it up so you edit the list of Canvas items (Segments,
Relationships, etc.) in the Slide Master. I know what you’re thinking- I hate those Master things
and I never use them. Generally, neither do I. But in this case it’s a good way to achieve some
rudimentary layering, allowing you to do show things on top of the Canvas without having to
recopy all the elements. You’ll see what I mean on the file. The key thing is that to edit the list of
Canvas items: Go to the ‘View’ menu, then go to ‘Master’ and edit the first slide you see under
the Layout label over on the left:
Last note: The lines with multiple bends that you see are called a ‘Polyline’ in Google Doc’s. If
you click the downward arrow on the line item in the menu bar, you’ll see it.

Using the Omnigraffle Template

Omnigraffle: Initial Editing of the 9 Key Elements in the Canvas
The first thing you’ll want to do is fill out the elements of the canvas. These layers are set to be
visible and editable in the Omnigraffle template you just downloaded. Click and edit:

Omnigraffle: Creating the Triparte View

One popular view of the canvas is in the three parts shown below- a) the offering b) customers
and c) infrastructure.

To get this view, we need to show a layer that’s hidden by default. I’ll be drip feeding basic,
related Omnigraffle instructions as we go through this. If you prefer a more comprehensive
introduction, they have a pretty good set of intro videos.
You can see the layers as small rectangles under the page (‘canvas’) we’re on:

You’ll notice on each that when you hover over it there are three icons: an eye, a printer, and a
padlock. The eye controls whether or not the layer is shown- try clicking it on and off to see. The
printer controls whether the layer gets printed. The padlock controls whether or not the layer is
editable. This is will be important as we go on- in general I think you’ll find things a lot easier if
you lock all the layers you’re not editing. To show the background above, click on the show/eye
property of the layer labeled ‘Tripart’.

Notice also the pencil- that tells you the layer you’re editing- DON’T FORGET TO CHECK
THIS AS YOU GO ALONG, ESPECIALLY IF YOU’RE NEW TO WORKING WITH
LAYERS.

If you’ve updated the canvas elements with the items you want (for the moment at least) then I
would lock (using the padlock icon) all those layers. If you don’t, you may find you’re having
background/foreground problems in selecting the shape you want on the layers that follow.

Omnigraffle: Creating the Items by Business Type View

This next layer allows you to color code the various elements against a legend (which you can
create at the bottom of the diagram). One likely use for this is when you feel the elements of your
model bleeds into several core ‘business types’ and you want to delineate that. (In his book
‘Business Model Generation’, Alex Osterwalder put forward to the idea of three core business
types: ‘product innovation’, ‘customer relationship management’, and ‘infrastructure’). You may
want to categorize various parts of the business for any number of reasons- things you do now
vs. things you propose to do, etc.

Before you move on to this view, you’ll want to hide and lock (if you unlocked it) the ‘Tripart’
layer we just covered (that’s the padlock icon within the layer sub-menu- see directly above).
Then just click ‘show layer’ (the eye has it) on the layer ‘ElementbyCat’. Congratulations, you’re
on to your second layer. One thing I like to do periodically to make sure that I’m getting things
on the layer I want is to toggle ‘show’ (eye) on the layers to make sure things are where I think.
Another note on layers: If you goof up (I do a lot), moving things from one layer to another is
easy but a little (to me) non-obvious. What you need to do is copy or cut whatever it is you want
to move and then before you paste, make sure the layer you want the content to land on is the
one under edit (that it has the pencil showing) which you can do by click to the left of the layer.

Omnigraffle: Creating the Value Proposition to Customer Segment Mapping

This view is a simple mapping that says ‘These various propositions link to these various
customer segments.’.

You’ll notice I’ve hid all the element layers except for Propositions and Segments. That’s my
personal preference- most of the diagrams that follow are about focus and clarity.

You’ll need to use shapes, lines and (possibly magnets) to manipulate this diagram substantially.
It’s not a big deal, trust me. The colored shapes are a circle with a line attached to it. You can see
the inspector below:

This is where you go to set the properties of most items on Omnigraffle. The top section has a
series of buttons you select between to manipulate fill, lines, shapes, shadows (if you roll that
way), images, and text. The bottom section has a few items but the only item I’ve every found
myself using the is the properties for ‘magnets’- see below. (For more in the Inspector, see the
OmniGraffle Tutorial). If, for example, you want to change the color of one of these lines, you’ll
need to use the Inspector to update the fill color of the circle and the line color of the line. So,
you’d use the fill style for the circle and the line style for the line.

Magnets are attachment points on shapes- pretty much everything in the application has them.
They can make the lines a little hard to go where you want- you may find they keep being drawn
to a place you don’t want them to go. If this is the case, you may want to select the line and go to
the magnet properties (see above) and uncheck the item that says ‘Allow connections to other
objects’. This will keep the line for anchoring to other objects which is what you want if it keeps
veering off to a place you don’t like. If you want to see the Magnets, go to the top menu: View
>> Magnets.

Another note on Lines: if you’re having trouble bending them to the places you want, experiment
with right clicking on them and adding or removing ‘midpoints’, which are basically arms/points
of freedom in the lines.
Yet another notes on lines and the circles: If you have multiple propositions mapping to the same
customer segment, you mind find the visual explanation clearer if you make all the lines the
same color. You can see this done in a few of the items below and decide for yourself.

You’ll find several other layers in the template corresponding to the items below. All the tips and
tricks you need to work with them are described in the above examples. Other layers:
Value Proposition to Customer Segment to Revenue Mapping
Key Partner to Key Activity Mapping
Key Activity to Key Resource Mapping
Key Activity to Cost Mapping
Key Activity and/or Key Resource to Value Proposition Mapping

Omnigraffle: Lean Startup- Assumptions and Experiments Mapping

This one’s of a slightly different ilk- a ‘lean canvas’, if you will. The idea here is to map the key
assumptions attached to the various parts of your business model and pair those assumptions
quick and inexpensive experiments which will allow you to quickly validate or invalidate the
assumptions. This is the central idea of the ‘Lean Movement’. If you’d like a quick backgrounder
on that you can check out the Speaking section of the site- see the item ‘Planning’.

These items are rectangles with text on the inside. I think it’s helpful to see the elements with the
assumptions and experiments next to them if you can make all that fit. If you can’t just hide the
various element layers (Customers, Propositions, etc.) and overlay the assumptions