8/4/2021 Business Model Canvas Explained | A Step-by-Step Guide with Examples

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The Easy Guide to the Business Model Canvas

Updated on: 27 July 2021

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 (https://creately.com/usage/business-model-

canvas-template/) 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 (https://www.moneycrashers.com/unique-nontraditional-business-model-
examples/) 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 (https://creately.com/usage/business-model-canvas-template/) 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 (https://www.amazon.com/Business-Model-
Generation-Visionaries-Challengers/dp/0470876417)’ as a visual framework for planning,
developing and testing the business model(s) of an organization.
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(https://creately.com/demo-start?tempId=uJE97g8KB0X)
Business Model Canvas (Click on the template to edit it online)

Why You Need a Business Model Canvas

The BMC provides a quick overview of the business model and is devoid of the unnecessary
details compared to the traditional business plan.
The visual nature of the business model canvas makes it easier to refer to and understand by
anyone.
It’s easier to edit and it can be easily shared with employees and stakeholders.
The business model canvas can be used by large corporations as well as startups with just a
few employees.
It clarifies how different aspects of the business are related to each other.
You can use a BMC template to guide a brainstorming
(https://creately.com/usage/brainstorming-templates-examples/) session on defining your
business model effectively.

How to Make a Business Model Canvas

There are nine building blocks in the business model canvas and they are customer value
proposition, customer segments, channels, customer relationships, revenue streams, key
resources, key partners, key activities, and cost structure.

When filling out a business model canvas (https://creately.com/usage/business-model-canvas-

template/), 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.
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8/4/2021 Business Model Canvas Explained | A Step-by-Step Guide with Examples

(https://creately.com/demo-start?tempId=6c7Nt1mzhU9)
Business Model Canvas (Click on the template to edit it online)

Let’s look into what the 9 components of the BMC (https://creately.com/usage/business-model-

canvas-template/) are in more detail.

Customer segments
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 (https://creately.com/blog/diagrams/how-to-create-a-
buyer-persona/) for each of the selected customer segments.

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8/4/2021 Business Model Canvas Explained | A Step-by-Step Guide with Examples

(https://creately.com/demo-start?tempId=6ufdRGfSuGB)
Customer Persona Template (Click on the template to edit it online)

There are different customer segments a business model (https://creately.com/usage/business-

model-canvas-template/) 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 (https://creately.com/usage/stp-model-template/) for segmenting your

market and developing ideal marketing campaigns

Customer relationships

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8/4/2021 Business Model Canvas Explained | A Step-by-Step Guide with Examples

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 (https://creately.com/usage/customer-journey-mapping-tools-templates).
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.

(https://creately.com/demo-start?tempId=zB7yanBaRcs)
Customer Journey Map (Click on the template to edit it online)

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8/4/2021 Business Model Canvas Explained | A Step-by-Step Guide with Examples

Channels
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.

Revenue streams
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

Key Activities
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.

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8/4/2021 Business Model Canvas Explained | A Step-by-Step Guide with Examples

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.

Key Resources
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
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

Cost structure
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.

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8/4/2021 Business Model Canvas Explained | A Step-by-Step Guide with Examples

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
(https://creately.com/diagram/example/jk245xpyb/Value+Proposition+Canvas+Template) 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).

(https://creately.com/demo-start?tempId=wzEoTP6zPKc)
Value Proposition Canvas (Click on the template to edit it online)

What Are Your Thoughts on the Business Model Canvas?

Once you have completed your business model canvas (https://creately.com/usage/business-
model-canvas-template/), 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.
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8/4/2021 Business Model Canvas Explained | A Step-by-Step Guide with Examples

Join over thousands of organizations that use Creately to brainstorm, plan, analyze, and
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Get started here (https://creately.com/plans/?ref=blog-en-generic)

9 elements of a business model canvas (https://creately.com/blog/tag/9-elements-of-a-business-model-canvas/)

business model canvas (https://creately.com/blog/tag/business-model-canvas/)

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how to make a business model canvas (https://creately.com/blog/tag/how-to-make-a-business-model-canvas/)

what is a business model canvas (https://creately.com/blog/tag/what-is-a-business-model-canvas/)


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of-graphic-organizers/)
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8/4/2021 Business Model Canvas Explained | A Step-by-Step Guide with Examples

Author

Amanda Athuraliya
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.
View all posts by Amanda Athuraliya → (https://creately.com/blog/author/amanda/)

Comments

Zhanibek Zhartay Kazakhstan

This article on Business Model Canvas was urgent and interesting! I apply this canvas from my
professional activity. Thanks for the detailed description
26.05.2021 (https://creately.com/blog/diagrams/business-model-canvas-explained/#comment-73491) - reply

Lisa Lowthers
Hi Amanda,
I would like to use this article in a course I am teaching and would like ot have it translated into
French. Can you contact me so we can discuss this please?
Thanks so much,
Lisa
27.04.2021 (https://creately.com/blog/diagrams/business-model-canvas-explained/#comment-73234) - reply

Amanda Athuraliya
Hi Lisa,
That would be okay.
Best wishes,
Amanda
03.05.2021 (https://creately.com/blog/diagrams/business-model-canvas-explained/#comment-73277) - reply

Shavonne
Hi Amanda, This was very insightful!
01.04.2021 (https://creately.com/blog/diagrams/business-model-canvas-explained/#comment-73014) - reply

Ahmad Kamal
https://creately.com/blog/diagrams/business-model-canvas-explained/ 10/13
8/4/2021 Business Model Canvas Explained | A Step-by-Step Guide with Examples

Dear Amanda,
thanks a lot for the article on BMC. i really appreciate it very much. keep up the good work
amanda.
04.11.2020 (https://creately.com/blog/diagrams/business-model-canvas-explained/#comment-71055) - reply

Frank Dethier
Dear Amanda
Thank you, very helpful
I am still struggling if/how a BMC can be used for a strategy creation process at a business unit
level
Frank
15.10.2020 (https://creately.com/blog/diagrams/business-model-canvas-explained/#comment-70793) - reply

Rotimi
Dear Amanda,
This article on Business Model Canvas was quite helpful!
Your brilliance on the subject matter is highly commendable.
Much appreciated.
25.07.2020 (https://creately.com/blog/diagrams/business-model-canvas-explained/#comment-69731) - reply

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