Wikipedia defines them thus: A business model describes the rationale of how an organisation creates, delivers and captures value.
In practice a business model ties together a conceptual framework (who your customers are, what they are looking for, what you will provide them with, how you’ll provide it) with some financials (cost structure and revenue streams). In essence it is a planning tools and as with much planning the value comes from the clarity of action that emerges in the process. There are many different ways to approach defining your business model but the tool we like most of all here at Crunchers is something called a Canvas.
A canvas is a way to put the business model on a one page document and it has the advantage of making something that could be very complex relatively simple. Obviously it will not have the rigour of a full business plan but it is a way to rough something out quickly, like sketching the house you are building vs doing architect’s drawings.
What is great is that it allows you to clarify some basics quickly that can massively help in focusing action.
There are different types of canvases that we can use each with slighly different sections to complete but our favourite is the Lean Canvas, developed by a business coach Ash Maurya. As you can see above the canvas consists of the following sections to complete:
- Customer Segements
- Problem (the customer has)
- Solution (the business is providing)
- Unique Value Proposition
- Unfair Advantage
- Key Metrics
- Revenue Streams
- Cost Structure
We find this tool so useful we have built it into our Improving the Numbers software GoalDriver.