Every startup business needs a plan—but a traditional business plan isn’t your only option. Find out how using a business model canvas for startups can get your business off the ground faster.
By Rieva Lesonsky
Is the thought of writing a business plan holding you back from starting a business? Even though writing a traditional business plan is easier than ever, it can still be an intimidating task. If you’re eager to get started with your business—without the drudgery of creating a massive document first—a business model canvas for startups might be right for you.
What is a business model canvas for startups?
A business model canvas is a quick-start alternative to a business plan. It helps you think through the most important aspects of startup–such as your product or service, your target market and the resources you’ll need to launch–in a brief, chart format.
When to use a business model canvas
Why might you want to use a business model canvas instead of a traditional business plan? Here are some situations where a business model canvas might be appropriate:
- You suddenly have an opportunity you want to act on. Maybe a restaurant space is for lease in the exact area you dream of launching your restaurant. Perhaps you have the chance to form a partnership with someone who has lots of the resources you need to start a business. Using a business model canvas can enable you to act quickly before opportunity slips away.
- You want to beat the competition. If you have an innovative business idea, such as a software application or invention, using the business model canvas can help you be first to market. In a highly competitive space, other startups are likely planning launches similar to yours; the business model canvas can help you get the jump on them.
- You don’t need outside financing. If you are trying to get a bank loan, angel capital or venture capital, you’ll need to have a traditional business plan ready to show the financing source. But if you have sufficient startup capital on your own, there’s no law saying that you have to follow the traditional business plan format.
- You want to rapidly assess the viability of your idea. Writing a traditional business plan will reveal any flaws in your idea; however, a business model canvas can help you pinpoint problems faster. Using a business model canvas, you can decide immediately if your idea will fly or if you need to revise it or scrap it and move on to another concept.
Of course, some people just prefer the speed of a business model canvas and don’t want to spend weeks or months crafting a lengthy traditional business. If this is you, go ahead and try the business model canvas. Just keep in mind that this format isn’t an excuse for neglecting the details of planning your startup.
What’s included in a business model canvas for startups
The business model canvas for startups takes a high-level view of your business idea and focuses on the key elements you’ll need to make it viable. Developed by Alexander Osterwalder, it’s a one-page document in chart form that covers the nine “building blocks” that help your business startup make money.
- Key Partners: Who are the buyers, suppliers, partners and other alliances that can help you accomplish core business activities?
- Key Activities: What are the most important actions you need to take in order to fulfill your value propositions, strengthen customer relationships, secure distribution channels and maximize revenue streams?
- Key Resources: What essential resources are needed to launch and run your business and create value for your customers?
- Unique Value Proposition: What products and services do you plan to offer? What customer needs do they meet? How do they differentiate your business from your competition
- Customer Segments: What customer groups will your business serve? Identify the customer personas that your business provides value for.
- Customer Relationships: What relationships will you build with your customer segments? What kind of relationship does each customer segment expect?
- Channels: What distribution methods will you use to deliver your products or services to your target market?
- Cost Structure: What will it cost to start and sustain your business? Which resources and activities will be the most expensive?
- Revenue Streams: How will your business make money? How will you price your products and services? Are there other potential revenue streams?
You can create a business model canvas on paper or whiteboard. There are also several apps you can use to create your business model canvas; they allow you to incorporate additional information, easily save and share the business model canvas, and more.
Where to get help with the business model canvas
There are several places to get help creating your business model canvas. You can start by taking this SCORE webinar on using the Business Model Canvas. Then visit Strategyzer, Canvanizer and Xtensio to find a business model canvas tool you can use. You’ll also find sample business model canvas examples, resources and training to help.
Both the traditional business plan and the business model canvas can help startup entrepreneurs evaluate their ideas and make important decisions about startup. (Learn more about what to put in a business plan.)
Of course, you can use both methods if you want: Many entrepreneurs start with a business model canvas to give them a “jump start” and then flesh out a traditional business plan further down the road.
Not sure what a business model is? Check out this simple explanation of business models to find out.
(Disclosure: SCORE is a client of my company.)
Young businesswoman explaining strategy stock photo by Flamingo Images/Shutterstock