Building a Business Model Canvas Step by Step – Developing a Business Idea Using the Business Model Canvas (Senior 3 Entrepreneurship) | Ganzaa

Developing a Business Idea Using the Business Model Canvas

Lessons

Senior 3 · Entrepreneurship

Developing a Business Idea Using the Business Model Canvas

4 lessons

Lesson 4 of 4

Building a Business Model Canvas Step by Step

25 min

Nine blocks, one at a time

A canvas is built on a large sheet, often with sticky notes so that ideas can be moved, removed and argued about. Each block has its own options. The table gives the main ones; knowing them helps you fill the canvas with precise answers instead of vague ones.

Block	Meaning	Main types or options
Customer segments	the groups of people or organisations the business serves	mass market; niche market; several segments; multi-sided (two groups that need each other)
Value propositions	the benefits that make each segment choose the business	newness; better performance; lower price; convenience; design; reducing a cost or a risk; access
Channels	how the business makes customers aware, sells, delivers and gives after-sales service	own channels (shop, sales staff, website); partner channels (wholesalers, retailers, agents)
Customer relationships	the kind of relationship the business builds with each segment	personal assistance; self-service; automated service; communities; co-creation with customers
Revenue streams	the ways each segment pays	sale of goods; usage fee; subscription; rent; licence fee; commission; advertising
Key resources	the most important assets needed	physical; human; financial; intellectual (brands, recipes, designs)
Key activities	the most important things the business must do	production; problem solving for clients; running a platform or network
Key partners	the suppliers and partners that make the model work	suppliers; alliances with non-competitors; joint ventures; cooperation with competitors
Cost structure	the most important costs of running the model	fixed and variable costs; cost-driven (cheapest possible) or value-driven (quality first)

Definition

Niche market: a small, specific customer segment with special needs, such as boarding schools that buy food in bulk. Mass market: a large group of customers with broadly similar needs, served in the same way.

Assumption: something believed to be true about a business, such as a price customers will pay, that has not yet been tested.

Steps to build a canvas

Prepare: a large sheet with the nine blocks, sticky notes and pens, and the people who will run the business.
Customer segments: start with whom you serve. Be specific.
Value propositions: for each segment, the problem you solve and the benefit you offer.
Channels: how each segment will hear about, buy and receive the product.
Customer relationships: how you will win, keep and grow each segment.
Revenue streams: what each segment pays, how and how much.
Key resources: what you must have to deliver the value.
Key activities: what you must do well.
Key partners: who supplies or helps you.
Cost structure: the main costs created by the resources, activities and partners.
Check the fit: every value proposition has a segment and a channel; the revenue can cover the costs.
Test and revise: treat every note as an assumption; check the most important ones with real customers, then change the canvas.

Tip

Right side first, then left, then the bottom. Begin with customers and value (the right side), then what you need to deliver it (the left), then the money (the bottom). Use one colour of sticky note per customer segment, so you can see which value, channel and revenue belong to which group.

Worked example 1: Ishimwe’s finished canvas

Checking the fit: each segment has a value proposition and a channel (families buy at grocery shops; restaurants and boarding schools order by phone at a bulk price). The market sellers are both a key partner and the reason the value proposition “less waste” is true. The revenue of Frw 1,000 a packet must cover the costs in the bottom-left box; lesson 3 showed she breaks even at 184 packets a month. The case is illustrative.

Worked example

Worked example 2: testing an assumption (illustrative figures)

Ishimwe’s most important assumption is that she can sell 300 packets a month. She tests it: in two weeks, two grocery shops sell 110 packets.

Monthly rate: $110 \times 2 = 220$ packets a month.

Compare: 220 is above her break-even of 184 but below her target of 300, a shortfall of $300 - 220 = 80$ packets.

Revise the canvas: two restaurants asked for bigger bags, so she adds a 1 kg bulk bag (value proposition), lists restaurants and boarding schools more clearly (customer segments) and adds phone orders (channels). She also lowers her sales forecast in the business plan until the new channels prove themselves.

Warning

Common mistakes. (1) Filling the left side first, then looking for customers to fit. (2) Vague notes such as “good quality” or “everybody”: write who exactly, and what exactly. (3) Never testing: a canvas that has not met a real customer is only a guess.

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Practice

State the steps in building a Business Model Canvas.
Give two types each of: (a) revenue streams; (b) key resources; (c) customer relationships.
Distinguish between a niche market and a mass market, with an example of each.
A youth group plans a mobile phone repair kiosk at a trading centre. Suggest one entry for each of the nine blocks of its canvas.
What does “checking the fit” of a canvas mean? Give two checks.
In a three-week test, a kiosk sells 45 phone covers. At that rate, about how many will it sell in a four-week month? If its break-even is 50 covers a month, what should it conclude?
Choose a business idea for your school or community and draw its canvas with at least two notes in each block.

Show answersHide answers

Prepare; customer segments; value propositions; channels; customer relationships; revenue streams; key resources; key activities; key partners; cost structure; check the fit; test and revise.
(a) any two: sale of goods, usage fee, subscription, rent, licence, commission, advertising. (b) any two: physical, human, financial, intellectual. (c) any two: personal assistance, self-service, automated service, communities, co-creation.
A niche market is a small, specific segment with special needs (boarding schools buying food in bulk); a mass market is a large group with similar needs served the same way (people buying airtime).
Example: segments: phone users at the trading centre; value: fast, cheap repairs while you wait; channels: the kiosk, phone calls; relationships: personal service, a repair guarantee; revenue: repair fees, sale of covers and chargers; resources: tools, spare parts, a trained technician; activities: repairing, buying parts; partners: spare-parts suppliers, the landlord; costs: rent, parts, wages, electricity.
Checking that the blocks agree with each other. For example: every value proposition is linked to a segment and a channel; the revenue streams can cover the cost structure.
$\frac{45}{3} = 15$ a week, so $15 \times 4 = 60$ a month. 60 is above the break-even of 50, so the kiosk should cover its costs from covers, though the margin of 10 is small; it should keep testing and look for more sales.
Answers vary; check that each block has specific notes and that the blocks fit together.

1Nine blocks, one at a time

2Steps to build a canvas

Nine blocks, one at a time

Steps to build a canvas