9 - Cost Structures

A credible financial plan is another critical requirement for successful startups, and understanding your cost structure is a key part of your financial plan. The hypotheses in all the other segments of the canvas affect your cost structure. In the cost structure section of the canvas, you'll want to document the nature of all of those costs - including your hypotheses about your variable costs, fixed costs, economies of scale, economies of scope. And of course, you're recording those hypotheses so you can go test them! This video is part of a playlist series on capturing your startup business model hypotheses using the business model canvas template. The playlist covers all 9 sections of the business model canvas: - Customer segments - Value proposition - Customer relationship - Channels - Revenue sources - Partners - Key activities - Key resources - Cost structure.

Video: (6:25)

8 - Key Activities

What do you believe are the Key Activities for your business? Capture those in the Business Model Canvas Key Activities section so you can test those hypotheses! What kind of a company do you have? Which of the following best describes the primary focus: - Production of a product - Problem solving (e.g. consulting) - Software tools - A platform or network Each of the above different types of companies involves a different focus in terms of key activities. This video discusses a number of examples. This is one of several videos in our Business Model Canvas Explained series to help you with Business Model Generation. We begin with a business model definition and then provides an overview of the 9 sections of the business model canvas: - Customer segments - Value proposition - Customer relationship - Channels - Revenue sources - Partners - Key activities - Key resources - Cost structure.

Video: (5:01)

7 - Key Partners

Partnering is another critical strategy for successful startups. You should not try to do everything yourself - some capabilities are best obtained through partnering. In your business model canvas, you want to capture your key assumptions (hypotheses) around your partnering strategy so you can test those hypotheses. The video is part of a playlist series on capturing your startup business model hypotheses using the business model canvas template. The playlist covers all 9 sections of the business model canvas: - Customer segments - Value proposition - Customer relationship - Channels - Revenue sources - Partners - Key activities - Key resources - Cost structure.

Video: (4:10)

6 - Key Resources

What are the key resources you'll need for your business to grow and thrive,? Capture those hypotheses in a Business Model Canvas so you can test them! This video provides a structure to think through the various categories of resources, from financial to physical, human capital and intellectual property. This video is part of a Business Model Canvas series to help you capture and test your startup business model using the business model canvas template. The Business Model Canvas Explained series includes videos on : - Customer segments - Value proposition - Customer relationship - Channels - Revenue sources - Partners - Key activities - Key resources - Cost structure.

Video: (4:19)

5 - Revenue Streams

Use the Business Model Canvas Revenue Sources segment to document your hypotheses around your startup business model revenue sources - how exactly you will charge customers to create revenue. This is clearly an important part of your business model generation process - and you'll need to test these hypotheses with customers to make sure they agree that they way you are charging for your value makes sense to them! In this video we review some key revenue sources hypotheses you'll need to capture and test: - How will you charge customers? - Who will you charge (in a multi-sided market)? - Pricing: How will you set the price for each customer? - Value pricing: what are customers willing to pay? - Pricing: Given all the above - what is your price? This video is part of a Business Model Canvas series to help you capture and test your startup business model using the business model canvas template. The Business Model Canvas Explained series includes videos on : - Customer segments - Value proposition - Customer relationship - Channels - Revenue sources - Partners - Key activities - Key resources - Cost structure

Video: (7:50)

4 - Customer Relationships

The Customer Relationship is one of 9 sections in the Business Model canvas, but as I explain in this video, it is an important part of your business model that touches virtually every other section of the canvas, including: - Value proposition - Customer segments - Channels - Partners - Key activities - Key resources - Cost structure - Revenue streams And of course the right customer relationship is critical if you're going to acquire, retain and up-sell customers, and get referrals.

Video: (9:46)   

3 - Channels

Channels are the touch points through which an organization liaises with its customers and as such, play a huge role in defining the customer experience. Channels can be categorized as marketing, sales or distribution channels. 

What are examples of channels in a business model?They are the ways how you reach out to your target customers. These channels could be physical channels, such as a store needed to sell clothes or a local market, or they could be virtual channels, such as an e-commerce website selling clothing online.

Video: (00:50)

2 - Customer Segments - How to Build a Startup

Watch the vídeo and learn about the second step of BMC (Business Model Canvas).

Video: (2:05)

Business Model Canvas Customer Segmentation Deep Dive

Watch this video to learn much more about Customer Segmentation.

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1.Strategyzer's Value Proposition Canvas Explained

The Value Proposition Canvas allows you to design products and services that customers actually want. In this short video, we walk you through the tool and how it works.

Video: (3:12)

Business Model Canvas Explained

A 2-minute overview of the Business Model Canvas, a tool for visionaries, game changers, and challengers. This method from Strategyzer's bestselling management book Business Model Generation is applied in leading organizations and start-ups worldwide.

You may download Business Model Canvas form clicking on the links below. 

The Business Model Canvas - 9 Steps to Creating a Successful Business Model - Startup Tips

The Business Model Canvas - 9 Steps to Creating a Successful Business Model - Startup Tips The Business Model Canvas, is a strategic management and entrepreneurial tool. It allows you to describe, design, challenge, invent, and pivot your business model. The Business Model Canvas is comprised of 9 key segments: The left hand section of the Business Model Canvas is the Infrastructure section and comprises three key areas: Key Activities: The most important activities in executing a company's value proposition. Key Resources: The resources that are necessary to create value for the customer. Partner Network: In order to optimize operations and reduce risks of a business model, organization usually cultivate buyer-supplier relationships so they can focus on their core activity. The middle section of the canvas describes the business offering and is the value proposition delivered to different customer segments. Value Propositions: The collection of products and services a business offers to meet the needs of its customers. According to Osterwalder, (2004), a company's value proposition is what distinguishes itself from its competitors. The value proposition provides value through various elements such as newness, performance, customization, "getting the job done", design, brand/status, price, cost reduction, risk reduction, accessibility, and convenience/usability. The value propositions may be: Quantitative - price and efficiency Qualitative - overall customer experience and outcome The right hand side of the Business Model Canvas describes the customers, the channels through which you deliver services and and the relationships you have with your customers. Customer Segments: To build an effective business model, a company must identify which customers it tries to serve. Various sets of customers can be segmented based on the different needs and attributes to ensure appropriate implementation of corporate strategy meets the characteristics of selected group of clients. Channels: A company can deliver its value proposition to its targeted customers through different channels. Effective channels will distribute a company's value proposition in ways that are fast, efficient and cost effective. An organization can reach its clients either through its own channels (store front), partner channels (major distributors), or a combination of both. Customer Relationships: To ensure the survival and success of any businesses, companies must identify the type of relationship they want to create with their customer segments. The bottom section of the canvas describes the finances. Cost Structure: This describes the most important monetary consequences while operating under different business models. A company's DOC. Revenue Streams: The way a company makes income from each customer segment. 

Business Model Canvas Explained

The Business Model Canvas (BMC) is a strategic management tool to quickly and easily define and communicate a business idea or concept.

It is a one page document which works through the fundamental elements of a business or product, structuring an idea in a coherent way.

The right side of the BMC focuses on the customer (external), while, the left side of the canvas focuses on the business (internal).

Both external and internal factors meet around the value proposition, which is the exchange of value between your business and your customer/clients.

Why we use it

• To quickly draw a picture of what the idea entails.
• It allows us to get an understanding of your business and to go through the process of making connections between what your idea is and how to make it into a business.
• It looks at what kinds of customer decisions influence the use of your systems.
• It allows everyone to get a clear idea of what the business will likely be.

How to use it

1. Value Proposition:

The Value Proposition is foundational to any business/product.

It is the fundamental concept of the exchange of value between your business and your customer/clients.

Generally, value is exchanged from a customer for money when a problem is solved or a pain is relieved for them by your business.

Good questions to ask when defining your business/product:

• What is the problem I am solving?
• Why would someone want to have this problem solved?
• What is the underlying motivator for this problem?

Tips:

A good way to approach this for users/customers is by looking at your customer segments and figuring out where your product/service solves the problem for your customer, based on Maslow's Hierarchy of Needs.

If you are selling your product or service to another business, you are a key partner in them achieving their Value Proposition for their customers.

It is important to have context around the goals the company is trying to achieve for their Customer Segments and where your business/product/service fits in the value chain.

3. Channels

Channels are defined as the avenues through which your customer comes into contact with your business and becomes part of your sales cycle.

This is generally covered under the marketing plan for your business.

Good questions to ask when identifying the channels to reach your customers are:

• How are we going to tell our customer segment about our value proposition?
• Where are our customers?
• Are they on social media?
• Are they driving their car and listening to the radio?
• Are they at an event or conference?
• Do they watch TV at 7pm on a Friday night?

Examples of channels:

• Social media
• Public speaking
• Electronic mail (email marketing)
• Networking
• SEM (Search Engine Marketing)
• SEO (Search Engine Optimisation)
• Engineering as marketing
• Viral marketing
• Targeting blogs
• Sales and promotions for commissions
• Affiliates
• Existing platforms
• PR
• Unconventional PR
• Social advertising
• Trade shows
• Content marketing
• Community building
• Offline advertising (billboards, TV, radio)

Understanding how to reach your customers is so crucial to your business.

4. Customer Relationships

Customer Relationships is defined as how a business interacts with its customers.

So, do you meet with them in person? Or over the phone? Or is your business predominantly run online so the relationship will be online too?

Some examples are:

• In person (one-to-one)
• Third party contractors
• Online
• Events (one-to-many)
• Phone

A really helpful step is to create a User Journey Map of your customers as they interact with your business.

This helps clarify the points of engagement between you and your customer and the modes used to relate to your customers.

This will also help you start to define your operations as a business and also help you identify opportunities for automation.

5. Revenue Streams

Revenue Streams are defined as the way by which your business converts your Value Proposition or solution to the customer's problem into financial gain.

It is also important to understand pricing your business accordingly to pain of purchase in exchange for the pain of solving the problem for your customer.

But how do you gain revenue?

There are many different revenue models here:

• Pay per product (pay per view)
• Fee for service
• Fixed rate
• Subscription
• Dividends
• Referral feeds
• Freemium
• Equity gain

7. Key Partners

Key Partners are a list of other external companies/suppliers/parties you may need to achieve your key activities and deliver value to the customer.

This moves into the realm of 'if my business cannot achieve the value proposition alone, who else do I need to rely on to do it?'.

An example of this is 'if I sell groceries to customers, I may need a local baker to supply fresh bread to my store'.

They are a key partner to achieve the value my business promises to the customer.

9. Cost Structures

Your business cost structure is defined as the monetary cost of operating as a business.

• How much does it cost to achieve my businesses key activities?
• What are the cost of my key resources and key partnerships?
• How much does it cost to achieve the value proposition for my customers/users?
• Are there additional costs to running a business?
• Legal?
• Insurance?
• What is the cost of my business?
• It is important also to place a monetary value on your time as a cost.
• How much would it cost you to hire you?
• What is the opportunity cost of running your business?

BMC - APPLE

Apple has always been a major favorite of customers from all around the world. The sleek designs of their products and their uniqueness have always attracted people. This attraction is seen by the $229 billion generated by Apple in the 2017 fiscal year. Apple was founded on April 1, 1976 by tech-entrepreneurs Steve Jobs, Steve Wozniak and Ronald Wayne. The first product of the company was the Apple I personal computer which was single-handedly designed and hand-built by Wozniak.

By going public in 1980, Apple started its journey towards success. Thought initially the high prices of the products as well as the internal power struggles caused issues for the company, they were resolved later on. By revenue, Apple is the world's largest information technology company and the world's third-largest mobile phone manufacturer after Samsung and Huawei. Apple has always been ranked as the world's most valuable brand repeatedly.