Artwork for podcast I Hate Numbers
How to use the Business Model Canvas
Episode 19129th October 2023 • I Hate Numbers • I Hate Numbers
00:00:00 00:15:32

Share Episode

Shownotes

In this week's episode, we delve into the Business Model Canvas, a powerful tool for visualizing and describing your business or organization.

Understanding the Significance

We often hear business owners and organizations talk about business models without fully understanding what a business model entails. Consequently, comprehending your business model is crucial. Additionally, according to American entrepreneur and educator Steve Blank, a business model describes how your company creates, delivers, and captures value.

Moreover, having a well-articulated business model brings various benefits. It helps in effective communication, aids in financial planning, and ensures sustainability. We at I Hate Numbers are here to guide you through this valuable process.

The Business Model Canvas

Moreover, the Business Model Canvas comprises nine building blocks that together provide a comprehensive view of your business. It starts with the Value Proposition; namely, identifying your core value and what sets you apart from competitors.

Similarly, we'll look at Key Partners, the crucial stakeholders and resources necessary for your business's success.

Building the Foundation

The Key Activities involved in delivering your value proposition are essential. Whether you're a small bakery crafting personalized cakes or an art gallery curating exhibitions, these activities are the core of your operations.

The Resources that Matter

Firstly, Key Resources, both physical and non-physical, underpin your business. For a bakery, it's the talent of your bakers and the quality of ingredients. In the art gallery world, curators, exhibition space, and the art itself are paramount.

Nurturing Customer Relationships

Effective Customer Relationships can be diverse. Specifically, for a bakery, it's about offering a friendly and welcoming experience. In the art gallery, it could mean guided tours and interactions with artists.

Establishing Channels and Segments

Diverse Channels are essential. A bakery might use a physical shop, website, and social media, while an art gallery leverages physical exhibitions, digital art sales, and partnerships.

Also, Segments help you understand your audience. Consider demographics, interests, and pain points. A bakery caters to event planners, residents, and businesses. An art gallery might target collectors, tourists, and schools.

Balancing Costs and Revenue

Understanding your Cost Structure is vital. For a bakery, this includes labour, raw materials, and marketing costs. An art gallery's costs encompass rent, marketing, and salaries.

The Key - Revenue Streams

Finally, your Revenue Streams define your financial goals. A bakery's streams may include counter sales, customized cakes, and takeaways. An art gallery earns from ticket sales, artwork sales, memberships, fundraising, grants, and donations.

Similarly, the Business Model Canvas is a dynamic tool that helps you craft a comprehensive view of your business, guiding your financial modelling, business planning, and communication strategy. Feel free to download our Business Model Canvas template to get started.

Wrapping Up

We hope you found this episode valuable and insightful. Lest, we encourage you to share it with others who can benefit from understanding the power of the Business Model Canvas. We look forward to your feedback, and until next week, Happy business modelling.



This podcast uses the following third-party services for analysis:

Chartable - https://chartable.com/privacy

Transcripts

::

I often hear business owners, organisations talk about business models without necessarily understanding what a business model actually is, how they articulate their own business model and what purpose and what benefits there are in having a well-articulated and descriptive business model. According to the American entrepreneur and educator Steve Blank, a business model describes how your company creates, delivers and captures value.

::

In this week's podcast, I'm going to outline a really valuable, powerful tool for developing, articulating and describing your own business model. I'm also going to be looking at two examples to illustrate this one for a small business and one for an arts organisation and check the show notes at the end folks here.

::

There's the illustration in the tabular form and also there's a free template for you to download for you to describe your own.

::

You are listening to the I Hate Numbers Podcast with Mahmood Reza. The I Hate Numbers podcast mission is to help your business survive and thrive by you better understanding and connecting with your numbers. Number love and care is what it's about. Tune in every week. Now, here's your host, Mahmood Reza.

::

Hi folks, welcome to another episode of I Hate Numbers. This is the podcast with a simple mission. It's there to help you and your business make more money. Who doesn't want that? To increase your financial awareness and understanding, reduce your stress and anxiety, save time, save tax, and have the businesses that you aspire to have.

::

And who wouldn't want that? And I certainly want that for you. Let's crack on with the podcast. Now the particular model in the toolkit that I'm going to be looking at is something called the business model canvas. Now this is a wonderful tool for visualising, understanding, and describing your business or your organisation.

::

The power of having a business model helps you understand the communications that you need to have. It's very powerful when you build a financial model like a budget, when you look forward, when you come up with your business plan, when you look at how you're going to create value, how you're going to make money, how you're going to be sustainable.

::

A really good articulated business model pays for itself in terms of the time and energy it requires to put it together. When you put your business model together, by the way, folks, make sure you involve yourself and your team and actually coming up with that end product. And what I'm going to do, I'm going to be looking at two discreet businesses, even though they might be in different sectors, even though they might have different profit objectives, the model can still be applied and adapted accordingly.

::

I'm going to describe each of the nine building blocks within the business model canvas and giving an example and illustrating what they refer to. Now, the first of the nine building blocks is what's called the value proposition. And this is where you as a business, as an organisation, identify your core value, your why.

::

What is it you're trying to help your clients, your customers with? What's the transformation you're trying to achieve? What's the pain problem you're trying to fix? What is it that you offer that makes you unique and different to that perhaps of your competitors? Now, if we take an example of a small bakery, a small bakery is something we can all identify with, and I’ve got to be careful not to get overtly hungry as I'm going through the example of a small bakery.

::

I'm going to be using a small bakery as an example and also contrast that with an art gallery as well. Then we think about the value proposition for a small bakery. It could be providing freshly baked goods of high quality, perhaps making those wonderful cakes for celebratory things, making them personalised.

::

If we applied the same to an art gallery, the value proposition could be unique art pieces, producing artwork of emotional and educational value. Perhaps even having those immersive art experiences. Let's go on to the second building block in our business model canvas. We do think about key partners.

::

Now, all businesses, all organisations will have key stakeholders or key partners. These can be suppliers who are part of your supply chain. These could be the resources that we require from those individual partners and the activities they may then perform for us. Now again, remember the key is not just describing and articulating and outlining them, but it then leads us to think about the planning, where the risks might lie, the resources that we might need,

::

and how we formulate future plans and communication channels. Now for our small bakery, one of the key ingredients, excuse that pun, would be the supply of good quality raw materials, good quality ingredients for our baked goods, for the items that we're going to serve to our customers. For an art gallery, the key partners in our business relationship will be the artists themselves,

::

those who provide sponsorship. If our art gallery is very keen on promoting local work, then relationships with art schools in this environment, in this environment, will be very valuable as well. The third building block is the activities, what we might call key activities. So these are specific activities necessary to deliver our why, our value proposition.

::

What differentiates these activities from others? And this impacts on our revenue streams, more of that later, our distribution channels and our customer relationships. Now for our small bakery, the key activities could be the actual baking, production, the manufacture of the items to be sold, the marketing activities to inform our client base of what's going on.

::

If we think about that same question, that same building block for our art gallery, this could be the curation of exhibitions, the organising of events. And if we have a digital presence, perhaps a digital gallery, perhaps, then it's our online presence as well. And that online presence is also going to be useful for when it comes to communicating and marketing.

::

Building block number four, key resources. Now resources by nature can be physical or non physical. What we're asking ourselves here is what's the specific key resources or assets that we need to deliver that value proposition. Value proposition by the way folks typically should be one of the first things you consider.

::

Now consider what resources you need those distribution channels for those revenue streams. for them to actually be effective and to function. What resources are needed to maintain those key customer relationships, to give operational efficiency, to maintain that infrastructure to keep us sustainable, as well as giving us levers for growth.

::

Now in the context of a small bakery, those key resources will be the talent of our team, our bakers, making sure that our kitchenware, our kitchen equipment like the ovens are fit for purpose. Can you imagine what would happen if your ovens broke down and there's people waiting anxiously for their food?

::

In the context of an art gallery, it'll be the curators. So putting on an art exhibition requires good curatorial excellence. We need the exhibition space, all the marketing, promotional and educational materials that we're collecting, as well as the actual works of art themselves. Let's talk about relationships now, customer relationships.

::

This is our building block. Number five. So what type of relationships are we wanting to have with our customers? What's the engagement? What's the interaction amongst those different segments? And more about segments in a few moments. Frequency of communication, the level of support that we might be providing if we think about our small bakery, the customer relationships might be that we want to be engaging, friendly, accessible, welcoming, certainly in the hospitality sector,

::

when we're providing a service to members of the public or to other businesses, then the friendliness of the service is going to count quite highly. If we're making personalised birthday cakes, then those personalised consultations would also be part of that customer relationship. In the context of the art gallery, these will be guided tours,

::

the interactions we have with our artists who may be there to present their works. If we're working with schools from an educational program perspective, then those are going to be important customer relationships that have got to be developed, fostered and kept an eye on. Let's move on to our next

::

building block. And we're talking about channels. Now we're not talking about TV channels here, but we're talking the old conventional term is distribution channels. How do we get what we're offering to the end customer, the end audience, the end client? What's their channels of distribution? How do we market?

::

How do we communicate? How do we get our message across? Do they integrate well? Are they efficient? Do we maximise their usage? Now, for a small bakery, if it's got a physical shop presence, then the storefront, the actual physical inner workings of the property, will be one of its key channels. Some of those items, some of those goods, might be sold via the website.

::

Social media will play its part as well. In the context of an arts organisation, then the exhibitions themselves, again, it might be a physical building, there may be sales of the digital artwork through the website or through partnerships that we're brokering and developing. The last few now, the last three, come down to this.

::

The next one is segments. Just like an orange can be broken up into different segments, customers can also be profiled, put into different segments. Not everybody will have the same requirements and the same needs for what we're offering. And if you just think of your clients, your customers as a lump without trying to segment them, you're going to find the communication very difficult.

::

And you're trying to cater for one homogenous audience with a variety of products and services you've got. So segmentation is really powerful. If you're not doing that at the moment, folks, then one of the things about the model that it brings out is what you need to do going forward. More of that in the roundup.

::

So who's the value proposition? Who are the targets? Are you breaking this down by demographics, by interests, by perhaps customer avatars you might be creating? Who are your important customers? What are they like? What's their wants? What's their needs? What's their pain points? What's the transformations?

::

Is this a mass market? Is it a niche market? Understanding your customers, the KYC, is important. Now in the small bakery, your customer segments could be event planners, perhaps if you're doing any outside catering. Yours might be a walk by trade, a destination place. It could be there for the local residents, local businesses.

::

In the arts gallery, the segments could be collectors. If you're a major art gallery, then obviously that could be a destination place for tourists, it could be arts enthusiasts, it could be schools. You know better what those segments will be. Hopefully this is giving you a flavor, folks, about what you need to do when you get down and dirty producing your own canvas.

::

And the last couple I'm going to look at is now cost structure. So what are the key costs in your company's business model? What are the things, the drivers, that actually influence those costs? What are the key resources? Can you match those costs to your revenue streams? You might want to use that useful taxonomy of looking at costs in terms of direct and indirect.

::

Or you might want to use that idea of fixed and variable. They have that same flavor. And check out the show notes, by the way, for links to previous episodes. Are you factoring in, are you enjoying those economies of scale? Now if we think about our small bakery, the cost structure typically will be the labour costs, the wages of the bakers, the assistance, front of house staff, the cost of the raw materials, the ingredients, property costs, marketing costs, and the like.

::

In the art gallery situation is going to be the cost of acquiring or renting the arts, the rent of the space, the costs involved in marketing and promoting the upcoming event, the salaries of the staff. And lastly, we're now thinking about the revenue streams. Where does that money actually come from? For this value proposition ultimately,

::

businesses whether you are a what I call a private commercial organisation or a not-for-profit or a social enterprise, an artist, one of the key financial goals and objectives has got to be making money. And by making money, I'm talking about making a profit. If you don't generate in excess of what it costs you to run your organisation, then you're going to be on the slippery slope to hitting a financial brick wall.

::

And certainly, I wouldn't want that for you. Does your business have multiple streams of revenue generation? It's been my experience of over 30 plus years here that all businesses will have at least two or three different sources of revenue. What's the pricing strategy for how you actually price up your proposition to your clients, your customers?

::

How do your customers pay? Different ways of receiving that payment. Now, if we conclude with our small bakery here, the revenue streams could be food that's sold across the counter, personalised customer cake orders, takeaway, if that's what your bakery does. And for the art gallery, it'd be the selling of tickets to come and see a show, an exhibition, actually selling the artwork itself, either directly or on a commission basis.

::

Perhaps you operate a membership scheme. Perhaps during the course of the year, you have fundraising events, you access funds through grants and donations. And folks, just to summarise and conclude, when you're putting together your own business model canvas, you may find there can be question marks about where you get that data from.

::

And that begs the question about how good is your data to actually help you answer these questions. If there are gaps, if there are deficiencies, worry not. Those things can be fixed. Those things can be put right. In any use of any model, anything that we do for our organisation as a holistic approach, we need to make sure we've got good management information, we've got good financial data capture.

::

If you're finding that you've got a deficit in your organisation, not know which way to go forward, then by all means, respond, drop me a line. And we'll see what we can do to help you. You've got the canvas here to download, to try for yourself. Always good to go through to look at what you're like at the moment.

::

And then think about what you need to do going forward to develop that business model to have the model that you desire. That model feeds into so many different avenues, from modelling in financial terms, putting your business plan together, finding out how your communication strategy should unfold,

::

where the resources are best positioned. So folks, I hope you found this week's episode useful and helpful I'd love to hear your thoughts your comments. If you’ve found it valuable and you feel there are other people out there who could benefit I'm always going to love it when you recommend and pass on those details to those people to listen to the podcast. And folks until next week then happy business modelling.

::

We hope you enjoyed this episode and appreciate you taking the time to listen to the show. We hope you got some value. If you did, then we'd love it if you shared the episode. We look forward to you joining us next week for another I Hate Numbers episode.

Follow

Links