Starting a Business is a hectic task because it involves a lot of activities like registering the business, formulating a plan of action, deciding the production process, setting up a budget, etc. Evaluating the market and establishing a good relationship with the existing competitors is also necessary before launching a business. Prior to incorporation, the proprietor must design a path for the successful operation of the business. This is known as a business model.
There are so many different types of business models and the documented form of the existing or newly formulated business models is known as business model canvas. The main advantage of a business model canvas is that it will help the owners to improve the focus and clarity of the goal of the business. It can be divided into many different segments and they are as follows.
The first segment of a business model canvas is value proposition. It describes what the business is trying to provide and it also states for whom the company is providing. This is all about the needs and wants of the consumer on the basis of their satisfaction level and not based on any specific product or service. It defines what problem of people the company is trying to solve and it ultimately reaches the product or service the business is planning provide. It also denotes the benefits and features of the products of the company.
It is the most important section of the business model canvas. It describes the details of the target customers. Before starting the business, the promoter must make a detailed study of the population. It includes identifying potential customers, the best place for business, etc. The study must also include the personal characteristics of the business like their gender, age group, social habits, etc. All these details must be documented in the customer segment of the canvas.
A channel is a path by which a company will be providing the goods and services to the target customers. In earlier times, there was only physical channel that will take the goods from the production unit to the wholesalers or to the retailers and finally to the customers. But now, since the technology has improved, there are many other ways to make the goods and services available to the consumer such as online channels. The channel segment of the business canvas will describe the pathways a business has chosen to sell their goods.
Customer Relation Segment
Even though this section has some similarities with the customer segment, it is entirely different. The customer relation segment will explain the methods for attracting customers and how to keep them. It also denotes the methods to increase the customer base of the business. This formulation of this section depends on the character of the target customer and also the type of distribution channel because it would require a different approach to attract customers in both traditional and online businesses.
Revenue Stream Segment
This section will describe how a business is planning to make their income. This segment depends on the value proposition segment and also on the customer segment. There are different models that a business can adopt to increase its revenue such as sales model, subscription model, license model, etc. Adopting a model depends on the type of product or service the company is planning to provide its potential consumers. A business unit has the option to choose either one or multiple revenue models to increase their profit.
This part of the business model deals with the management of resources of a business. A company will need several resources like production plant, infrastructure, vehicles, labors, etc. capital is also one of the important resources of a company. This section will help in the estimation, procurement, and allocation of resources on a timely basis. This segment also deals with the appointment of employees and formulating plans to reduce employee turnover.
This section will show all the anticipated expenses of the business. It includes all types of costs such as cost of production, wages, and salaries to employees, rent of the building, etc. The cost segment will help in estimating all the fixed and variable expenses that are needed for the smooth running of the business. This section will not only show the revenue expenses but also the capital expenses of the company. In short, any expense that is incurred for the establishment and also for the functioning of the business will be recorded in this segment. Whether any person is already running a business or planning to start a new business, preparing a business model canvas is a good method to make a better clarity on their objectives. It will help to make the plans more precise and rational.