For any aspiring small business owner to take an idea and turn it into a successful business, he or she must first develop a sound business plan. Traditionally, writing a business plan has been an arduous process, requiring the entrepreneur to conduct market research, a SWOT analysis, and so on before sitting down to articulate the business’ roadmap to profitability over dozens of pages. These plans often contain enough information to fill three-ringed binders. It’s easy to see why this process can stop many creative small business owners from getting their ideas off the ground.
Using the traditional approach is often needlessly complex. Instead, we at Kenan Foundation Asia recommend that owners use a different approach, known as the Business Model Canvas (BMC), a tool developed by www.strategyzer.com, to develop a guide for their businesses. The beauty of the BMC is that it distills the entrepreneur’s analysis and vision into a single piece of paper, and yet still provides a picture of the nine essential elements that an enterprise must consider on its road to profitability and success.
Let’s take a closer look at the BMC and identify some of the key questions small business owners must answer to transform their ideas into a flourishing enterprise.
Value Propositions: This is perhaps the most important element of your business – that’s why it is place in the center of the canvas. You must identify what unique value you provide to customers to satisfy their needs or solve their problems.
Key Activities: What does your business need to do to produce its value proposition and make the model work? List the strategic activities directly related to your value proposition.
Key Partners: Who are your suppliers and strategic partners that enable your business to operate efficiently?
Key Resource: List your key resources, such as employees, machinery, capital, land or intellectual property. This will help you understand the assets you need for your business to be successful.
Customer Segment: Who are your customers? Are you pursuing the mass market or a niche market? It is very important to answer these questions because it will affect the way you communicate and market your products or services.
Customer Relationships: What is your strategy to find and keep customers? Thinking about your customer relationships will help you build brand loyalty, leading to satisfied customers who make repeat purchases and recommend your product or service to others. Examples of effective mechanisms for building strong customer relationships include having an after-sales service center or using social media to listen to customer feedback.
Channels: How will you distribute your product or service to customers? Will you go through your own channels, such as a website or store? Alternatively, you could work with a partner, such as a wholesaler, or some combination of the two.
Cost Structure: What are the main costs of your business? These include both fixed costs, such as rent or staff’s salaries, which do not change based on the quantity of a good produced, and variable costs, such the electricity bill, which vary depending on how much is used.
Revenue Streams: How will your business make money? There are a number of different ways an enterprise can make money, from selling a physical asset to charging a usage fee. You need to develop a sound strategy to capture value from customers in exchange for selling your good or service.
Now that you know the nine key building blocks of the BMC, get your team together and think through these questions to develop a clear strategy for business success.
To learn more about how Kenan is strengthening small businesses, visit www.kenan-asia.org/small-business-competitiveness