If you have a business idea or an idea that you want to turn into a business, using the Business Model Canvas as a tool to assess the viability of that business idea is critical. Every successful entrepreneur has gone through a similar exercise, so if you’re not convinced yet, let me show you how the Business Model Canvas can help you assess the key areas in your business and their potential for success.
Can You Even Reach the Potential Customer?
As you may know, it is extremely important to know how, where, and when you can reach and engage with customers/potential customers to generate sales. The Business Model Canvas answers this question. Deciding on a sales channel (for example, opening a physical store vs. starting an e-commerce store) will affect how you reach your customer and how much it will cost to reach them.
Can You Obtain Key Resources?
If you cannot obtain the key resources for your business idea, there will be no way to execute on the idea successfully. Key resources could be physical assets such as manufacturing equipment or human capital (e.g. a key employee, like a programmer). These resources could also be intellectual knowledge or connections that could get you free rent, as an example.
Proprietary knowledge is a key resource that could determine the success of your business idea.
Assessing for Financial Feasibility
Cash is king.
An entrepreneur needs to know all the ins-and-outs of how the business will make and spend money. Profit margins, lifetime customer values, revenue streams, and cost structures are all areas that will be assessed using the Business Model Canvas. If the idea ends up having too many costs, and not enough potential revenue streams to explore, that could be a problem. On the contrary, you may find your business idea has a lot of revenue streams, a small cost structure, and low barriers to entering the market.
Assessing for Operational Feasibility
Knowing the key activities of your potential business is critical to determining if you need additional key resources or are able to execute with only your immediate capabilities and resources. For example, a drone distribution business would have heavy reliance on technology that could operate multiple drones to fly them to delivery points in a safe and secure manner. To successfully execute on this idea operationally, you would need to have the operational skills or tools, including necessary software.
Killing a Business Idea
The Business Model Canvas is a great way to assess and discover the viability of your business idea. This will save you countless hours and resources trying to execute on something that won’t work, and will allow you to move forward with your next idea. It can be used to kill your idea by assessing the key areas—if you find you don’t have the key resources, aren’t able to generate enough cash, or don’t have a customer segment to properly target, then the idea will not succeed and it is time to go back to the drawing board.
Designing Your Business Idea
You can design your business idea to fit your lifestyle using the Business Model Canvas. Changing how you present value and how you take payment can all affect your personal lifestyle for running a business. For instance, with a business model where you serve people in-person, such as a Smart Home implementation service, you would not be able to leave the country and still run your business without hiring people. If you sold Smart Home implementation guides for the DIY person, you could run the business from your laptop, and the business model would look a lot different.