The Business Model Canvas: Attracting SMART Investors and Creating Value for Your Business

See things from their perspective – that’s the major point you should always bear in mind when you aim to attract investors. Investors are exceptionally busy people or even entities, especially when you are dealing with one that has an established name in the industry. You have to understand that have to deal with numerous people on a day-to-day basis, and these people are just like you – in need of funding from these investors. This means that in order to attract and convince them, you must stand out! How? Understand their minds, put yourself in their shoes and make the decision-making process easier for them. The key is to be clear and concise in your business plan.

I know an entrepreneur who struggled the way you do. Joshua, a retailer in a small town, has been making excellent money in a niche market. From a small, unknown entrepreneur, Joshua works really hard to finally make a name for himself. He sourced unique products to be imported and made all decisions by himself. As a result, he managed to open up five new retail stores located in different small towns. With this success, Joshua sees a golden opportunity for him to grow his business even further, i.e. by making his retail business available online.

Joshua realised maybe something was wrong with his business plan, thus he made a few modifications here and there and used it to help him connect with others. He tried preparing his business plan as per the Business Model Canvas, which he heard of a long time ago and invested his time learning online. A business plan that consists of only one page was finally prepared by Joshua. He was still determined to get funded. Unfortunately, it did not work out for him as well. Joshua figured maybe the Business Model Canvas was not suitable for him but he was interested in exploring it further. Hence, Joshua connected further with an acquaintance who was a CFO from a firm that outsources services, and Joshua subsequently hired him as his consultant.

This represents how you could be distinguished from your competitors. In other words, it is your explanation of what unique products and services you could offer, letting customer segments gain value from you. This is determined by the quantity (e.g. price, speed) and quality (e.g. design, functionality, brand status) of your products and services.

Customer segments are the target audience that you aim to offer value. Customers may exist in more than one group, and therefore they should be divided into several segments. These segments could be based on age, gender, geographical area, interests, etc. Each segment will have specific needs and requirements, and this makes it easier for you to place your focus on how to attract your customers, according to segments. As a result, better customer satisfaction could be attained and this contributes to greater VP.

Maintaining a solid relationship with your CS plays an essential role for you to not only retain customers, but to also attract new ones. Establish good interaction with your customers, such as being aware of their needs with personal assistance, or provide in-store demonstrations on how to use your product. You could even create loyalty cards is useful to make customers come back to you, besides analysing customers’ purchasing behaviour. Anticipate each and every one of your customers’ needs and use this information to establish a better relationship with them.

You have your VP in place, so via what channels will you deliver them? This is where your customers come into contact with your business and contribute to your revenue stream. You must have a reliable distribution and sales channel that will help you communicate your business to your target audience. The five stages of channel distribution include awareness of the product, purchase, delivery, evaluation and satisfaction, and lastly, after-sales. In this digitised era, the best channel to make yourself visible to your target audience is by combining offline (physical stores) and online (web stores) channels.

How does your business convert the VP into a financial gain? How much would you need to earn so that your business breaks even? These are some of the things you have to consider in determining your revenue stream. You must have a clear revenue model for your business to identify the sources of your revenue. It may be from the sales of your products or services, or even through subscriptions fees, lease income, licensing, and even advertising. Maximise your revenue stream as much as possible.

The people who help your business in gaining success. In the business world, it is important for you to establish alliances or expand your network with various external companies or even individuals. Your business cannot carry out all of its activities all by itself, as you need external parties to help you deliver value to customers, for instance, the most prominent example would be your suppliers. Combine your knowledge and specialisation with your partners so that both parties benefit from one another.  

A business involves a combination of core activities so that it achieves its VP for its customers. It is not only about being able to sell your products and services, but you must consider how you solve problems, the quality of your products and services, and even networking. You need to know what KA adds value for your customer, which in turn, will develop a healthier relationship with your existing customers.

Running your operations effectively requires a wide variation of resources, be it physical, intellectual, financial, or even human resources. In other words, these are the major inputs you need so that your key activities could be carried out to create your VP. Physical resources are your assets such as machinery and business equipment. Intellectual resources represent knowledge, brands, and patents. Financial resources are rather straightforward, i.e. the flow of funds and sources of income. Lastly, the human resources represent your people, the employees.

You must take into account every single cost associated with the purpose of operating your business. Place emphasis on the cost of creating and delivering your VP, cost of creating R, and costs to maintain the CR. This could be clearly set out once you clearly identify the components of KP, KA, and KR. It is all up to you to decide if your business is cost-driven, i.e. focuses on minimising costs, or it is value-driven, i.e. focuses on giving customers maximum value.

With the BMC, you could clearly visualise the exchange of value between your business (internal) and your clients (external). You provide investors with a comprehensive overview of your business plan and eliminate all unnecessary information that is the least of their interests. It is not only easy to refer to, but it is effortlessly understandable. Therefore, it is the perfect tool for you to inform investors of your business strategy and use it to raise funds for your business.

Now that you have understood all nine fundamental building blocks of the BMC, you shall learn how you could create your own BMC. Answer a series of questions in relation to all nine elements, and subsequently, perform some simple calculations to identify the value of your business. This is the BMC Elicitation process.

  - What values do you deliver to your customers?

  - Which one of your customers’ problems are you helping to solve?

  - What bundles of products and services are you offering to each Customer Segment?

  - Which customer needs are you satisfying?

  - For whom are you creating value?

  - Who are your most important customers?

  - What specifically is your customers’ background, categorise them into segments, e.g age group,          occupation, interest, demographic.

  - What type of relationship does each of your Customer have with you?

  - Segments you expect to establish and maintain with them?

  - Which ones have we established?

  - How are they integrated with the rest of our business model?

  - How costly are they?

  - Through which Channels do your Customer Segments want to be reached? How are you reaching         them now? How are your distribution Channels integrated?

  - Which ones work best?

  - Which ones are most cost-efficient?

  - How are you integrating them with customer routines?

  - For what value are your customers really willing to pay?

  - For what do they currently pay?

  - How are they currently paying?

  - How would they prefer to pay?

  - How much does each Revenue Stream contribute to overall revenues?

  - Who are your Key Partners?

  - Who are your Key Suppliers?

  - Which Key Resources are we acquiring from partners?

  - Which Key Activities do partners perform?

  - What Key Activities do your Value Propositions require?

  - What Key Activities do you do to distribute Channels?

  - What Key Activities do you do to maintain Customer Relationships?

  - What Key Activities do you do to streamline Revenue?

  - What Key Resources do your Value Propositions require?

  - What key Resources do you do to distribute Channels?

  - What Key Resources do you do to maintain Customer Relationships?

  - What Key Resources do you do to streamline Revenue?

C – Cost 

  - What are the most important costs inherent in your business model?

  - Which Key Resources are most expensive?

  - Which Key Activities are most expensive?

You then need to perform the following calculations:

Three perspectives as exploring more money i.e. Customer Segment perspective, Value exploration perspective, Revenue stream perspective

Identify Running Cost for new Value created

One time Cost need for new Value created

Initial Cost = C + CR + CD + KA + KR

Take off with Investment you need with SMART investor

Initial own money or from investors, dilute % of new Shares (S) to your company valuation, (V)

At the end of this process, you shall have your own personalised BMC. Use this confidently to prove to investors that your business model is thoroughly planned out, and watch the magic happen – investors will show interest in no time!

You need to ask the boss to think by Chunking up one level, and chunk sideways and chunk down if necessary, and repeat the process for 3 to 6 times, until they got the answer unconsciously

          _________ for what purpose?

Repeat the above at least three times to loop your lateral thinking to solve the problem for each of the nine building blocks of the BMC.

You finally have your entire BMC visualised on a page on a sheet of paper. Perfect! But are you doing this all for the sake of convincing investors? What other use could I find with this BMC? It consumed so much of my time preparing it! Well, good news for you, obtaining funding is not the only purpose the BMC serves. You can use the BMC to plan out your Blue Ocean Strategy, whereby my previous article "Dive Into The Blue Ocean, Find Your Money With No Hesitation", having a BMC in place is the number one step of the Blue Ocean Strategy elicitation! Yes, the BMC does serve more than one purpose. Just use it where you deem useful as it is a very informative one-page overview.

The BMC is best used when you are pitching your business to investors. Use it together with the Cash FundedOn™ formula in my book 'NEXT LEVEL BOSS - THE SECRETS' to give investors a comprehensive idea of your business plan. I mostly use the BMC to help SME bosses with strategy planning and raising funds. With the BMC, I also helped entrepreneurs of fresh startups make their ideas a reality by having sufficient funding, and all of them showed positive results! You may think that the BMC is strictly for business purposes; well, in fact, it could be implemented in individual departments or units of or business, or even as a model to plan for an individual’s personal model as well. Mobilise, understand, design, implement and manage. The BMC is indeed the perfect visual aid to facilitate creativity and communication.

With thorough guidance from the CFO, the CFO realised Joshua had one major problem – Joshua had a lot of money on his table he did not see, because he was living on a tree and could see the forest as a big picture of his business. The CFO worked together with Joshua to prepare a BMC in replacement of the thick business plan Joshua initially prepared. After finalising, Joshua finally saw all the money he had. Turns out, immediate fundraising was the last thing he needed. With that, Joshua goes for his money by offering his loyal clients and key partners a discounted drop shipment to grow his immediate funds and turn it into extra profits. He managed to make his retail business go online with a key partner with no sweat at all. Following that, Joshua had more ideas but he no longer uses thick business plans to get investors – now, the BMC is now his most valuable friend. Joshua used the BMC to raise funds and yes, he successfully got what he wanted!