Business Model Canvas | What is, examples and how to write one

For many, the Canvas business model has served as a structure where they should empty their ideas with the intention of turning them into a business project. 

And this was the intention of its creator!

Read on to learn what a business model is, its importance, the main types that exist and how to make a Canvas model.

Business Model Canvas
Written by

This post is also available in: English Español Français

Table of Contents

What is a business model?

The definition of the business model tells us about a tool prior to the business plan that allows us to define, with total clarity, what will be offered to the market. 

Understanding then that some of the most important points to define at that moment are how the offer will be made, which is the public to whom it is expected to sell, and how the income will be generated. 

We can then affirm that it is a tool of analysis that gives the possibility not only to know who you are, but how to do it, what is the cost, the means that you need to use, and also the sources of income that you will have in relation to all of the above. 

Many experts affirm that the importance of defining a business model lies in the fact that it acts as a DNA, where it will not only allow you to see how everything is done, but will open the doors to modification, allowing you to always polish, change and even mold. 

A common mistake when talking about these models is to lock in the idea and say that it is only a company’s way of making large amounts of money. And, although it can be taken in this way and be a good idea, it goes beyond that. 

The business models that work today are those that create value for the customer.

This means that they have a clear value proposition, able to reach the customer, to make a difference, and to establish strong ties with the customer, building loyalty and making them feel special.

Business-Model-Canvas
Communicating with customers

Customers are very important in a business model!

If you are wondering how to validate a business model, we will tell you that the right way to do this is to have customers who are willing to pay for your service, or for your product. 

Value is created by really staying close to the customer.

From the beginning you must go down the path of establishing close relationships, where it is of vital importance to try to discover what their needs are, or what kind of problems they have to be solved. 

However, once a business model is already in the market, it can be modified.

In fact, experts tell us how it has the capacity to vary constantly.

So it would be a mistake to take it as something that must be strict for the company.

And, be careful. We are not talking about changing it in its entirety, but rather about making changes or variations. Even if they touch the most important points.

Otherwise, everything the company has been fighting for could fall apart very quickly.

8 Types of business models

There is a huge amount of business model types, and this is because one has been created for each type of business that might come to your mind. However, we will give details of some of the most relevant ones, so yours could be among the following:

1. Manufacturer

The manufacturer’s task is to convert raw materials into final products. 

These products can be sold directly to customers, or through an intermediary who takes on the task of offering them to their target public. 

Among some examples of manufacturers we can mention the big brands in charge of making cars, such as Audi, Toyota, among others.

2. Distributor

Keep in touch with distributors

What a distributor does is to buy products from a manufacturer and place them in the market through retailers, or directly. To continue with the previous example, we could then mention car dealerships.

3. Retailer

Entrepreneur talking at phone in shop

It is in charge of acquiring products from a distributor, or a wholesaler, to proceed with the sale of them directly to its public.

Among the most popular examples today we have Walmart, or Target, just to mention a couple.

4. Franchises

Man hand picked wooden block with store icons. Business empire and franchising concept

It is important to clarify that a franchise has the ability to be either a manufacturer, a distributor or a retailer.

Instead of creating a new product, it uses the business model and brand of a parent company while paying royalties to it.

Among the most popular examples are McDonald’s and Pizza Hut.

5. Ecommerce

selective focus of toy shopping cart with small carton boxes near laptop, e-commerce concept

They are also known as online business.

It is one of the types of business models that work as an upgrade of what a traditional business is.

What you do is sell your products through an online store.

6. Freemium Services

Woman choosing subscription plan

In this case, what companies do is to offer their basic services at no cost, while charging an additional cost for their complementary services.

What they achieve is to offer their customers more than one plan according to the different benefits they may be interested in. 

Generally, in the case of the free ones, we can find some limitations, such as advertising or storage limitations.

While the Premium (referring to the paid one), these restrictions do not appear.

Although not everyone is willing to pay, there are those who go beyond.

7. Transaction Facilitator

Bohemian dressed Woman relaxing in the living room reading a book

This is a relatively recent business model, where the company adds more than one niche service provider and sells its services under its own brand.

Revenues are earned through commissions.

As examples you might look at Airbnb or Uber.

8. Advertising

Banner Showing Advertising with Bike Icon

The types of business models that go into advertising have not stopped evolving.

However, there are companies like YouTube that provide information at no cost, but they are full of advertising, which is completely paid for by their providers.

What is the Canvas model?

The Canvas business model is defined as a tool used to analyze and create models in a simplified way.

It is visualized as a canvas divided between the main aspects that involve the business, and everything revolves around the value proposition you want to offer. 

It is commonly used when you want to turn an idea into a real project, and capture what you have in mind within what is a business model.

This model is modified as it is developed, with the validation of customers, or with the emergence of new ideas. 

The origin of the Canvas business model comes from the mind of Dr. Alexander Osterwalder, who intended to help us all not only find, but also foster new ways to create, deliver, and capture customer value.

How to create a business model Canvas?

At this point we will help you understand the different segments of the Canvas business model so that you can create your own easily and quickly.

There are 9 of them, so we’d better get to work:

1. Market segments

This first block seeks to define the groups, or segments, of people, or entities, which we have in mind to reach with the value proposition that we will make in the next point. 

We start from this point because, once the specific needs of the target audience are known, the rest of the business model can be accurately designed.

2. Value proposition

They value each other's expertise

The value proposition is nothing more than the set of benefits that the company will offer to the customers that have been selected in the first point. In other words, this is the way in which the company will solve a need of a specific market. 

Remember that the benefits work as the reason why that group of customers will repeatedly choose your product or service.

It is not necessarily necessary to have a unique value proposition, but it is what is most recommended when you want to start quickly and not have so many competitors.

3. Distribution Channels

Clothing store interior

This block seeks to analyze the way in which a company can reach the customer market that has been chosen in the first point, so that the value proposition that has already been stipulated in the second point can be brought to them. 

It is important to clarify that a company’s channels can be of different types, and some like to define them as direct and indirect channels, or proprietary and partner channels.

4. Customer relations

Customer and tailor

This block, within how to make a Canvas business model, has to do with the way in which the company relates to the customers that have been defined in the first point. 

It should be noted that the most popular methods are personal assistance, exclusive personal assistance (more personal and intimate than the previous one), self-service, automatic services, among others.

5. Income Streams

Board showing the recent income

This block represents the money generated by the company from each of the market segments defined in the first point. Some of the main examples include the following:

  • Brokerage expenses.
  • Licensing or patents.
  • Loans, rent or leasing.
  • Subscription fee.
  • Usage fee.
  • Sale of products or services.

For each source of income a fixed pricing mechanism can be set (established in a list), or dynamic (which have the ability to change according to the market).

6. Key resources

Business people planning resources

In this case, the aim is to detect which are the most important elements for the business to function.

Key resources make it possible to create and offer the value proposition, reach markets, establish relationships and, of course, earn income. 

We remind you that these can be physical, intellectual (brands, patents, among others), human, and economic.

7. Key activities

Business professionals at work

In this case, within the intention of the Canvas business model, what is done is to identify which are the most important actions that must be executed in a company so that the model created can work. 

Some of the activities that are most often taken into account are production, problem solving, platform/network (in the case of technology companies), among others.

8. Key partnerships

Business partners.

In this block you want to specify the network of suppliers and strategic partners that will help the business work. Some examples from which you can take ideas are the following:

  • Customer-supplier relationships that will help ensure the reliability of supplies.
  • Joint ventures, which serve to create new business.
  • Coopetition, which are strategic partnerships that are formed between companies that normally compete with each other.
  • Strategic alliances between companies with which you do not compete.

9. Cost Structure

Businessman accountant making notes at report doing finances and calculate about cost of investment

In this last block on how to make a Canvas business model, the next step is to analyze all the costs associated with the implementation of the model created.

In other words, it is necessary to convert into numbers some of the blocks that were studied previously.

The Canvas business model advises that all models should always aim to reduce their costs. However, it talks about two types:

  • The Canvas business model that is cost-driven. In this case, the aim is to cut costs at every possible point with the intention of making as much profit as possible.
  • The value-driven Canvas business model. This is where premium services come in, where excellence in the user experience is part of the business model. As an example, high-end hotels who do not care about spending for their services.
More about Business Planning.