Paper Example on Developing a Business Model Canvas: Key to Success for Startups

Introduction

Business start-ups present a variety of challenges that entrepreneurs have to encounter, deal with, and find an appropriate solution for them to become successful, instead of a failing statistic as has been the case for a majority of new establishments. For these businesses to increase their chances or likelihood of being successful and becoming an established business, its founders need to develop a business model canvas. The business model contains detailed information on the key partners of the business, key activities, value proposition, customer relationships, customer segments, key resources, channels, and revenue streams.

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Customer Segment

For a start-up to be successful, it needs to identify a specific need that it will satisfy its targeted customers through the creation of a product or service, which it can produce or offer at a low cost, and be able to profit from it. The creation of a product or service will be determined by the type of customers that an establishment is targeting. For instance, if a business wants to sell women's clothes it has to identify the following customer factors: the targeted age of the customers is it young or old women? Do they want to sell trendy, designer, comfortable or sporty wear? What niche do they have that other women clothes business lack, is it their prices, design, materials that they use, a combination of two or three factors? Answering these questions means that as a start-up, a business has identified the customers whom they are creating value for, and also noted its most important customers.

Value Propositions

In value propositions, a start-up points out the value that it will provide to its customers. This is determined by a business being in a position to identify its targeted customers' current problems, and how it will be instrumental in solving it through the identification of the products or services that it is offering to its customer segment. Value proposition assists businesses in terms of identifying the specific needs that it is satisfying.

Key Partners

In this chapter, the author points that a business model canvas needs to include the key partners of the business. It assists an establishment in terms of identifying the key partners of a business and its key suppliers. By providing a list of its key partners, a business is able to identify the importance of the partnership in terms of the resources that are being provided, and also the activities that a partner performs. For instance, a key partner for a business may be involved in manufacturing or distribution of a key resource. In this case, the start-up will record information on the number of its key partners, their role with the establishment, and the resources that they provide for the start-up.

Key Activities

A business will also have to provide a list of the key activities that it will engage in in product or service delivery to its customers. Some of the most important key activities that a business can note are its distribution channels, will they be direct, or indirect? What are the overall costs of using their selected distribution channels, and their overall benefits? A business has to also list its customer relationship initiatives, and expected revenue streams. In reference to a business distribution channel, a business has to identify the most cost-effective and successful channel that it can use to ensure that its product or service reaches the customer in a timely manner. This means that it will assess all the distribution channels that are available to the business, identify their effectiveness level through determining their overall costs, length of time before the product reaches the consumer, available alternatives, benefits and challenges of these distribution channels. It is also essential for a business to determine if it can use only one, or a combination of the distribution channels to deliver the products or services to the customers.

A business sustained success is determined by its ability to not only attract new customers, but by its ability to retain its current customers. Positive customer relationships are essential for a business as it means that an establishment has found a group of people who believe in their products or services, and therefore whenever they feel like fulfilling a specific need, they will come to purchase from this particular business. By mapping out the customer relationship in the business model, a start-up is able to:

• Define the type of relationship that it will establish with its customers.
• To identify the relationships that it has been able to establish with its targeted customers.
• To assess how they will integrate these relationships with their current business model
• Overall cost of establishing a business-customer relationship

Building Customer Relationships

The main challenge for a business start-up can be how to build powerful relationships with their clientele. How are businesses able to stay connected with their clients, while providing them with the much value they seek when seeking to fulfil a need? Any business needs to establish a plan whereby they are able to facilitate the networking process, ensure that these connections grow and work for the business. There are a variety of essential tactics that can be used by a business that wants or needs to build on its customer relationship.

For start-ups, their business growth will be determined by their ability to build networks, which can be established from other business colleagues, prospective and existing customers, partners, suppliers, contractors, professional acquaintances, association members, family, friends and social acquaintances. These contacts are a potential for customers that are in need of connection with the business for the fulfilment of their needs. Networking is considered a long-term investment for a business, and when it is done properly, it can translate to a wider customer base.

In business, relationships have a short shelf life, and to sustain them, entrepreneurs have to make follow-ups, and regular connections with the individuals that they are targeting. This may mean sending a regular personalised message, or email informing the new contacts that they have been added to the newsletter list and therefore they will be provided with the latest copy. The ned for regular connections is based on the fact that, in most cases, when entrepreneurs meet potential customers, they do not have the need for what an establishment is offering. However, through constant communication, which is done in such a manner that it does not become a nuisance, a new contact is reminded of a business with a specific product or service. Other effective manners of building effective customer relationships are e-mail marketing, rewarding loyal customers, exceed the clients' expectations, requesting for feedback, and showing the customers appreciation for the business.

A business establishment has also to identify its revenue streams. After a business has identified its customer segment, and the need that it will fulfil, it has to take into consideration, the price tag of the product or service. This will be determined by the cost of production and distribution, and the expected profit margins. In addition to that, businesses have to determined their preferred method of payment such as cash or use of online payment channels. The author notes that all of these factors should be included in a business model canvas as a mapping process. The purposes of a map are to track data and knowledge as useful start-ups are able to determine the value chains, workflow, petal diagrams and business ecosystems.

Creation of Value Chains

Effective start-ups are the ones that are able to create their value chains as this determines the process of converting the raw materials to finished products that are then distributed to the intended customers. The value chain not only identifies the key players in the conversion process of the raw materials to the finished products, but it also identifies the key resources that they are acquiring from their partners. The value chain also helps a business to determine if the set industry's organization is changing and the steps that an establishment needs to make to ensure that these changes do not have a negative impact on the business.

Importance of Workflows

Workflows helps an establishment in the identification and breakdown of how the things are working out for a business. The workflow map contains the following factors: the steps in the production process, materials required, data (overall costs, quantity of the materials), required personnel, and the vital decision points. It is important to point out that the workflow helps a business identify the strategies that a customer or client uses to solve his or her current problems, the key steps in the process of a business to fulfil the clients' needs, the material, data and personnel needed in this process, and key decision-making by an organization. In addition to that, the workflow helps a business to identify potential solutions to problems that may arise due to unforeseen, or unexpected changes. The petal diagram assists an organization to identify its competition, and therefore ensure that they model their product in such a way that it is unique in comparison to the existing alternatives, while the ecosystem map helps a company identify the individuals that affect their success by taking into consideration both the major and minor players.

Types of Customers

One of the most important points that is provided in this chapter on mapping for start-ups is the ability of a company to identify and categorize its customers. A customer persona is based on the demographics (age, gender, job title, hobbies, and affiliations). A customer persona helps an organization know the type of customers that it is looking for, and how it can identify them. There are also different customer types and they influence the success of a business in different manners:

Decision Maker: Decides when to adopt a product or service that is being offered by a company.

Economic Buyer: This is the payer of the services and can be a parent to a child that a business is targeting in terms of the products or services that it is offering.

Influencer: These are the customers that sway the decision of other potential customers and an example is a social media influencer, or a celebrity.

End User- These are the day-to-day users or regular customers.

Early Evangelists- They are the ones who recommend on whether a product or service can be adopted by potential users, and in most cases they have already 'tested and tried' the product they are advocating for, or against in the market.

Saboteur: This type of customer has a negative influence on product adoption as he or she may undermine its effectiveness in fulfilling a need...