The Business Model Canvas | Maaike Doyer

One of those things is the Business Model Canvas, right? The real purpose is to have that common language within the team. It's a simple framework, right? Everybody understands these 9 building blocks, whether it's the lady at the reception or the CEO, everybody will get it, these 9 building blocks. Really everybody will. So immediately you can have a common language with everyone within the organization. It's simple, it's visual, it's this one-page overview, and that will really help you. To get that. As a sidestep, I'm gonna go into a bit of the financial parts here as well because there were a couple of questions around that. Have you actually been using it for your, for your ideas already? Been fully?

Yeah.

Was it easy? Was it difficult?

Easy.

Did you do it right then? Because normally I hear it's difficult, so that's interesting. And you have a lot of options probably. You know, the structure is easy. The structure is easy. The structure is easy, but using it, because most of the time what we see in the beginning, people just start to throw in Post-its, right? It's more like a Post-it placeholder instead of a canvas. And so they just throw in a lot of Post-its, but then the real thing starts like, hey, what are the connections between all the building blocks? Because for me, that's the most important part. All the building blocks need to be connected with each other. Otherwise, the business model doesn't work. The first thing I always check when someone gives me their business model, I always check what I call the golden triangle: customer, value proposition, revenue stream. That's what I really need to understand, and I need to be able to connect all the Post-its in this triangle with each other. If I cannot connect that, I don't even need to look at the other building blocks yet. I first need to get there. Because sometimes, I'm taking an example as a not-for-profit. Anyone thinking about a not-for-profit organization, by the way? No? Maybe?

Social.

Social B, right? That's the way I like it better anyway. A lot of time what you see in profit is, a not-for-profit, There's a customer that you're doing the work for that needs some support in whatever way, and there's another customer in there that actually gives you funds or whatever, who's actually paying so that you can help the other person in there. So there are 2 complete different customer segments. Most of the time I see in the value proposition only items related to the person who needs help and not at all to the person who's paying. Like, well, you should make sure you have some value for the person who's paying because otherwise why would he pay you, right? So that's something that I see. Also in revenue streams, often I see different customer segments and I literally want to see for every customer segment, I want to see a Post-it in here for everyone, even if it is for free. Because sometimes you decide that it is for free for one of your customers and that's okay. But make sure you put that Post-it in there, free, because it's a choice. And maybe in the future you would like to change that, or maybe not. So that's, that's the golden triangle. I think the other thing is, especially in the phase where you are right now, probably nothing is final yet. You probably have so many options, and probably when you go through all the individual building blocks, you're like, huh, shall I do it this way or shall I do it that way? I don't know yet. And then Before you know it, you have all the Post-its in there and then it doesn't make sense anymore. If you feel that that is happening, make a choice at that moment for that canvas. Put it in a title above it. It's like, okay, I made this specific choice and I'm gonna build a business model if I indeed in practice would make that choice. And immediately I'm gonna take another business model canvas where I make— do the other option so that I have it next to each other. Instead of trying to put it in one. One for each value proposition that you want. Yeah, not specifically for value proposition, but different idea. It could be that you're saying like, okay, I'm exaggerating, but maybe you're saying like, should I go an offline channel or an online channel? That could be a choice. This is a bit of an extreme choice, but then do create one where you only have an offline offering, and do create one where you only have an online offering. Maybe you'll merge them later on, that's fine. But at least you can understand what the different options are instead of throwing it all in one. That can confuse you a lot of times. Also, if you need to explain it to someone else, they will be confused probably. So, does that help?

Yeah.

Yeah? Numbers, right? Especially if you've done a couple of those options, So you put them out there. Do numbers on this high level, on the business model level. That's the first step. Start over here, customer segments. Start with, okay, this is one of my customer segments. What is the total market size anyway? If you say women in the US between 25 and 35, for example, that's your customer segment. How many women in the US between 25 and 35 are there? That's question 1. That's your market size. It's probably relatively easy to sort of more or less get a number for that, right? And then the difficult question pops in, what could be my market share? Like, what is the percentage that I expect that I can have? Is it 1%, 20%, 80%? It all depends, right? Sometimes, I recently saw it like it's with dogs, like how many dogs are out there in the US? So that's a number you can find. So what's the total market size? And what is your first guess? And it's a guess, it's absolutely an assumption, but what's your first guess? This can be my potential market share. So those are the numbers that I put in here. Then you go to the revenue stream and it's really price times quantity, right? So if you already know market size and market share, you know how many customers, how many people will actually be your customer and do they buy something from you every week, once a year, once a month, how often do Do they actually do a transaction with you? And what is the price per transaction? That's simple. It's really simple. It's, it's, right?

Yeah. When you evaluate that, let's say you have a recurring sort of business.

Yep.

To evaluate the market size in terms of money, do you do like an annual or just per one sale?

Annual. I would always do it annual and important indeed, especially at a growth stage as a startup because you don't start with your ideal size. Typically, I look at a business model, okay, what if it's really up and running, right? So maybe 2 years out, something like that, okay, 2, 3 years out, this is what I sort of expect. And then later on you can calculate it back to, okay, year 1, it would mean we will only have 1% instead of the 5% or 10% that I anticipate in 2 years. So, and the price might be lower, so then you start to play with that.

So it's the total money that that company will pay you per year times the amount of people you're—

Yeah, yeah, yeah. So really keep it at that high level because if you go into more details, it will only be more assumptions. Because the only thing that I know is true about financial planning is that it's never right. Now, it— I've never ever in my whole life seen any financial budget that turned out to be correct. Never. Never ever, right? So you need to understand what the big variables are, especially in the beginning. What are the most crucial variables? What are your assumptions behind that? Like, okay, my assumption is I can get 5% market share. It's an assumption. We need to test that assumption. But get those numbers, try to get those numbers in at first, and then of course get out of the building and start to test them. Can we get some more proof? whether this number is actually correct? Or if we say, well, the subscription fee is $100, well, we can put it in there. Can we test that as well, right? Can we get some more proof that $100 is indeed a good number, yes or no? The cost, usually that's more easy. I think people typically know how many FTE, how many people do I actually need? There's a cost associated to that. Is there any other licensing or office space? that I need to have or an IT infrastructure that I need to buy. Typically people know what the costs are for that, so those are the cost elements. But another example of a startup was in Estonia, was supporting a startup there. He came up with a lamp and was okay if that's your idea. And he said he would sell it in shops, resellers.

Mm-hm.

I asked him the question, how much money would you like to make? €2,000 a month. Okay, fair. You're a startup, right, in Estonia? €2,000 a month will work. So that's in there as cost. What's the purchase price of a lamp?

€20.

Okay, €20. You're doing it through a reseller, so you probably need to pay him some money, right, of this €20. How much will you give him?

€5.

Okay, so that's in your cost element, €5. What is— how much money do you actually need to create the lamp, the material that you actually need? It was about €10. Okay. So I asked the question, how many lamps do you need to produce to get €2,000 salary, right? That's— and he looked at it and he was like, that's not possible. I cannot produce that many lamps. And it's like, okay, well then, This model won't work, but I'm convinced there are other models. Maybe we need to do the production in a different way. Maybe we need to do 3D printing. Maybe we need to choose a different channel, right? We can still work with your product. There's still options, right? But he was, he was working on it for months. No one ever asked that simple question about the numbers. And I think most people are afraid of numbers, and that's what I see in practice a lot. But don't be afraid. Put those high-level numbers out there. Get a feeling for it. I've also even had with a large corporate, we came up with an amazing idea. We were all in love with it, including myself. It's dangerous being in love with an idea, but okay, we were all in love with it. And then, then I said, let's add the numbers. So exactly as I just said, market size, market share, price times quantity, what are the costs? Put them out there. We couldn't create a profit. Not even with our Post-its. We couldn't get it profitable. And we love the idea. So if you cannot even show the money on paper, you will not be able to show it in real life, right? There needs to be something changed in the model, otherwise it won't work. So just do it now and then, okay? Thank you.