Business Model Canvas – an Overview for SME’s

Over the past twenty or so years working with hundreds of prospective clients and in engagements with clients in both Scaling Up & E-Myth Mastery, first up – what I have set out to do is to understand the business. I did that by conducting what I called a ‘needs analysis’ – asking a series of questions to the CEO, General Manager or Business Owner on ‘how they made money’.

The “Needs Analysis” – Understanding the Business Model

As I listened and asked the questions in a sequential order, I sketched out on one-page a series of circles/ovals, and within each a few words describing the product or service they were offering, who was their target audience, what was their value proposition, how they sold, what was their conversion rate, what was the average sale price, what was the total revenue, the contribution margin, how they produced their product or service, what were the costs, what were the overheads, the Gross profit, the net profit, the break-even point, how many people in each functional area, how productive were their people, the accounts receivable days outstanding ….and so on and so forth. And, through the process I was also connecting these circles/ovals as to cause & effect.

What I found is that yes – for some of these questions the answers were easily forthcoming from the leaders, but for most of the other questions I received a vague response or no response. What surprised me was that this applied to both small and medium sized businesses. This sketch gave me a clear and visual representation of their entire business model, including key activities, resources, dependencies, customer segments, etc., and importantly the drivers of profitability & cash-flow. By visualizing the components of the business model, it made it easier for me to understand how they interact and support each other and then work out potential focus areas that need to be optimized.

Almost often, the response from the CEO, GM or business owner after this ‘needs analysis’ exercise was that it was a positive experience – with comments such as “I don’t know all this”, “These are very good questions”, “I never looked at these”, “We need to know all this stuff and be on top of them and manage them”, “We have a lot of work to do”.

What I propose here is a tool based on practical experience called the ‘Business Model & Key Activity Canvas’ that I believe is more insightful & practical for small & medium sized businesses.

The Business Model & Key Activity Canvas / © StrategyandExecution Advisors

The Business Model Canvas

This One-Page Business Model & Key Activity Canvas is laid out in blocks rather than circles/ovals. This allows for a little more description for clarity and visualization to enable alignment and communication with the wider team & stakeholders – so that they can connect the dots to understand how they/their department or team impacts the business.

The tool does contain some similar elements to those you’d find in various business models, however, the focus on strategy and key activities makes it much more useful in all the stages of your company’s growth, when you’re continually trying to fine-tune and future-proof the financial engine of your company.

The resulting canvas can be a great help in identifying strong and weak areas in the business strategy and what can be improved. The tool measures what matters – remember ‘what you don’t measure you don’t understand and what you don’t understand you cannot manage’.

Then, on an ongoing basis, through facilitation – the leadership team then collaborates to analyze the results, work out root causes and identifies the elements that are required for performance management and process improvements – which then keeps the business model improving for sustainability, efficiency, profitability & cash flow.

Key Drivers

At the next level – the Business Model & Key Activity Canvas can be used as a living document with all the key drivers tracked with Actual versus Target sections – and Actions noted on it – which then should be used and reviewed in strategy sessions.

An article in ‘The Australian’ newspaper recently claimed that almost half of all small businesses are failing to make a profit. If only they clearly understood their business model and the key drivers and then developed & implemented actions for improvement – the result would almost certainly be different.

As I have experienced first-hand – this lack of knowing & understanding the Business Model & Key Activities is not just a small businesses issue. I have seen this – to my surprise – many times with medium sized businesses. To me that is scary!

Understanding the Business Model and Key Activities is an essential step in working ON your business, rather than IN it.

Need assistance in understanding Your Business Model & Key Activities for greater control over profit, cash-flow & your sanity and to help your team achieve your objectives to grow your business? Contact me at tedb@strategyandexecution.com.au to schedule a free 30-minute discovery meeting.

TED BONEL, SCALING UP COACH – STRATEGY & EXECUTION BUSINESS ADVISORS

Need assistance to help your team achieve your objectives to grow your business? Contact me at tedb@strategyandexecution.com.au to schedule a free 30-minute discovery meeting.

ABOUT STRATEGY & EXECUTION

We have been providing organisations and their leaders with facilitation support and executive education focused on strategy development and strategy execution for more than 20 years. Using business models such as Scaling Up, Exponential Organizations, E-Myth Mastery, Outthinker etc, we support organisations seeking to create or refine excellent strategies and execute them quickly and effectively.

Our expertise is based on a mixture of wide business experience, effective tools as well as a great deal of consulting and executive education. Our approach to working with clients is as unique as our specialist focus. We always seek to challenge our clients’ thinking – but equally are unafraid to roll up our sleeves and help execute the ideas we help generate. Learn more about us here or view our upcoming workshops and events.

If you are preparing for strategy development and/or a strategy implementation challenge and are committed to creating value for your organisation, we look forward to hearing from you. Contact us now