A business model canvas is a tool entrepreneurs use to identify the key ingredients that make up their business and often form a business plan’s foundation. A lot more detail is included with a business plan, but the canvas does a great job of getting things started.
What your co-op will do, why it needs to do this, and how it will function as a business should become clear by completing a business canvas. But, before starting this exercise, try answering the following questions:
Who are the co-op’s owners?
What services will the co-op provide?
Where will the co-op operate?
Who will use the co-op’s services?
If you could provide a basic answer to these questions, go forth and conquer the canvas. But if more work is required, try some other resources first:
A business model canvas has nine segments that make up all aspects of your business.
Value propositions
Customer segments
Channels
Customer relationships
Revenue streams
Key resources
Key partners
Key activities
Cost structure
These nine segments can be grouped into four categories:
Infrastructure: The activities, resources, and partners that enable the business to operate.
Offering: The central part of the business model – its value proposition.
Customers: It’s vital to understand the groups your business will serve, how they will interact with your business, and how you’ll connect with them.
Finances: How will your co-op generate revenue? What costs will it incur while operating?
Let’s take a closer look at each of these segments and what you should consider when mapping out your business model.
Value Propositions: The most important component of any business model is the value proposition. This doesn’t mean your specific products and services – rather, it’s the value the business provides to customers or members. To figure out what your value proposition is, answer these questions:
What problem will your business solve?
What gap will your business fill in the marketplace?
Why will people use your business?
What value will someone gain by using your business?
A value proposition shouldn’t get too specific. Focus on the higher-level purpose of your business. For example, Modo Car Share Co-operative in BC gives people an affordable alternative to owning a vehicle. Shift Delivery Co-op in Vancouver provides environmentally-friendly local delivery services.
Customer Segments: Customers are essential to every business. Without someone to use your business, you won’t be in business for long. As an entrepreneur, you need to know who your business is for – who are your customers? Why will they use your business? Once you’re up and running, you’ll be able to track this and monitor who uses your business. As a start-up, you’ll need to identify who will see value in what you do. Describe your ideal customer(s) and map out the different groups they represent, what they’re interested in, and how you can reach them.
Your business may appeal to a wide range of customers. For example, Red River Co-op in Winnipeg sells fuel, food, hardware, farm inputs, and liquor – their customer base includes a broad cross-section of people in Winnipeg and the surrounding area.
Your business may serve a niche market with a particular group of customers. For example, the Fogo Island Co-op Society exports harvested seafood to a small handful of processors in Southeast Asia.
Channels: A channel connects your business and its products with customers. In many cases, you may rely on a physical channel like a storefront where people can come to purchase products. In other cases, you may use a website to make sales and couriers to deliver products. With the widespread use of technology, most customers will expect some form of a digital channel. The Saskatoon Farmer’s Market Co-operative offers multiple channels for its customers — it has a physical market where customers connect with vendors and a virtual market where customers can order products online.
Customer Relationships: Your business will need to identify the best way to engage with customers. There are three important stages in the business’ relationship with customers: getting new customers, encouraging customers to continue using the business’ services, and convincing customers to increase their use of the business. Some businesses use sales teams to connect with customers, while others use a self-service model. The channels you use will define how customers interact with the business and determine what relationships are viable. For example, if you’re selling goods to customers in a storefront, you may develop a ‘personal assistance’ relationship that ensures the customer is supported while making sales.
Revenue Streams: Revenue streams are simply how money comes into your business — i.e. how customers purchase what you’re offering.
Most businesses, especially ones people can visit, sell goods or services directly to customers, like the International Women’s Catering Co-op. Some businesses get others to distribute their goods — like La Siembra Co-op, which makes chocolates sold through grocery stores. Like Moss Digital Co-op, many tech companies have multiple revenue streams — they might collect fees for completing specific projects and provide ongoing services that require customers to pay a subscription. Sometimes, revenue will only come from select customer segments — Hullabaloo Publishing Co-op sells advertising space to companies and gives its publications away for free.
You’ll need a clear strategy on where your revenue will come from and be aware of the logic behind how you’ll determine your prices to make sure you’re covering your costs.
Key Resources: What do you need to do business? Given the things you want to provide and the people you want to sell it to, what do you need to make it possible? Some of these common ingredients include:
Start-up capital (like a line of credit)
A store or space to house your business
People that will do the work – usually staff or volunteers
Inputs like seeds, products, or material that you’ll use to build your products
Equipment like computers, paper, and phones that you’ll need to operate your business
It’s important to understand your key resources so you can figure out your start-up costs. This will change over time as you expand your business.
Key Activities: What are the things you need to do to operate your business? Do you need to figure out a supply chain to bring goods to your marketplace? Do you need to develop and promote the services you want to provide to clients? What do you need to become an expert in to make your business work? Obviously, this will depend on the kind of business you’re operating and how you want to go about operating.
Key activities for La Siembra Worker Co-op, for example, include producing chocolate, sourcing cocoa and other organic ingredients from fair trade suppliers, and distributing their products to local retailers. Think through the processes of obtaining inputs, producing products, and getting your goods to market: what steps are involved in this process?
Key Partners: Key partners are the people and companies you’ll need to work with to run your business. This will likely include key service providers that you’ll need to keep your business going. For members of western Canada’s Co-operative Retailing System (CRS), Federated Co-operatives Limited is an essential partner — FCL is the wholesaler that provides the goods and fuel that CRS stores sell. For many of Canada’s Credit Unions, Concentra Financial — a wholesale bank that supports credit union services — is an important key partner.
Your list of key partners will be specific to your industry. You’ll need to identify important suppliers, competitors, and buyers. As you grow, the relationships you need will likely change. It’s a good idea to be aware of relevant key partners, including any newcomers that impact your business.
Cost Structure: What are the costs you need to pay to operate the business? If you have a list of your key activities, partners, and resources, you should already know where your costs will come from.
From here, identify your fixed costs (the costs that you’ll have to pay consistently, like rent) and variable costs (costs that will fluctuate with your business, like packaging). Outline your costs and consider ways of managing them. Can you do things more efficiently? What costs will you have to pay upfront? Do some research to assign some actual numbers to these costs; this will help you complete a complete financial plan later.
Business Canvas Exercise
As you work on business planning, creating a business model canvas can help you get folks on the same page and begin working through some of your business’s specific details. Here’s what you’ll need:
Some markers or pens
A whiteboard or 9 sheets of paper (or a Google doc if you’re practicing social distancing)
A lot of coffee
Start by downloading the business model canvas from here. Then fill in each box. Start with the value proposition and work through each segment. This process will help get everyone to get on the same page about how the business will work, and it’ll lay a great foundation for a business plan.
Other Resources
There’s a lot of information available on building a business canvas. We highly recommend the book Business Model Generation; it gives a thorough overview of real companies’ business models and breaks these down into easy-to-understand concepts. This video also gives a great overview of business models for start-ups.
With a business model canvas in hand, consider using the information you’ve generated to work on a business plan. Our Biz Plan Creator provides a great template for co-ops.