business model canvas for a bank

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Business Model Canvas – Banking

• by Joel Finningley
• Business Model Canvas , Fintech-Banking

Fintech is the talk of the town these days. Disruption is the mode du jour worldwide, and now it has arrived into the world of finance to shakeup the banks. But few Fintechs actually make any money, which is why we are going to look at the banking business model in more detail.

How do banks make money.

Banks have been around forever. It wasn’t until the 1400s where the model for ‘modern bank’ was derived, as the concept of deposits and custody of assets paved the way for the core banking business – the Net Interest Margin (NIM) .

For as long as humans have been around, we’ve been banking. Life was built around credit, and individuals often oscillated between playing the role of debtor and creditor. Everyone – whether individual, estate, or empire – was a part of a vast global network of credits and debts. The Great Race For Assets

The NIM is the difference between the price that banks pay their depositors (savings rates, GICs, etc.) and the price that they loan out money to would-be creditors (loans, mortgages, credit cards, etc.). In theory, the more money that banks bring in via deposits, the more they can lend out.

However, banks can use this liability ( the money they owe you) to create an income-generating asset by using the deposits as collateral to issue an interest paying loan. The spread between the rate they pay you for your deposit and the rate the charge for loans has historically been the driver of profitability. The Great Race For Assets

The average NIM for American Banks in 2018 was 3.3% . That means that for every $100 Million they loaned out, they would earn ~$3.3 Million in income. The concept of fractional reserve banking – where banks loan out leveraged amounts (ie. 10-25X) against their deposits – provides further fuel for the NIM revenue stream across asset classes including:

• consumer loans
• commercial loans
• government loans

All of these lending categories are tied back to NIM. They loan out a leveraged amount against their depositor base at varying interest rates; therefore, the core strategy of the banks is to build their depositor base and grow AUM (Assets Under Management).

This is achieved through retail banking operations, asset management (ie. investments), private wealth management for families with larger asset bases, and commercial banking for businesses. European banks (in particular) are struggling mightily with their profitability because of negative interest rates and the corresponding impact on NIM.

A “low-for-long” interest rate level would therefore erode banks’ NIM. BIS

They have other fee-based revenue streams for retail (account fees, etc.), and trading/investment banking divisions that make money from capital markets.

But at the core, the banking business model is built around NIM (Net Interest Margin) and AUM (Assets Under Management). When NIM margins/profitability are cut, they can’t simply increase their leverage/credit supply to make new loans and expect to make up lost profitability.

Thus, a very low level of profits might prevent banks from increasing their credit supply because they are not able to cover those costs associated with higher lending. BIS

Fintechs that chip away at this part of the banks’ business model will become progressively more valuable, while those who simply earn subscription revenue or small percentages of transactional revenue will not be a threat to the banks , even if they have a large users base and beautiful mobile UX.

Community-Centric or Commercial Partner Strategy?

Historically, banks were considered to be part of the fabric of local communities and centered their strategies around trust in the community .

Times have changed , however, and the Big Banks in each country are monolithic, globally-controlled entities that rely on commercial partnerships in order to keep driving their NIM and AUM.

There is certainly a difference between TBTF (Too Big To Fail) Big Banks, and local Credit Unions at the state/provincial level. Big Banks will partner with large corporates, sports leagues, global airlines, and anywhere else where they can gain access and visibility to new consumers. State/provincial Credit Unions will be more likely to partner with more

This is in contrast to the Fintech model that is being driven more by a community of users who are ‘ fed up with banking ‘ in the traditional sense. They market online and through partnerships that help build the ‘community’ and drive those users onto their digital-only branches.

It is pertinent to understand how both strategies (commercial partnerships & community-driven engagement) work given that the big Silicon Valley and Tech firms (Square, Shopify, to some extent Apple) are beginning to enter into the banking game , usually via a specific vertical. The Big Tech firms have both the technological know-how and balance sheet capacity to tap into both channels.

Most Fintechs have the tech and community engagement working for them but the majority have failed to build a profitable business model and continue to rely on VC capital . Even though Big Banks have huge technology and legacy UX problems, they have the balance sheet and continual profitability (-ex- Euro Banks) to acquire firms that are seeing success, creating a bridge to transition towards the future banking model .

Some Big Banks like Goldman are using separate brands (ie. Marcus) to bridge that gap and initially, they are seeing success. They offered savers in the UK a 1.5% high-interest savings account and recently had to close to new accounts after seeing too much demand for the product. Marcus by Goldman is providing to be the best new bank blueprint among the Big Banks and part of the BaaS (Banking as a Service) push by incumbents.

New-ish Fintechs like SoFi are now in the banking game and applying the same model as the banks, with slightly different branding (ie. Members). While next-gen money apps like Cash App (by Square) and Venmo (bought by Paypal who are owned by eBay) are beginning to enter the banking fray through their community-driven, digital payment apps.

But the end-game is not users or eyeballs like in the Valley, it is AUM growth and fat NIM margins to ensure that banking profitability extends into the digital era . Furthermore, there is a large layer of legal and regulatory expertise – including banking licenses and compliance teams – that Big Banks and Credit Unions already have in place, giving them leverage in their partnership and acquisition strategies.

Fundraising and Valuation

Banks are typically the most valuable entities in their respective countries, and therefore have no issues raising money. If they need to raise more capital at any moment in time, they can issue shares to large-cap investors and bond offerings at specific coupons to investors chasing fixed-income yield.

Typically, it is pension funds, mutual funds, and other large capital groups that purchase these stocks/bonds and hold for the long-term, but almost all major Big Banks are listed on public exchanges. Smaller Credit Unions typically operate more like a cooperative and may be state or member-owned, meaning that they do not trade publicly.

Most Fintechs, on the other hand, are not yet public nor profitable and rely on the continuous injection of Venture Capital (VC) to fund operations.

Some big tech firms like Square and even Shopify are well-capitalized enough as it stands to launch their respective banking/fintech products, but they may require more capital depending on the specific banking strategy that they choose in the future.

Banking Business Model Canvas

A business model is defined as:

“the rationale of how an organization creates, delivers and captures value.”

Alex Osterwalder et al invented the Business Model Canvas to help individuals and organizations conceptualize how to analyze, create, and develop business models.

Banking Value Proposition

Provide retail and commercial banking services to citizens at a local, national, and international level.

• retail banking services including bank accounts, loans, credit cards, mortgages, and wealth management services
• commercial banking services including business bank accounts, commercial loans, capital markets services, and private wealth management for family businesses

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Bank Business Model Canvas

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Resources On Bank

• Financial Model
• Business Plan
• Value Proposition
• One-Page Business Plan
• SWOT Analysis
• Description
• 1. Key Partnerships
• 2. Key Activities
• 3. Key Resources
• 4. Value Propositions
• 5. Customer Relationships
• 6. Channels
• 7. Customer Segments
• 8. Cost Structure
• 9. Revenue Streams

Introduction

Banking is an ever-evolving industry that continues to grow as technology enables more secure and convenient banking solutions. The global banking market is predicted to reach $36 trillion by 2027, with a compound annual growth rate of 4.7%. Digital banking solutions are expected to become increasingly popular as people shift towards paperless transactions and convenience becomes more of a necessity than a luxury.

The number of digital banking customers even in developing nations has increased by 48.2%, making it a lucrative option for banks to explore. Banks are increasingly investing in technology and solutions that provide digital banking services to customers, such as online banking and mobile banking applications.

This presents an exciting opportunity for startups and entrepreneurs to enter the digital banking sector and provide solutions and services to meet customer needs. Combining financial products, banking solutions, and customer education, businesses need to assess the various features and capabilities of the digital banking ecosystem before taking the plunge.

Bank Business Plan

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Key Partnerships

For a successful bank business model canvas, key partnerships should be established with technology providers, financial advisors, affiliate marketing partners and other banking and financial institutions between customers and the bank. These partnerships are important as they can provide a wide range of services to customers such as access to information, technological solutions, financial guidance, and better interest rates.

• Technology providers : Partnerships with technology providers allow the bank to offer customers convenient, secure, and tailored digital banking services.
• Financial advisors : Financial advisors enable the bank to offer customers advice related to banking and investments.
• Affiliate marketing partners : These partnerships allow the bank to offer customers exclusive deals and promotions.
• Banking and financial institutions : Working with other banking and financial institutions allows the bank to offer customers access to a range of banking and financial services.

Key Activities

• Development of digital banking platform
• Establishment of partnerships to optimize and improve products and services
• Developing and executing marketing and promotional strategies
• Providing financial advice, consultation and educational resources to customers and clients
• Implementing security measures to ensure customer data and financial information is protected
• Assisting and educating customers with financial products and services

Key Resources

In terms of resources, banks require a full suite of resources to run efficiently and reach their potential customers. This includes:

• Technology: Banks need a wide range of sophisticated technology solutions in order to secure customer data, develop and maintain software solutions, and offer a broad range of services to customers.
• Human Resources: Banks need a highly trained and knowledgeable staff to cover the wide span of operations from customer service and compliance, to personal banking services and financial advisors.
• Financial Resources: Banks need a large amount of financial resources in order to appropriately stock up on inventory and savings for customers, meet legal and compliance requirements and protect customer deposits.
• Marketing Resources: Banks need marketing resources in order to reach and engage with new customers. This could include advertising, public relations and digital media solutions.

Value Propositions

• Convenience of 24/7 digital access : Customers can access their accounts and perform transaction anytime, anywhere using a secure online platform.
• A range of financial products and services : Customers have access to a wide variety of products and services tailored to fit their specific needs, including online banking, payments, investments, and more.
• Customized financial advice and educational resources : Customers receive personalized advice and resources from bank experts or from their mobile device.
• Secure and reliable banking platform : Banking with the bank is safe and secure, with the latest technologies and fraud prevention methods used to protect customer data.

Customer Relationships

The Bank must strive to develop standard relationships with its customers that are transactional, consultative, and community-focused.

Transactional Relationships

• Customer Service - The bank must provide effective customer service that is knowledgeable, efficient, and responsive.
• Product Offerings - The bank must provide products and services that meet the customers' needs.
• Accessibility - The bank must ensure that customers have easy access to bank services, both in-person and electronically.

Consultative Relationships

• Advice - The bank must strive to develop an advisory relationship with its customers, offering advice that helps them make informed decisions about their financial life.
• Tailored Solutions - The bank must provide tailored solutions to customers that are tailored to their individual needs and preferences.

Community Relationships

• Partnerships - The bank should strive to develop partnerships with local and national organizations that are beneficial to the communities it serves.
• Community Outreach - The bank should actively engage with its local communities, and provide support to those communities in various ways.

The bank will use a variety of channels for customers to access corporate banking services, including:

• Website - an online presence to provide customers with access to banking services and products.
• Social media - a platform to interact with customers and provide support to banking products and services.
• Mobile app - a platform to enable users to access the banks’ services and products, wherever they may be.
• Advertising campaigns - an effective method to reach out to customers, allowing them to gain a better understanding of the banks’ products and services.

Customer Segments

The Bank customizes its services to meet the needs of multiple customer segments including:

• Individuals : Individuals who need banking services for their daily activities.
• Businesses : Companies and organizations that need banking services for their operations.

Cost Structure

Cost Structure consists of the development cost, infrastructure cost, marketing and promotional cost, technology and IT cost, as well as personnel costs:

• Development Cost : Expenses related to setting up the bank, including any legal fees, accounting fees and other costs associated with getting the bank up and running.
• Infrastructure Cost : Cost related to setting up the physical presence of the bank, including costs for office rent and any equipment needed.
• Marketing and Promotional Cost : All expenses related to online and offline marketing, such as advertising and promotional activities.
• Technology and IT Cost : All costs associated with the digital platform and technology, such as server hosting and maintenance.
• Personnel Costs : This includes any costs related to staff salaries and benefits.

Revenue Streams

The revenue streams of the bank can be divided into four areas:

• Commissions from financial products and services : This includes fees earned from offering financial services and products, such as deposit accounts, mortgages, investments, etc.
• Membership fees : This includes fees earned from customers who are members of the bank.
• Fees from investments : This includes fees earned from investments, such as stocks, bonds, mutual funds, etc.
• Advertising revenue : This includes revenue from any advertising or sponsorships, or any other related promotions.

The Business Model Canvas (BMC) provides a structured framework that has been used to create a business model for a bank. The BMC emphasizes that a bank's business model should focus on creating quality customer experiences, delivering financial products and services in an efficient and effective manner, and driving innovation and growth. By focusing on these elements, a bank can maximize its potential and create long-term value for customers, shareholders and society.

The BMC provides guidance on the key components of a bank's business model, as well as how they interact and work together. This includes aspects related to value propositions, customer relationships, revenue streams, channels, cost structures, and resources and competences.

By following the BMC model, a bank can ensure that their business model is well-structured, efficient and effective in achieving their goals. In addition, the BMC helps to ensure that the bank is well-integrated with its various stakeholders, and taking into account their various concerns and expectations. Ultimately, this will allow them to provide customers with a quality service that meets their needs and expectations.

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Why bank of america corp.'s business model is so successful.

Bank of America Corp. business model canvas

Bank of America Corp.’s Company Overview

Bank of America is an American multinational banking and Financial services corporation headquartered in Charlotte, North Carolina. It is the second-largest bank holding company in the United States by assets. The bank's 2008 acquisition of Merrill Lynch made Bank of America the world's largest wealth management corporation and a major player in the investment banking market. Bank of America is one of the world's largest Financial institutions, serving individual consumers, small, middle-market businesses, and large corporations with a full range of banking, investing, asset management, and other Financial and risk management products and services.

Country: north Carolina

Foundations date: 1930

Type: Public

Sector: Financials

Categories: Financial Services

Bank of America Corp.’s Customer Needs

Social impact:

Life changing: heirloom

Emotional: provides access, reduces anxiety, rewards me

Functional: saves time, avoids hassles, simplifies, reduces effort, quality

Bank of America Corp.’s Related Competitors

Bank of america corp.’s business operations.

Cross-selling:

Cross-selling is a business strategy in which additional services or goods are offered to the primary offering to attract new consumers and retain existing ones. Numerous businesses are increasingly diversifying their product lines with items that have little resemblance to their primary offerings. Walmart is one such example; they used to offer everything but food. They want their stores to function as one-stop shops. Thus, companies mitigate their reliance on particular items and increase overall sustainability by providing other goods and services.

A brokerage firm's primary responsibility is to serve as a middleman, connecting buyers and sellers to complete transactions. Accordingly, brokerage firms are compensated through commission once a transaction is completed. For example, when a stock trade order is executed, a transaction fee is paid by an investor to repay the brokerage firm for its efforts in completing the transaction.

Cash machine:

The cash machine business model allows companies to obtain money from sales since consumers pay ahead for the goods they purchase, but the costs required to generate the revenue are not yet paid. This increases companies' liquidity, which they may use to pay off debt or make additional investments. Among several others, the online store Amazon often employs this business model.

Customer relationship:

Due to the high cost of client acquisition, acquiring a sizable wallet share, economies of scale are crucial. Customer relationship management (CRM) is a technique for dealing with a business's interactions with current and prospective customers that aims to analyze data about customers' interactions with a company to improve business relationships with customers, with a particular emphasis on retention, and ultimately to drive sales growth.

Digitization:

This pattern is based on the capacity to convert current goods or services into digital versions, which have several benefits over intangible products, including increased accessibility and speed of distribution. In an ideal world, the digitalization of a product or service would occur without compromising the consumer value proposition. In other words, efficiency and multiplication achieved via digitalization do not detract from the consumer's perceived value. Being digitally sustainable encompasses all aspects of sustaining the institutional framework for developing and maintaining digital objects and resources and ensuring their long-term survival.

Customer loyalty:

Customer loyalty is a very successful business strategy. It entails giving consumers value that extends beyond the product or service itself. It is often provided through incentive-based programs such as member discounts, coupons, birthday discounts, and points. Today, most businesses have some kind of incentive-based programs, such as American Airlines, which rewards customers with points for each trip they take with them.

Customer data:

It primarily offers free services to users, stores their personal information, and acts as a platform for users to interact with one another. Additional value is generated by gathering and processing consumer data in advantageous ways for internal use or transfer to interested third parties. Revenue is produced by either directly selling the data to outsiders or by leveraging it for internal reasons, such as increasing the efficacy of advertising. Thus, innovative, sustainable Big Data business models are as prevalent and desired as they are elusive (i.e., data is the new oil).

Brands consortium:

A collection of brands that coexist under the auspices of a parent business. The businesses in this pattern develop, produce, and market equipment. Their strength is in copywriting. Occasionally used to refer to a short-term agreement in which many companies (from the same or other industrial sectors or countries) combine their financial and personnel resources to execute a significant project benefiting all group members.

A digital strategy is a strategic management and a business reaction or solution to a digital issue, which is often best handled as part of a broader company plan. A digital strategy is frequently defined by the application of new technologies to existing business activities and a focus on enabling new digital skills for their company (such as those formed by the Information Age and frequently as a result of advances in digital technologies such as computers, data, telecommunication services, and the World wide web, to name a few).

Cross-subsidiary:

When products and goods and products and services are integrated, they form a subsidiary side and a money side, maximizing the overall revenue impact. A subsidiary is a firm owned entirely or in part by another business, referred to as the parent company or holding company. A parent company with subsidiaries is a kind of conglomerate, a corporation that consists of several distinct companies; sometimes, the national or worldwide dispersion of the offices necessitates the establishment of subsidiaries.

Digital transformation:

Digitalization is the systematic and accelerated transformation of company operations, processes, skills, and models to fully exploit the changes and possibilities brought about by digital technology and its effect on society. Digital transformation is a journey with many interconnected intermediate objectives, with the ultimate aim of continuous enhancement of processes, divisions, and the business ecosystem in a hyperconnected age. Therefore, establishing the appropriate bridges for the trip is critical to success.

Combining data within and across industries:

How can data from other sources be integrated to generate additional value? The science of big data, combined with emerging IT standards that enable improved data integration, enables new information coordination across businesses or sectors. As a result, intelligent executives across industries will see big data for what it is: a revolution in management. However, as with any other significant organizational transformation, the difficulties associated with becoming a big data-enabled company may be tremendous and require hands-on?or, in some instances, hands-off?leadership.

Corporate innovation:

Innovation is the outcome of collaborative creativity in turning an idea into a feasible concept, accompanied by a collaborative effort to bring that concept to life as a product, service, or process improvement. The digital era has created an environment conducive to business model innovation since technology has transformed how businesses operate and provide services to consumers.

Integrator:

A systems integrator is an individual or business specializing in integrating component subsystems into a unified whole and ensuring that those subsystems work correctly together. A process is known as system integration. Gains in efficiency, economies of scope, and less reliance on suppliers result in cost reductions and may improve the stability of value generation.

Mobile first behavior:

It is intended to mean that as a company thinks about its website or its other digital means of communications, it should be thinking critically about the mobile experience and how customers and employees will interact with it from their many devices. The term is “mobile first,” and it is intended to mean that as a company thinks about its website or its other digital means of communications, it should be thinking critically about the mobile experience and how customers and employees will interact with it from their many devices.

Self-service:

A retail business model in which consumers self-serve the goods they want to buy. Self-service business concepts include self-service food buffets, self-service petrol stations, and self-service markets. Self-service is available through phone, online, and email to automate customer support interactions. Self-service Software and self-service applications (for example, online banking apps, shopping portals, and self-service check-in at airports) are becoming more prevalent.

Private level banking:

Private label banks allow any business with a sizable client base, brand, or unique technological solution to operating as a private label bank. Private banking refers to the customized financial and banking services to its affluent high net worth individual (HNWI) customers. HNWIs generally have more money than ordinary individuals, enabling them to access a broader range of conventional and alternative assets. Private banks' goal is to connect such people with the most suitable alternatives.

Technology trends:

New technologies that are now being created or produced in the next five to ten years will significantly change the economic and social landscape. These include but are not limited to information technology, wireless data transmission, human-machine connection, on-demand printing, biotechnology, and sophisticated robotics.

Tradeable currency:

This pattern involves the creation of a digital asset and the establishment of a payment mechanism. Through this, the user earns points that may be used for other services.

Innovative retail banking model:

The design has no resemblance to a bank but more to a coffee shop. There is free wifi and a large number of iPads accessible for internet use. Automated teller machines (ATMs) are located around the perimeter of the coffee shop, allowing customers to conduct financial transactions. The workforce consists of a mix of coffee shop patrons and banking personnel who circulate and make themselves accessible. If you need services not available through an ATM, fully trained bank personnel can offer all services typically available at a conventional bank branch.

Subscription:

Subscription business models are built on the concept of providing a product or service in exchange for recurring subscription income on a monthly or annual basis. As a result, they place a higher premium on client retention than on customer acquisition. Subscription business models, in essence, concentrate on revenue generation in such a manner that a single client makes repeated payments for extended access to a product or service. Cable television, internet providers, software suppliers, websites (e.g., blogs), business solutions providers, and financial services companies utilize this approach, as do conventional newspapers, periodicals, and academic publications.

Take the wheel:

Historically, the fundamental principles for generating and extracting economic value were rigorous. Businesses attempted to implement the same business concepts more effectively than their rivals. New sources of sustained competitive advantage are often only accessible via business model reinvention driven by disruptive innovation rather than incremental change or continuous improvement.

The lock-in strategy?in which a business locks in consumers by imposing a high barrier to transferring to a competitor?has acquired new traction with New Economy firms during the last decade.

Product innovation:

Product innovation is the process of developing and introducing a new or better version of an existing product or service. This is a broader definition of innovation than the generally recognized definition, which includes creating new goods that are considered innovative in this context. For example, Apple launched a succession of successful new products and services in 2001?the iPod, the iTunes online music service, and the iPhone?which catapulted the firm to the top of its industry.

Solution provider:

A solution provider consolidates all goods and services in a particular domain into a single point of contact. As a result, the client is supplied with a unique know-how to improve efficiency and performance. As a Solution Provider, a business may avoid revenue loss by broadening the scope of the service it offers, which adds value to the product. Additionally, close client interaction enables a better understanding of the customer's habits and requirements, enhancing goods and services.

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Business Model Canvas

Clearly map out your business idea.

Have a great idea for starting a business, but don't really know how to map it out?  This is where the Business Model Canvas comes into its own. It helps you define your idea more clearly and forms the perfect basis for developing your business plan .

What is the Business Model Canvas?

The Business Model Canvas is a visual chart for strategically mapping out your business model. Using nine building blocks , you describe your organisation, your target group, your customers, your suppliers and your earnings model.

This business model comprises four components:

• Your customers (right side)
• Your value proposition (middle)
• Your infrastructure (left side)
• Your finances (bottom)

The nine building blocks of the Business Model Canvas

The Business Model Canvas enables you to map out the foundations of your business on the basis of nine components , giving you a better view of your resources and your strengths and weaknesses.

What problem are you solving or which needs are you satisfying? Why should someone choose your company and not a competitor’s?

Who are your customers? Your answer to this question determines your target group. Are you targeting private individuals or professionals? What is the gender, age and purchasing power of your target group?

How do you communicate with your customers ? Which channels do you use to deliver your product or service to your customers? List your communication, sales and distribution channels .

For example , bricks-and-mortar shops, a web store, social media, human intermediaries, etc. Think about your house style as well.

How do you attract customers and how do you retain them? How do you raise awareness of your offering? Each customer segment requires a different approach.

What are your revenue streams? Indicate how much turnover each product or service generates. Also think about how you want to achieve that turnover. How many customers do you need to achieve it? What price are you charging?

What do you need to run your business? Is it only physical resources, such as a computer, an office or machinery? Or do you need people to work for you, as well? Money is also a resource.

In this section, you list all the activities that make your business model work (for example, production, marketing and sales).

In this section, you describe which suppliers and partners are essential for making your business a success . For example, an accountant, a communications agency, employees, etc. Indicate why you want to work with them.

In this section, you list all the costs that are necessary to run your business (include both fixed and variable costs).

Get started

When you’re ready to create your own Business Model Canvas, download the template below (Dutch version only). You’ll also see useful tips with additional information. Start by describing everything as precisely as possible and link the building blocks to each other.

Take a critical look at your existing business

If you’ve been running your business for a while, use the Business Model Canvas to take a fresh critical look at it. This will ensure you continue to respond to the needs of the market and always stay one step ahead of your competitors.

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My Business Model

The My Business Model canvas can help you turn your business ideas into reality. Whether you're interested in starting, acquiring or repositioning a business, use our canvas to create your business model.

Why using My Business Model ®

The My Business Model ®  canvas not only helps you communicate your project effectively, it also encourages you to think strategically and facilitates teamwork and the exchange of ideas. Jot down short sentences in each block, add sketches and use arrows to make connections.

Above all, be creative—your business is one of a kind.

Watch the introductory video

Download the canvas and complete your business model

The Business Model Canvas is an essential tool that will accompany you throughout your strategic planning process. It is based on the nine building blocks of My Business Model ® .

Download the canvas

A clear vision of your business in 9 blocks.

Value Proposition

Your value proposition is your product's value added as seen through your customers' eyes.

Try to determine what needs or problems your product or service addresses.

• What value does it create?
• What are you actually giving your customers?
• What are the features of your product?
• What are the advantages of your offering?

Customer Segments

Customer segments represent the different groups of individuals targeted by your business.Ask yourself these questions to identify your customers:

• Who do you create value for?
• Who are your target customers or customer segments?
• Who are your biggest customers?
• What are their needs?
• What problems do they have?
• What is their profile?

Your offering is closely related to your customers.

Look again at the questions about your value proposition and analyze its impact on your customer segments. This will help you establish a solid link between the two blocks on the canvas.

The next step is to decide on effective communication and distribution channels for your business.

Bearing in mind the different channels that businesses can use (including websites, online stores, bricks-and-mortar stores and warehouses), answer these questions:

• How do you reach your customers?
• What channels do you use to distribute your products or services?
• What channels do you use to communicate with your customers?

Remember that the channels you use must be consistent with your value proposition and customer segments, as defined in the two previous blocks.

Customer Relationships

You've identified your customers, thanks to the Customer Segments block. Now it's time to define the kind of relationship and service that will suit them best.

For example, some products and services require personalized service, while automated service works better for others. Decide what's best for your business by answering these questions:

• How would you describe your relationship with your customers?
• What type of relationship do your customers want?
• How can you attract these customers or increase their loyalty?

After modelling your business's relationships with customers, look again at your distribution channels to make sure that they are appropriate.

Key Resources

Key resources are all the assets that help keep your business running smoothly.

These resources are manifold and may include staff, tools, property, permits, patents, know-how, experience and reputation. Identify your business's resources by answering these questions:

• What do you need in order to deliver on your value proposition?
• What resources are essential?

Key Activities

Your key activities help you deliver your value proposition and bring your product or service to market. They also make your business more competitive.

For example, a manufacturer might stand out from the competition not only for its products, but also for coming up with a new production method. Similarly, a professional firm could set itself apart by creating and patenting a new problem-resolution method. Ask yourself:

• What activities are key to delivering on your value proposition?

Your key activities are dependent in large part on your key resources. Take another look at the previous block to make sure that it is clearly linked to your activities.

Key Partners

Setting up your business and keeping it profitable will require you to work with suppliers, subcontractors, distributors and other partners who are essential to delivering on your value proposition.

Bearing in mind that partnerships come in a variety of different forms (for example, you might form a strategic alliance with a competitor or launch a business with one of your suppliers), ask yourself these questions:

• Who are your most important partners and suppliers?
• Which partners help you carry out activities that you do not perform in-house?
• Which partners provide you with the resources that you don't have in-house?

Remember that a good partnership brings many benefits, including maximizing profits and reducing risks.

Revenue Streams

Revenue streams are a key component of the business model, for both your business and your investors.

Whether your revenues come from fees, contract agreements, subscription agreements, rental/leasing agreements or licensing agreements, it's important to set prices according to what your customers are willing to pay for your product or service. Ask yourself these questions:

• Where do your revenues come from?
• How do your customers pay?
• How do they prefer to pay?
• What are your most profitable products or services?

Cost Structure

Businesses face a number of different costs. These may concern resources, employees, training, relations with partners, distribution, operations or taxes.

It's in your interest to be familiar with the costs you face and to find an innovative structure that means you don't depend on resources and activities that eat into your profits. Ask yourself these questions:

• What is the cost of your key activities and key resources (fixed and variable)?
• What are the costliest aspects of your business model?

My Business Model is the product of a collaboration between National Bank and the National Bank | HEC Montreal Institute for Entrepreneurship.

The Institute for entrepreneurship National Bank - HEC Montreal  is dedicated to  promoting and supporting business creation and entrepreneurial takeovers . It helps develop innovative entrepreneurs via educational activities and training, carrying out and communicating cutting-edge research and providing  coaching and networking opportunities . It also offers activities intended to identify, assess and present the issues faced by Quebec business creators and SME owners. The Institute has four distinct roles:

• An observatory  of Quebec entrepreneurial trends and best practices
• An idea accelerato r  for innovative businesses
• A centre for knowledge transfer and customized training
• A networking and event space

To learn more about the Institute's activities, visit  iebn.hec.ca

Note : The website is available in French only.

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