TOOL

Common Mistakes in Completing

the Business Model Canvas
Use this tool to gain insight and focus of each of the nine Business Model Canvas boxes. The bold text highlights
common misconceptions, the subsequent text provides further specific detail for each category.

Customer Segments
Buildings don’t buy things—customers are people! Hospitals, schools, and governments
may be the entity that owns the bank account, but individual people make the decisions. You
need to identify who they are—and their role in the purchase decision-making process—so
that you can seek them out.

Segments are too broad. Startups are the most capital-constrained entities on the planet.
“Students” or “moms” is too broad a segment to reasonably address. Drill down—get specific!

Value props go in a different box. Don’t define your customer segment by wants and needs.
Yes, wants and needs are important, but they go in Value Prop, not Customer Segment. You
want Customer Segment to define a “who” that is findable and identifiable. Your “why” goes in
Value Prop.

Value Propositions
Your features don’t matter. Value props should be articulated in the context of why this
matters to the customer in question. People buy ½” drill bits because they need a ½” hole, not
because they want a drill bit. Number of gigaflops, miles per gallon, paint color options—all of
these are product features that lead to a customer gain or pain relief. It’s the pain or gain that
matters, because that’s what motivates customers.
Each customer segment should have at least one value prop. You are likely to start with
multiple customer segments (if you’re doing it right and your segments aren’t too broad).

You have too many value props. During business model development, people commonly list
all the possible value propositions they can think of. That’s an okay place to start, but ultimately,
a deep understanding of the customer and their need should inform the decision of which one
or two (three at the most ) value props drive the behavior of each customer segment.
Quantify, whenever possible. Some value props can’t be quantified—signaling of prestige
associated with buying a branded luxury good, for example—but most can. If your value prop is
to save a buyer time, earn them new revenue, or save them money, you should try to quantify
how much, and you should always be thinking about how much of that benefit is necessary to
make a difference to that customer.

CREA501: Finding the Right

Type of Investor or Investment
1
© 2019 eCornell. All rights reserved. All other copyrights, trademarks,
Center for Regional Economic trade names, and logos are the sole property of their respective owners.
Development
Channels

Think physical and virtual. Virtual products can have physical channels (an iTunes gift card
sold at Target) and, of course, physical products can have virtual channels (a dinette set sold by
Wayfair). Most business models use both types of channels.
Channels are how you get your product to the customer. Building awareness is in
customer relationships. Channels are literally about the store where the customer goes to
order, transact, and get delivery. Getting customer awareness and keeping yourselves in
their good graces so that you can sell to them again is important, but that’s in Customer
Relationships, not Channels.

Customer Relationships

Awareness is required, and doesn’t come for free. Customer relationships are about how
you “get, keep, and grow” customers, and the first step of “get” is for customers to be aware
that you have an offering that meets their needs. Articulating how you will gain awareness
is the first critical step in customer relationships, and is one that will require effort on the
business’ part to make happen (e.g., “social media” is an insufficient answer).
“Keep and grow” can be the difference between a business model that works and one
that doesn’t. Once you have expended the time, effort, and resources to acquire a customer,
it is almost invariably cheaper to sell to them again (or sell them other new products) than
it is to find and close a new customer from scratch. Articulating strategies to keep and grow
customer relationships can be what makes your business model financially viable.

Revenue Streams
There are two parts that must be present: revenue model and pricing tactics. Both are
important. Revenue model is how you will sell (asset sale? subscription? rental?) and pricing
tactics is about how you will price.
Tie your pricing to value created. Ultimately, a customer won’t pay $10 to save $1; the value
received as your revenue must be a subset of the total value created. Your cost of producing
the good or service doesn’t matter here; what matters is the customer’s willingness to pay for
the value created.

Key Activities
This is about your core competency. What is the thing that you need to do yourself to enable
your business model to have a compelling value proposition? Activities shouldn’t be a generic
list of stuff, but should focus on what it is that you must do excellently to achieve your vision.
It could be product and technology innovation (R&D) or it could be fulfilling a way to be the
lowest cost provider (supply chain management or manufacturing).

CREA501: Finding the Right

Type of Investor or Investment
2
© 2019 eCornell. All rights reserved. All other copyrights, trademarks,
Center for Regional Economic trade names, and logos are the sole property of their respective owners.
Development
Key Resources

Completeness matters. There are four main areas of key resources: financial, physical,
human, and intellectual (IP). It’s likely that some combination of all of them are required for
your business model to work, and it’s also likely that they will cost money. You don’t need to
list every nut, bolt, and screw required to assemble your desk chair, but a thorough accounting
of the main areas required to start will help ensure you gather what you need (and that you’re
ready for the cost associated with that).

Key Partners

You don’t have to list everyone under the sun. Even if it’s critically important (say, flour for
a bakery), if you have multiple sources of supply for a commodity ingredient, you don’t need to
list them.
Key partners are just that: entities without whom your business model wouldn’t work. It
could be someone with a patent you need to license, or a channel partner to get your product
to market, or an entity with a contact list that will enable you to build customer awareness cost-
effectively. Key partners are those entities who, if they don’t do business with you, will sink you.
Key partners act a lot like customers. Just like customers who need to be motivated by a
value proposition, so too do partners. Why would they do what you want them to do? What’s in
it for them?

Cost Structure

Underestimate at your peril. There are two main areas of error in cost structure: one is
forgetting major areas (such as employee taxes, insurance, and benefits on top of direct
compensation costs); the other is not scaling these costs appropriately as the company
grows. While the hope is that a larger company will get more productivity out of each person
on the team as the company grows and as those people specialize, it’s highly unlikely that
the marketing team, for example, will be the same size on Day 1 as it will be in Year 5 if the
company’s growth plans come to pass.

CREA501: Finding the Right

Type of Investor or Investment
3
© 2019 eCornell. All rights reserved. All other copyrights, trademarks,
Center for Regional Economic trade names, and logos are the sole property of their respective owners.
Development