Failing to plan is planning to fail.
This is the reason why the majority of businesses fail. The business model canvas app is genius in its simplicity, helping you plan your future company.
The fundamentals of your business will be presented in a brief, structured and comprehensive way.
Note, that a model canvas isn’t a replacement for a business plan - this document is obligatory as well.
However, it plays a slightly different role. Our article on how to write a business plan for an app startup is a great introduction to the topic.
A canvas includes the essentials only. Working on this document you answer the simple, yet tricky questions like “Who are your audience?”, “How will you attract them?”, “What are your goals?”, and “What are your revenue sources”. With a clear understanding of these points, you will have no difficulty presenting them to your investors.
On the internet, you will find many step-by-step tutorials telling you how to create a business model canvas for your mobile software company. We will show you how to make it work. A downloadable canvas template is included, don’t miss it!
But let’s start with a short introduction first.
Mobile app business model canvas
To make a long story short, a business model canvas is a graphical representation of your company structure. The template represents the nine basic points of any business: value proposition, partners, resources, customer segments, key activities, customer relationship, sales channels, expenses, and revenue.
Why do you need a business model canvas for application development?
Generally, this template is used when creating a new business. In the case of a mobile app, it helps determine the most important points for the planning stage. This will help protect the company from spontaneous decisions, like choosing the app monetization strategy when discussing technical assignments with the project manager.
Yet, this canvas can even be used by mature organizations to optimize processes, as well as clarify company goals and strategies. When discussing each aspect of the canvas template, the business owners and managers can spot gaps or weak points in the strategy, define future development or discover ideas regarding business optimization or expansion.
Remember that accuracy and careful planning are your friends! Spontaneity and chaos have already led lots of companies to failure.
The difference between the business model canvas and an app business plan
Despite similarities, a business model canvas and a business plan are documents with completely different formats, goals, presentation and development. Let’s take a closer look at both.
A business model canvas is a brief presentation of your business structure. It does not contain any information about your strategy and ways to realize an idea. Here, you also don’t describe your business processes and optimization. It does not contain figures and calculations.
A business plan is an extensive strategic document. It is based on the business model canvas and here you describe your strategy for developing each aspect defined by the canvas. When writing a business plan, you also include all possible calculations, graphs, and diagrams.
Let’s imagine that your business is a house.
First of all, you make the project of your house. It includes research on the area where it will be built, the architectural design, a cost sheet, and information on communications.
Only when all these documents are ready and approved can you start conducting the actual building works, starting with the footing.
So, the business model canvas is your business project. It’s a simple way of presenting information which hides a lot of work, research, and brainstorming. Only when it is validated and approved can you begin building.
The business plan is the footing of your future company. You create it only when the ground is analyzed, the idea is validated, and the project is approved.
Do you know that the majority of business plans fail when it comes to implementation in real market conditions?
Reason #1 - Bad business idea
This does not actually mean that the idea itself is bad.
The idea may be really good and successfully exist in the market in recent years. It may be an improved version of the existing application… yet the customers may be already satisfied by the existing product. They may not be ready to pay for the improvements you offer.
It means that the idea is invalidated.
How can you avoid failure at this stage? By validating the idea, of course. This is the main reason why you should start by creating the business model canvas.
As we have mentioned, the canvas is created to validate the idea. Only when you can prove the consistency of the idea (i.e. each of the nine model aspects we will describe later in this article) may you consider it validated. Only when the model is validated may you continue with creating the business plan – the implementation strategy.
Structure of the business model canvas
Having discussed the importance of creating a business model canvas for an app, we begin to consider each point of the canvas template.
Although the template seems to be simple, the meaning behind its building blocks may be unclear. The nine building blocks are divided into three key groups: Infrastructure, Customer & Sales, and Finance. Hopefully, our clarifications will help you understand how to create a business model for your app.
This is the cornerstone that defines the essence of your app. The model shows how your startup is different from competitors and how you will support the development process.
1. Value proposition
Customers will not use and buy an application that does not solve their problem. A value proposition is a set of advantages that your product offers to users and the reason they should pay for it. Let’s see some business model canvas examples of a mobile app value proposition:
Novelty - satisfying needs that have never existed before or that are not satisfied yet.
Productivity - increasing the efficiency of satisfying the client’s corporate or personal needs.
Price - offering a solution that is less expensive than the existing one, but that offers the same or better efficiency.
2. Key partners
No company can exist without establishing partnerships with other people and organizations. That is why your business model canvas should contain a description of your key partners and your collaboration. Let’s review possible partnership types for a mobile-based startup:
Co-founders - let’s imagine that the author of an idea is a talented business or salesperson without a solid technical background. He or she will require the assistance of a tech person, who will become the CTO and coordinate the technical side of the development.
Contractors - while developing the mobile application, you will have to sign contracts with companies that will perform different aspects of the work: software development company, marketing agency, law and accountancy firm, etc.
Suppliers - in case your digital business will tightly integrate selling, buying or producing physical objects, you will have to establish a partnership with local suppliers.
Make sure to include all possible parties required to start a successful business
3. Key resources
To start a mobile app company, you will need to possess certain physical and intellectual property, or human and financial resources that will be applied for development. According to your business model canvas, this property will be described as your key resources. Let’s review some examples:
Material resources - physical objects, such as equipment, buildings, and transport.
Intellectual resources - intellectual property, such as patents, trademarks, patterns, and databases.
Human resources - people that will work to develop your idea. This is particularly important for science-based or creative projects.
Financial resources - money assets, credits, and funds that will be used to pay for the development process.
Customers & Sales
This block defines which customer groups the company is going to target and how the sales process will be organized.
4. Customer segments
Now you need to describe the target audience of your application. While working on this section, you should analyze your potential customers from the point of view of demographics, interests and needs. The following questions will help you:
Who are your potential users? How old are they? Where do they live?
What are they interested in?
What is their need? What are their fears?
How do they make purchasing decisions? Why will they want to use your app?
This analysis should result in a buyer persona - a detailed description of your ideal customer. Understanding who your client is and what his preferences are will help you to make a product that better corresponds with his needs.
5. Key activities
How will you reach your customers and bring your value proposition to them? The key activities block of your business model canvas will help you answer this question.
If your company is thoroughly digital, key activities will focus on online marketing campaigns (email newsletters, social networks, online advertising, etc). Applications related to the physical world will also have to focus on creating a physical infrastructure: warehouses, distribution centres, shipping points, etc.
The main objective of this block is to think of the best channels for your product promotion.
6. Customer relationship
Here you will have to define how you will interact with your customers and support them. Let’s see how this process can be organized.
Personal support - direct communication of the customer with a company representative.
Self-service - the company does not communicate directly with customers but gives them all the necessary tools to do everything on their own.
Automated service - a more advanced form of self-service combined with automated tools like chatbots.
Community - creating communities where customers can exchange their knowledge. This form also helps the company better understand the needs of its customers.
7. Sales channels
How will you sell your value proposition? Think about this while completing this block of your canvas.
In case of a mobile app business models, the main options are applications for Android and iOS. You could also consider selling your product via a website, email campaigns, social networks, etc.
The final part of your business model canvas will describe your app’s two main money flows: expenses and revenues. Here you should oversee all possible expenses and consider product monetization.
8. Cost structure
The more expenditure items you oversee, the fewer challenges you will encounter while developing your app. Let’s review the expenses you will encounter for sure:
Organizational costs - establishing of your company as a legal entity with legal and accounting services.
Office, necessary equipment - everything you need to have your company up and running.
Development costs - hardware, the work of your software development team, maintenance of the online platform.
Human resources - employee salaries.
Marketing & advertising
We also recommend that you reserve some budget for unexpected expenses. It is always good to play safe.
9. Revenue streams
How are you going to monetize your application? Let’s review some possible options:
Revenue for selling the value proposition (selling the physical goods, commission, subscriptions. etc).
Advertising (you can use your platform to post ads).
Brand usage (when your app becomes a recognizable brand with a registered trademark, you will be able to charge for use of the brand)
Tips for creating a business model canvas for mobile app
Hopefully, our guide helped you understand what information you need to create a business model canvas. However, we understand that the most difficult part of any activity is deciding what to start with. So, keep reading the article to find some organizational tips!
Hopefully, before creating a business model, you have already conducted basic market research and studied competitor businesses. For clarity, you can even create a canvas describing their business models.
The best way to create a canvas is to brainstorm it in the small teams of 3-5 decision makers (founders and co-founders of the business, C-level officers). You will also need:
A printed or drawn canvas template on a big sheet of paper
You are welcome to download our free PDF with the business model canvas template. Print several copies since your canvas will likely go through multiple iterations.
Lots of markers and sticky notes
When brainstorming, do not forget that the canvas should contain only the basic points - leave strategic issues for the later. For your convenience, make the process as logical as possible, for example:
Connect each point of your value proposition to the corresponding block
Do not mix up actual ideas with future plans
Do not mix up ideas from different departments
Following these simple rules will help you move onto the next step.
Having finished brainstorming, put your canvas aside and return to it in a few days. This will help you review it with more objectivity. Create a checklist with criteria for the canvas evaluation. For example:
Will the customers pay for your value proposition? Why?
Is your model scalable?
Will it be able to produce stable revenue? When?
Is it protected from the competition? How?
If you are not satisfied with the answers, you can repeat the brainstorming session and make corrections to the model. Make as many iterations as needed, until your business model meets your expectations.
When the model is ready, you can save it in a digital format using canvas business apps like Canvanizer or just scan your paper business model. Now you are ready to share it with your partners, investors, and vendors.
By the way, a ready business model canvas is very helpful when starting your cooperation with a software development company. It gives your partners a brief overview of your app’s purpose and business strategy.
Let’s summarize the main points of the article:
Canvas is a powerful tool that will save you lots of time and money.The more attention you give to creating a canvas, the fewer challenges you will encounter later.
Business model canvases for apps and app business plans are not the same! Keep in mind the difference and don’t go into details when working on your model.
Use the printed business model canvas template to not forget any of the critical blocks.
Now you know everything about creating a business model canvas. You are closer to the successful implementation of your idea and prepared to all the challenges and unexpected expenses.