A Business Model Canvas is a very useful tool for Social Entrepreneurs whether they are starting out (helping the to frame ideas into an organized strategy and an actionable business plan) or existing ventures.
The tool itself, however, is no more complex than a series of nine boxes representing business segments drawn across one sheet of paper. It grounds founders to stay focused and concise as they map out their business according to each of the boxes to hone in on their business strategy and plan.
A good and conclusive canvas lays the groundwork for your business and changes with every iteration you go through. It describes how you create, deliver and capture value.
For social entrepreneurs seeking to break free from the constant cycle of grant proposals and payroll concerns, a robust business model serves as the driving force behind sustainable revenue generation. It provides the necessary framework for earning income consistently, allowing social entrepreneurs to focus on their mission and impact, rather than being stuck in administrative burdens.
Let’s analyze the components in the context of create, deliver and capture value.
Delivering ValueCapturing Value
| Building Block | Description | Tips for Social Enterpreneurs |
|---|---|---|
| Customer Segments | This section defines who our customers are and how to develop the best strategy to attract and retain them and in formulating a strategy to get them to accept and offer.
Guiding questions:
|
As a social entrepreneur, you may have to segment customers from beneficiaries. The ones paying for your product or service are not always the ones using it exclusively |
| Value Proposition | Why should the customer buy a product from this social venture in particular? The value proposition explains what problem you are solving for your beneficiaries and how.
Guiding questions:
|
A social enterprise’s value proposition includes the value created for both the individual and society at large – the enterprise’s social impact. If your customers and beneficiaries are not identical, ensure it specifies how you create value for both. |
| Channels | This section addresses how you are going to get the value to the customer.
It is crucial to make the purchase process as easy as possible to avoid potential abandonment. A smooth and intuitive user experience during the purchase process can help lead the customer to conversion and ultimately the sale. Be creative in reaching your target beneficiaries by considering their accessibility. Consider factors like literacy, mobile technology usage, access to electricity, and transportation. Don’t overlook these access limitations and identify easy and feasible channels for engagement from the start. |
Access limitations are easily overlooked so consider these from the start. |
| Customer Relationships | Keeping existing customers for the long term as this is more cost effective than acquiring new customers. This can be done through excellent customer care, high customer satisfaction and regular engagement. Ensure questions are always answered and that the customer is personally informed and advised about products.
Customer loyalty can also be promoted by creating a community where people can meet and exchange ideas. e.g. collaborations can be established, such as a fashion house developing an exclusive collection with influencers. These approaches should not be considered in isolation, but can be combined to create strong customer loyalty. Guiding questions
|
Trust and respect and cultural norms are key considerations when working with underserved communities. Relationships with your customers should reflect this in every aspect of communications. |
| Key Resources | Key resources are essential for creating value for customers and ensuring the sustainability of your social venture.
They are necessary elements to create value for both customers and the social impact being pursued. Social entrepreneurs need to identify and leverage resources that align with their social mission. These resources can include physical assets like facilities or equipment, human resources such as skilled staff or volunteers, intellectual resources such as innovative ideas or proprietary knowledge, and financial resources to fund operations and growth. |
By understanding and strategically managing their key resources, social entrepreneurs can optimize their ability to create positive social impact while ensuring the long-term viability and success of their ventures. It involves identifying resource gaps, seeking collaborations, and utilizing available resources efficiently to achieve their social objectives. |
| Key Activities | How can you remain successful, create and offer further added value, reach other markets and thus win more and more customers without neglecting the good customer relationship? This addresses the question on What is your main job as a social entrepreneur to run this business successfully?
Guiding questions:
|
Make sure they all key activities drive your intended social impact.
It’s easy to get overwhelmed by the many opportunities to make a difference. Start with your main activities for now, and expand later if successful. Take it step by step. |
| Key Partners | This section helps you leverage on partnership to identify opportunities for synergy.
By analyzing the relationship with various alliances you can outsource some core business activities whilst fulfilling value proposition to customers and beneficiaries. |
Being a social entrepreneur means having a broader range of stakeholders to be accountable to. To cultivate and handle these relationships effectively, it is important to establish partnerships with key stakeholders in sectors that are relevant to your venture.
Consider who else is actively addressing the issue you’re working on and identify your allies. This is particularly critical when operating in emerging economies, as building trust and strong relationships with partners in your value chain becomes crucial. |
| Revenue Streams | This helps in addressing how are you going to pay for all of this?
Guiding Questions
|
Don’t give your product away for free. Don’t make your beneficiaries dependent on free handouts, give them the dignity to pay for what you offer, even if it is a very small amount. We all appreciate the things we pay for more than for the ones we get for free. Charge SOMETHING for your product or service, and find other ways to generate revenue to at least break even.
You can have one customer segment pay a bit higher to subsidize for beneficiaries. Generating multiple revenue streams makes you less dependent and more resilient in case one stream dries up. To avoid cluttering up the Business Model Canvas, only the most important revenue streams should be shown, so that you can understand the margin. |
| Cost Structure | What are all of the costs that you’ll incur while operating your business? Two types of cost structures: value-driven and cost-driven. Determine which structure makes the most sense for your business and factoring that into your cost strategy.
It is essential to constantly optimise operational processes and check where adjustments can be made. The industry in which the company operates plays a crucial role. In highly competitive industries it is often not possible to raise prices excessively. In contrast, higher prices can be charged for products for which there are only a few suppliers. Carefully analyse fixed costs, company size and costs per customer. A thorough examination of these factors can identify opportunities to reduce costs and increase profitability. Then, introducing more efficient processes, optimize purchasing or renegotiating supplier contracts. The social entrepreneur can also examine the size of the social enterprise and whether any economies of scale can be exploited to reduce costs. Moreover, assess the cost per customer to ensure that prices are reasonable and that there is a balance between customer satisfaction and profitability. |
Social enterprises – hopefully – runs on a value-driven cost structure, which may include high quality and high ethical value. Ideally you manage to combine elements of both. Don’t sacrifice quality to save on cost. |
Conclusion
The real value of the Business Model Canvas Lies in identifying planning gaps between these 9 building blocks. It evolves along with every round of testing and iteration your idea goes through – make sure to keep it up to date.
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