A Primer to Live Free or DIY

How to Increase Profit & Business Efficiency

Then, lost in the weeds of these key activities, business owners start to feel trapped. They begin spinning their wheels working in the business, without ever having time to work on the business. So in this area of your canvas, think about that powerful three-word business plan:

Do less, better.

What is the one thing your company can do better than any of its competitors? (OK, maybe two things—sometimes.) Are you fundamentally a delivery company that exists to get physical goods into the hands of your customers as conveniently as possible? Are you in a problem-solving business like consulting? Are you in a production business —that is, actually making something, either the price or the quality of which is your core value? By asking these questions, you’ll zero in on that one key activity that’s truly essential to your business model.

There are also plenty of activities that don’t need to be listed under “Key Activities.” Bookkeeping and accounting should never be listed here—unless, of course, you’re an accounting firm. Every small business needs to maintain good books; that’s why you flipped the pyramid and hired an outsourced CFO. But don’t for a second confuse the importance of that particular back-office task with the key activities that your in-house team must become expert at in order to make your business model work.

Key Partnerships

Your next step in developing your canvas is to spell out your Key Partnerships. This is a powerful area of the canvas, especially for small businesses that are outmatched in scale by larger competitors.

The potential gain from forming strong partnerships often goes unappreciated. Could a partnership help you with important activities such as expanding, manufacturing, or distributing your product(s), and thereby dramatically improve the value you provide to your customers? What key partnerships could propel your business beyond the constraints of your limited cash flow?

And different types of partnerships are likely to advance your business at different stages. That is, certain kinds of partnerships may help your business survive its first year, and entirely different partnerships may help it thrive in its tenth. You may also find that it’s beneficial to move certain Key Activities on your canvas over to your Key Partnerships area, and then, down to the road, move them back again.

However this process plays out for your business, remember that partnerships are a powerful, and often overlooked, dimension of the business model, and one that you can harness to escape the DIY trap, improve business efficiency, and develop ambitious plans for the future of your company.

Key Resources

They Key Resources area of the canvas is another that often goes underappreciated, and one that can also serve as an escape hatch from the DIY trap.

It’s worth thinking long and hard about the Key Resources of your business, including trying to identify resources that you might be taking for granted. Ultimately, what are the essential resources that your business model relies upon in order to deliver its core product? What key assets (equipment, buildings, technology) do you need? How much capital do you need? Do you need a line of credit?

Earlier in this chapter you read that the number-one reason startups fail is a lack of product-market fit. What’s the second most common reason? Money. And if you’ve ever made five trips to Home Depot for a home improvement plan gone wrong, you know how

easy it is to underestimate the cost and time required to complete even the smallest project. So imagine how many entrepreneurs are wrong about the resources required to get their business off the ground. Lots of start-ups shut down simply because they don’t have enough runway; that is, they don’t have enough cash to sustain operations, let alone increase profit. In other words, there are risks here, and it’s crucial to be honest with yourself about what you truly need in order to make your business a success.

Over time, as your business grows and changes, the key resources will, too. As you begin to carve out a market niche, you’ll start to think about how to outperform competitors: What key resources are necessary for your business to execute its value proposition better than anyone else? Put another way, how can you gain an unfair competitive advantage that will make it difficult for anyone to outcompete you in the future? Is it a powerful brand? Intellectual capital? Unique partner relationships? A powerful database (like Facebook) or algorithm (like Google)? Whatever it is, this portion of your canvas is as key to your company’s survival in the long-term as it is for making it through year one.

Cost Structure

Cost Structure is the very last item on the Business Model Canvas. Add up all costs associated with your activities, partnerships, and resources on the left side of the canvas, and what you’ve got is the fundamental cost structure for operating your business.

Like Revenue Streams on the right side of the canvas, Cost Structure is often fairly clear once the rest of the canvas is in place. And just as we said that bookkeeping and other back-office tasks don’t belong under Key Activities, the expense associated with internal tasks like bookkeeping don’t belong in Cost Structure, either. Your canvas exists to make the big picture clear and easy to comprehend. So right now, you’re only including those costs that are critical to your unique business model.

Once you’ve got your sticky notes in place to indicate your central costs, you can now step back and look at the overall business model. To the extent that your Cost

Structure on the left is less than Revenue Streams on the right, you have yourself a business! To the extent that your Cost Structure is greater than your Revenue Streams, you don’t—not yet, anyway.

In either case, turn to Chapter Eight for the road map to establish or increase profit for your business.