How can you use the Business Model Canvas to evaluate your startup's finances?

Business Model Canvas is a business planning tool, that gives you general overview on how the business operates (including how it is making money). The part of Business Model Canvas is a Product Canvas, where you match Pain Points and Gain Opportunities with you product's, and/or service's features and values that is provides. It is one of the most popular tool to present the business idea in a simple, clear and easy way.

While focusing on profitability is key for any sustainable business, for startups (especially those at early stage) it is a lot more important to focus on revenue, with a clear "path to profitability". This means understanding how the unit economics play at scale, and at what scale the startup achieves profitability. Being very clear on "variable costs" vs. "overhead costs" is crucial to getting the unit profitability right. For example, if a company needs to spend $1 (variable cost) for every unit sales that brings in $5, then the gross margin is $4 per unit - and thus if the overhead costs are $4M, then the company can be profitable when selling 4M units, given that overheads don't grow further at this scale.

1. Check the Costs -> analyse... Check the CapEX, check the OpEX (Business Model Canvas don't divide the costs per those categories, but ask - drill & grill if you want to know :) ) 2. Check the Revenue Streams -> analyse... Look where is recurring revenue, and where is not; usually you will prioritise recurring revenue over non-recurring. 3. Check the Key Partners and Customer Segments -> analyse, take your conclusions. Are those Partnerships credible and sustainable in a long-term? How about Clients? Are those at any risk, because of macro-economical situation? 4. Check resources and activities -> similarly, analyse... If too much, too expensive, or not sustainable, be aware. This is basically how you evaluate with BMC.

The importance of metrics vary by startup stage, industry, and type of customers (e.g. B2C vs. B2B), but the most important metric is always "cash in the bank" and all cash flow metrics that ensures the startup stays alive, while growing whatever metrics that define success. Among the most important metrics: number of new users, daily (or weekly, monthly) active users, % users retained, basket size per user, user growth rate, and cost of user acquisition.

1. CAC - Client Acquisition Cost. 2. CLV (LTV) - Client Lifetime Value. 3. CLV (LTV)/CAC - should be around 3 (can differ based on particular case, but 3 used to be a general rule). 4. Cashflow - money on account (can be negative number, if you spend more than you earn; it is acceptable until some point, especially in SaaS). 5. Cash burn rate - How quickly you will spend all your money as a company. It shows how long you do have to generate business. Especially important on early stages. 6. Churn - What part of your Clients will leave you in the next 12 months? Especially relevant for SaaS.

To be fair, Business Model Canvas is not a tool for financial planning - you can only use it to assign the numerical values to Costs and Revenue Streams and put it into timeline. Then you will need a financial model. I would personally never try to think seriously about money based on Business Model Canvas - crazy idea of LinkedIn's Generative-AI. ;)

I almost completely disagree. Financial Model - yes, sure. ... but Business Model Canvas...? Just as an very general illustration for people that don't have idea what your business is about... Seriously, don't go this way.