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1. Cashflow Identification and Estimation using Business Model Canvas (BMC)
Cash is King
The term cash flow refers to the amount of cash and cash equivalents being transferred in and out
of a company. Cash received represents inflows, while money spent represents outflows. A
company’s ability to create value for shareholders is fundamentally determined by its ability to
generate positive cash flows or to maximize long term free cash flow. FCF is the cash generated
by a company form its normal business after subtracting any money spent on capital expenditures.
When the company expand their business or establish new business to know the approximately
flow of cash, the company plan blue print of the business and paint the idea and requirement
according to the Business model.
A business model Canvas is used as platform to describe the idea of business. Through this BMC
the flow of cash can easily be recognized (from where we get money, and where we have to spent).
BUSINESS MODEL CANVAS
What is BMC?
The term CANVAS is used in Business model is to paint or described the rationale of how an
organization creates, delivers and captures Value.
Business model should be easy that the concept of the business easy to understand. The challenges
of business model should be simple, relevant and intuitively understandable. The language of the
business model can be share easily, describes the core or essence of the business and does not
create the hurdle while making new strategies.

3. The Business model painted nine blocks on it Canvas. These are
1. Customer Segmentation
2. Value Proposition
3. Channels
4. Customers Relationship
5. Revenue Stream
6. Key Resources
7. Key Activities
8. Key Partnerships
9. Cost Structure
1. Customer Segment – to satisfy the customers, a company may constitute into different
segment on the basis of common needs, common behaviors or other attributes. An organization
must take conscious decision about which segments to serve and which segments to ignore. It is
summarized as, the organization for whom they creating value? And identify the most important
customers?
There are different types of customer Segments like
1. Mass Market – In this Business Models focused on mass markets don’t distinguish between
different Customer Segments.
2. Niche Market –this market is focused on particular requirement of particular customer.
3. Segmented – this group offer almost similar product with slightly difference according to
the need and problems of the customer.
4. Diversified – An Organization with a diversified customer business model serves two
unrelated customer Segments with very different needs and problems
5. Multi-Sided Markets – Some organizations serve two or more interdependent customer
segments. A credit card company needs a large base of credit card holders and a large number of
merchants who accept those credit cards.
The example of customer segment can be taken of Banks like there are various categories of banks
which focused on different segments like Regional Rural Banks; they are established to provide
the facility of banking and other financial services to the rural areas of the country. The operations
carrying out like disbursement of Wages of MGNREGA workers and distribution of pensions,
providing Para-banking facilities like locker facilities, debit and credit cards etc.

4. Prior to the customer segment, a company can explore the market and analyses the need and
requirement of the customer by carrying the research on the behavior of the customer by asking
the requirement of the customer what kind of service or product they required or by distributing
the sample product or free service to the customer and get response from the retailers or by
feedback form. In all the process the company required huge amount conducting research which
reflects the outflow of cash flow of the company prior to earn the revenue company required some
expenditure to create value proposition. Aftermath, the company can appropriately divide the
segment and able generate revenue which reflects the inflow of cash.
2. Value Propositions – reflects the value what the organization offers and what other
facilities accompany with the service. It is the reason why customers turn to one company over
another. That consists of a selected bundle of products and/or services that caters to the
requirements of specific customer Segments. It creates value for a customer segment through
distinct mix of elements catering to the segment’s needs. It may be quantitative and qualitative.
For example a bank provides different facilities on maintaining the certain amount in bank which
help the bank to create value in maintaining the client to the bank. Facility may be like provide
them Relationship Manger, enhance their credit limit, offering withdraw from home.
Like in the above example, a bank holder avail the facilities provided by the bank but those services
are not free for the bank. There always a cash outflow by providing the facilities to holder and in
complementary bank attract more deposits on which they earn interest (inflow cash). For creating
the value proposition continuous process of updating the customers and their requirement attract
the cash outflow (effect on their variable cost. Like in pandemic- the company advertises that their
staffs are vaccinated and the branch are totally sanitized and we care for you- this type of expenses
are to retained their existing customers and invite new customer by providing concern towards
corporate social responsibility.
3. Channels – The channels building block describes how a company communicates with
and reaches its customer segments to deliver a value proposition, communication, distribution and
sales channels comprise a company’s interface with customers. Channels are customer touch
points that play an important role in the customer experience. Channels serve several functions,
including:
• Raising awareness among customers about a company’s products and services
• Helping customers evaluate a company’s Value Propositions
• Allowing customers to purchase specific products and services
• Delivering a Value Proposition to customers.
• Providing post-purchase customer support.

5. Channel Types Channel Phases
Own
Direct
Sales force
Web Sales
Own stores
Partner Stores
Wholesaler
1.
Awareness
2.
Evaluation
3.Purchase
4.
Delivery
5. After
Sales
Partner
Indirect
The companies’ cash flow is also depending upon the medium of channel using by the company.
Some company use different platforms to make awareness of their services and product like
YouTube, Facebook, LinkedIn and other medium like physical camps, road shows and expos-
these channels attracts lacs of rupees as outflow of cash to attract the lacs of rupees as inflow. Even
on the evaluation of channels which medium have more probability to reach the hearts and the
pocket of the customer. Modes of payment- luxurious product need financial assistance-
partnership of which banks and their tie-up cost. Delivery of the product- matters how they deliver
and when they deliver, duration of delivery- needs patch up with some delivery service provider
like bluedart etc. All are these required fees or charges to avail the services to deliver the ultimate
product to the customer which is also showing the outflow of cash to attract the inflow of cash.
4. Customer Relationship – A company should clarify the type of relationship, it wants to
establish with each customer-segment. Relationships can range from personal to automated.
Customer relationships may be driven by the following motivations:
• Customer acquisition
To bring new customer in the business, it is important to know the how much cost is
incurred in maintaining the service with customer.
Physical Electronics
Earlier transaction depend upon the
working hours of the banks
It eliminates the boundary of time.
Only hard form of cash transaction
possible
Soft form of transaction can be done
through online mode Via Google Pay,
Paytm, QR code scanner and NEFT etc
Cost Incurred mainly to the human
resources in form of salaries, rent of
building etc.
Cost Incurred in maintaining the electronic
equipment’s, like computers, ATMs, debit
card, credit cards and other (apart of salary
and rent)
Update the pass book for balance of the
account and details of transaction
Now, Missed call alert, message alert,
online login portal are enough to the details
of transaction with-out going banks.

6. These kinds of facilities have importance over the physical service of any finance firm and
through electronic medium it is easy to create value of the firm or value proposition.
• Customer retention
• Boosting Sales
Type of customer relationship
• Personal Assistance – this relationship is based on human interaction. The customer has
option to directly communicate to the real representative to get help at the time of sales.
• Dedicated personal Assistance- it is same as personal assistance relationship but the
intensity of creating and maintaining the relationship is more. This is type of relationship
can be easily seen in private banks where managers interact to the important customers
directly.
• Self Service – a company maintains no direct relationship with customers. It provides all
the necessary.
• Automated Services – this kind of relationship is the mixture of self-service and
automated processes. It could be seen at online platform where a customer easily update
their KYC and easily download their bank account transactions.
• Communities – companies are utilizing user communities to build strong relationship with
customer that allow users to communicate their knowledge and give platform to solve the
problem of customers.
• Co-creation – under this, companies build relationship through customers. The experience
of one customer can influence the purchasing ability of other customer by sharing their
views, rating to the product or the service.
To maintain the customer relationship – A company may be in continuous contact with the
customer (post sale service) for the feedback of the customer and aware them by sharing the
new issue of different product and services. For this company need to maintain database of
their loyal customers and may purchase contacts from different telecommunication service
providers. To purchase the database for promoting and maintaining relationship firms need to
spent money (outflow of cash). If the relationships are based on automated process- the online
maintenance cost required which is again the outflow of cash. Take one more example to attract
the travellers - tourism IRCTC spent crores of rupees on the online platform and try to provide
basic necessity during the journey just to earn the revenue (inflow).
5. Revenue Streams – reflects the generation of revenue from different customer segments.
Each revenue stream may have different pricing mechanisms, such as fixed list prices, bargaining,
auctioning, market dependent, volume dependent or yield dependent.
A business model can involve two different types of revenue streams
1. Transaction revenues resulting from one-time customer payments.

7. 2. Recurring revenues resulting from ongoing payments to either deliver a value proposition
to customers or provide post- purchase customer support.
There are several ways to generate Revenue streams
• Asset sale – the most widely understood revenue stream derives from selling ownership
rights to a physical product. Amazon.com, flipcart, Meesho sells books, music,
consumer electronics and more.
• Usage fee – The revenue stream is generated by the use of particular service. The more
a service is used the more the customer pays. A telecom operator, a banking service.
• Subscription fees – This Revenue stream is generated by selling continuous access to
a service. A subscription of newspaper online or offline, a gym subscription etc.
• Lending/ Renting/Leasing – in this revenue stream is created by temporarily granting
someone the exclusive right to use a particular for a fixed period in return of fee.
Example Ola and Uber service provide rental cars, hotels etc.
• Licensing – the Revenue stream is generated by giving customers permission to use
protected intellectual property in exchange for licensing fees. Licensing allows rights
holders to generate revenues from their property without having to manufacture a
product or manufacture a product or commercialize a service.
• Brokerage – this revenue stream derives from intermediation services performed on
behalf of two or more parties. Credit card providers, financial service providers like
agents(mutual funds and other)
• Advertising – this revenue stream results from fees for advertising a particular product,
service, or brand. The newspaper revenue depend upon the advertisement, media
industry are also depend upon advertising revenue.
6. Key Resources – these resources allow an enterprise to create and offer a value
proposition, reach markets, maintain relationships with customer segments, and earn revenues.
Different key resources are needed according the requirement of the business model.
Key resources can be physical, financial, intellectual, or human. It can be owned or leased by the
company or acquired from key partners.

8. Physical Financial Intellectual Human
It includes physical
assets manufacturing
facility, building,
vehicles, machines,
systems, point of Sales
systems and
distribution network.
It includes Cash, lines
of credit, or a stock
option pool for hiring
key employment
It includes brands,
proprietary knowledge,
patents and copyrights,
partnerships and
customer databases.
Every enterprise
require human.
Human resources
are crucial in
knowledge-
intensive and
creative industry.
Like in case of Bank, if the branches of bank is available in most of area, their ATMs services,
availability of cash, online services enhance the brand and the cooperative staff, problem solving
nature of staff enables to create value proposition.
Key resources are also reflects the cash flow of company- banks provide different cards like debit
card, credit card along with different limits. To retain the customers the bank spent money on
technology for the smooth functioning of the bank. Develop different software for robustness of
the banking facility, Provide cafeteria for the customer- these are expenditure (outflow) are just to
earn revenue (inflow), installation of ATMs at different places.
7. Key Activities – every business model calls for a number of key activities. These are the
most important actions a company must take to operate successfully. They are required to create
and offer a value proposition, reach markets, maintain customer relationships and earn revenues.
Like key resources, key activities depending on business model. Key activity of the bank is to
provide cash and accept cash from the customers along with different activities like providing
security lockers, acting as agents, underwriters etc.
Like online shopping sites- their role is to provide platform to different product and service
provider to sell their product and services – by taking some subscription fees from the different
sellers they provide space to the users. These shopping sites have to spend to procure the interest
of the customer and seller to providing the smooth and quality transactions. Like expenditure on
advertisement to remain in the market, provide free delivery with minimum duration with safety.
8. Key partnerships – companies forge partnerships for many reasons, and partnerships are
becoming a cornerstone of many business models. Companies create alliances to optimize their
business models, reduce risk, or acquire resources.
• Strategic alliances between non-competitors
• Coopetition: strategic partnerships between competitors
• Joint ventures to develop new business

9. • Buyer-supplier relationships to assure reliable supplies.
Why partnership?
Optimization and economy of scale – it is almost not possible for any organization to produce
everything. This is the basic form of partnership to optimize the allocation of resources and
activities. It is usually formed to reduce costs and often involve outsourcing or sharing of
infrastructure.
Reduction of risk and uncertainty – Partnership can help reduce risk in a competitive
environment characterized by uncertainty. It is not unusual for competitors to form a strategic
alliance in one area while competing in another.
Acquisition of particular resources and activities – few companies own all the resources or
perform all the activities described by their business models. Rather, they extend their own
capabilities by relying on other firms to furnish particular resources or perform certain activities.
Such partnerships can be acquired knowledge, licenses, or access to customers. A bank, rely on
customer for the fund to deposit and need other customer or business to lend money. To sell their
service bank need clients. Or insurer may choose to rely on brokers to sell its policies rather than
develop its own sales force.
No business can emerge by its own- every business need partners for the proper functioning of the
business. Mobile network operators need help of mobile manufacture and vice-versa. Partnership
provide synergy to the business- Tata Motors partnership with VIVO IPL 2021 association with
BCCI- spending on such activities attract more sales of product.
9. Cost structure – creating and delivering value, maintaining customer Relationships, and
generating revenue all incur costs. Such costs can be calculated relatively easily after defining key
resources, key activities, and key partnerships. Some business models, though, are more cost
driven than others.
Cost driven – it focus on minimizing cost. This approach aims at creating and maintaining the
leanest possible cost structure, using low price Value propositions, maximum automation and
extensive outsourcing.
Value - Driven – some companies are less concerned with the cost implications of a particular
business model design, and instead focus on value creation. Premium Value propositions and a
high degree of personalized service usually characterize value-driven business models. Luxury
cars and luxury hotels with their lavish facilities and exclusive services.
Cost structures can have following Characteristics
Fixed Costs - Costs that remain the same despite the volume of goods and services produced.
Example salaries, rents and physical manufacturing facility, electricity bill, and building rent.

10. Variable costs – costs that vary proportionally with the volume of goods and services produced.
Economies of Scale – Cost advantages that a business enjoys as its output expands. Larger
companies enjoy benefits from lower bulk purchase rates. This and other factors cause average
cost per unit to fall as output rises.
Economies of scope – cost advantages, a business enjoys due to a larger scope of operations. In a
large enterprise, the same marketing activities or distribution channels may support multiple
products.