Cash Flow CanvasEstimated Reading Time: just 3 min

Revenue Streams and Cost Structure blocks are fundamental in the Business Model Canvas since they determine if the business is profitable.

Cashflow Canvas is a financial tool that helps a company to design and challenge their business’ profit model by:

  • Defining an operating budget
  • Forcing to validate and adjust the business model from a financial standpoint

Cash Flow Canvas

Cashflow Canvas is based on 8 blocks

  1. Revenue Streams: this block focuses on how the business generates revenues

Some useful questions for filling this section are

  • How does the company generate revenues?
  • What products and services do our customers pay for?
  • How are they sold?
  • How are the customers paying?
  • How would the customers prefer to pay?
  • How much does each Revenue Stream contribute to overall revenues?
  1. Direct Costs: this block focuses on the company’s Cost of Goods Sold (COGS)

COGS are the direct costs attributable to the production of the goods sold in a company.

They include:

  • Materials
  • Direct Labor Costs

They exclude indirect expenses as distribution costs and sales force costs

The easiest way to calculate COGS is by using the formula

COGS = Beginning Inventory + Purchases during the period – Ending Inventory

Some useful questions for filling this section are

  • How much is the Cost of Labor?
  • How much is the Cost of Direct Materials?
  • How much is the Cost of Manufacturing Overhead?
  • How are the Direct Costs associated with each Revenue Stream?
  1. Price Points: this block focuses on where the company’s product and services stand in relation to COGS and competitors

Some useful questions for filling this section are

  • What is the Target Margin compared to COGS?
  • What is the Actual Margin compared to COGS?
  • What is the company’s Positioning compared to competitors?
  • Is the Positioning enforcing the company’s Unique Selling Propositions?
  1. Mapping Assumptions: this block focuses on the business’ characteristics as well on the boundary conditions

Some useful questions for filling this section are

  • Is there any seasonality? How is it?
  • When will revenues be received?
  • What are the trends inside the industry?
  • What are the expected trends for the company’s revenues? Why?
  • What are the expected trends for the company’s COGS? Why?
  1. Team: this block focuses on the skills needed by the company and especially on the costs related to them

Some useful questions for filling this section are

  • What skill-sets does the business require?
  • Does the company has these skills? Is there a need for outsourcing?
  • How much do the Salaries cost?
  • What are the Benefits and how much do they cost?
  • Is there an Employee Welfare? How much does it cost? What are the Source Deductions?
  • How will the team be recruited and trained?
  • How much is the cost for Recruiting?
  • How much is the cost of Training?
  • How much is the cost for Retention?
  1. Space + Operations: this block focuses on how to run physical activities

Some useful questions for filling this section are

  • What are the company’s rents?
  • What are the operational costs? (for instance: telephones, internet, insurance, bank fees, vehicle expenses, office supplies, courier and postage, security, storage, hardware/software, equipment, maintenance permits, licenses, reports/filings)
  • How much is the DPO (Days Payable Outstanding)?
  1. Marketing + Sales: this block focuses on the costs related to Marketing and Sales

Some useful questions for filling this section are

  • What’s the cost of the Communication Plan?
  • What’s the cost of PR?
  • What’s the cost of Promotional Material?
  • What’s the cost of running the company’s Website?
  • What’s the cost of CRM?
  • What’s the cost of Discounts and Promotions?
  • What’s the cost of Commissions?
  • How much is DSO (Days Sales Outstanding)?
  1. Additional Expenses: this block focuses on the outstanding costs and unpredictable risks that may occur. To cover them the company will need some Contingency Funds.

Some useful questions for filling this section are

  • How much will Travel expenses be?
  • How much are the company’s Membership Dues?
  • How much are the company’s Association Fees?
  • How much are the expenses for Loans (interest and principal)?
  • What could Major Emergencies be?
  • What Large Expenditures may occur?
  • What Credit Protection may the company need?

APPLICATIONS, ANALYSIS & NEXT STEPS

Cashflow Canvas does a good job by helping the company figure out if the business is profitable so that it will gain a competitive advantage by making informed decisions.

Anyway, the most core application of the Canvas is to be the baseline for a Brainstorming and to ask at least quarterly:

  • Does it make sense?
  • Could it be better?
  • Does the rest of my team understand and agree? Are there additional ideas?
  • Did the competitive environment change? Does the company have/maintain a long-term competitive advantage?

The output is a list of ideas/changes to be tested and implemented for a continuous improvement of the company’s profitability.

Nicola Zaffonato Administrator

Business Strategy | Product Marketing | Executive Master eCommerce Management | Business Innovation Master | MSc

I am driven by my personal growth and of people/contexts that surround me.

I followed a professional path in Valentino Fashion Group and Luxottica during which, thanks to the ability to understand different businesses and interests, I was able to succeed in Operations, Merchandising and Retail.

These organizations have exploited my ability to mediate and translate needs/constraints into practice, assigning me to Project Management roles.

Luxottica relied on my ability to analyze, to anticipate things and to imagine/implement solutions by appointing me in Supply Chain Management department and assigning me to the Product Management of IoT solutions for Anti-counterfeiting and Retail digitalization.

During this professional path, I also developed my leadership by managing teams to build Processes, Organizations, Systems and Governance Tools.

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