What is business model and how to start with it
During the time that you consider tool like Business Model Canvas, you will get a sense of exactly how to use it with elegance and precision. And as you become more confident of the tool you use, you will realize just how easy it is to generate spontaneously business models. So that, when you have mastered them completely, you will become an unstoppable in business development.
I learned that one of the best tool for preparing business model in the business sector was Business Model Canvas. Being in internet marketing, industry that was changing daily, I started to use Business model canvas in 2011/2012 substituting the business planning process that was too robust. The Business Model Canvas is a strategic management and lean startup template for developing new or documenting existing business models. It is a visual chart with elements describing a firm’s or product’s value proposition, infrastructure, customers, and finances.
A business model (term coined in 2010) is an “abstract representation of an organization, be it conceptual, textual, and/or graphical, of all core interrelated architectural, co-operational, and financial arrangements designed and developed by an organization presently and in the future, as well as all core products and/or services the organization offers, or will offer, based on these arrangements that are needed to achieve its strategic goals and objectives.”
By my opinion business model is the simplest way to define how the business is functioning, where the transaction is happening and who is benefiting from the businesses (customers, partners etc.).
Starting with the Value Propositions field which is on the middle of the sheet, first you should define the basics of your business: what you are doing for your customers? What is you core business? What value you are proposing to your customers.
Your business is not focused if you didn’t defined your Customer Segments. This is also essential part of the Business Model Canvas. Define your customer segment. Can you name your customer? Can you say his age, sex, job, location etc.?
Yes, now you know your customers, but the story don’t end there. Customer Relationships is the most crucial part of the sustainability of your business. How you maintain the relations with your customers, making them to return to buy your services or products, that is the basis of successful business model.
Distribution is also important part of the business, especially if there is some innovation in this segment. You need to define the Channels of delivery of value proposition to the customers,either through own channels or partners channels.
Yes, now you are providing your services/product to the segmented customers trough channels. But the real question is “How do you make the money?”. Defining Revenue Streams is crucial financial part of the Business model. Yes, there are different financial models for your business, but you must to chose one or two to establish the basis of the cash flow of your business.
Right side of the Business Model Canvas is mostly market (demand)oriented, but the left side is your real business. Most of the businesses require partners to succeed in the delivery of their value proposition. Therefore definition of the Key Partners is again important part of the business. And yes, partnership is exactly as marriage or to be more correct marriage is a form of partnership :).
Just do your job! What are the Key Activities of your business to make the magic happen? Yes, everything is important, but what are the key business activities that are making or braking your business? Here focus is very important!
You need also to define the Key Resources of your business. Sometimes if you provide services, key resources can be your lead employees and the human resource capital. If you define this, you will know what not to lose in the working process.
At the end, but not the last, there is the Cost Structure of your business. Defining your costs, or the correlation with the scale of production/sales will define the profitability of your business. Yes, some of the biggest companies were not profitable in the first years, but if you do not have business angels and other long term investor, it will be good to calculate the numbers.
And that’s it. You needed just 10 minutes to read the text, 30 minutes to learn Business Model Canvas and couple of hours to develop yours. This will help you to clear up some noise regarding business modeling and planing and provide ground for doing your business!
