In our previous post (Read Here), we talked about an idea and idea creation and how ideas are fundamental to the development of any business. In today’s post, we will be exploring business model moving from idea to a viable business which is a big part of business with a purpose.
A business model is a plan for the successful operation of a business, identifying sources of revenue, the intended customer base, products, and details of financing.
Understanding the problems you are trying to solve for your customers is one of the biggest challenges you will face when starting a business. The customer is always right and they need to want what you are selling and your product has to be able to solve their real problems.
It is one thing to ensure your product fits into the market, it’s another for you to figure out how you will make money and this is why there is need to understand your business model. At its core, your business model is a description of how your business makes money. It’s an explanation of how you deliver good value to your customers at an appropriate cost.
The hands-on tool to develop a good business model is called the business model canvas.
The Business Model Canvas (BMC) gives you the structure of a business plan in a more simplified form. The elements of a business model canvas are.
- Customer Segments: Who are the customers? What do they think? What are their values, what do they See? Feel and Do? This helps you to define the kind of people you will want your product or service to serve.
- Value Propositions: What’s compelling about the proposition? What will make customers buy or use your product or service? In a single statement, you should be able to communicate the value your business has to offer.
- Channels: how do you get your products and services to your customers? How are your propositions promoted, sold and delivered? This will help you in defining what ways to get your business to your potential customers.
- Customer Relationships: Now that you know your customers and how to reach them, you need to figure out how you will interact with your customers through their ‘journey’? A lot of business do not sustain customer relationships. After few years of good customer service, it begins to fade. It’s good to develop a plan to keep your customers happy as long as your business exists.
- Revenue Streams: How does the business earn revenue from the value propositions? This is very important. This is defining how your business generates income either by a sale of product or provision of a service.
- Key Activities: What uniquely strategic things does the business do to deliver its proposition? Here, you have to Cleary identify and define the processes of your business operations.
- Key Resources: What unique strategic assets must the business have to compete? What do you for your business now to succeed, it could be a physical asset like land, machinery or human assets or intellectual assets, and it could be your social coverage. What do you have that can make you get started and have a good competitive advantage.
- Key Partnerships: What can the company not do so it can focus on its Key Activities? This will help the company to leverage the services of others who do them professionally hence securing good partnerships.
- Cost Structure: What are the business’ major cost drivers? How are they linked to revenue? Define all your cost analysis to see how much you charge for your services and what you will gain from it.
As you can see, a business model is simply an analysis of what costs and expenses you have and how much you can charge for your product or service.
The success of a good business model is that it gets more money from customer’s patronage than it cost to make the product. Meaning you can have a good profit margin.
The success of a good business model is that it gets more money from customer’s patronage than it cost to make the product. Click To Tweet The business model canvas helps you with defining your idea, improves your clarity and focus on the things required to help your business growth. Click To Tweet
Take out time to develop your business model using the business model canvas and you can share the email below for review.
Have a great week!
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