Having a solid business model at the heart of your organization is a cornerstone of growth and success. It gives your business a direction and strategy to follow. This is why we've compiled this short guide to developing a business model.
Business models - explained
A company's business model refers to a business's plan for making a profit. The idea behind a business model is to give a company direction and a roadmap for targeting a market, expenses, and the products or services it offers. There are different types of existing business models, ranging from advertising-based, subscription business model, franchise business model, direct sales business model, and brick and mortar retail to online retail. Of course, yours could also combine some of these types of business models.
Many companies use canvas templates to understand their business model. This means that the model is laid out in a grid pattern for visual reference. The grid has different sections for eg your business’s value, customers, and resources. These blocks can be used to develop a new business model without being too lost in the multitude of aspects that a successful business model needs.
Value: This block lets you define your value and what makes your business stand out. Defining a value proposition is key for successful businesses - link yours to your long-term goals.
Business activities: This block helps you lay out the actions you are taking for your company to succeed. This can include eg product development to employee training.
Relationships: This helps you define the relationships you envision having with your customer segments - whether it is more personal or automated.
Customers: You can use targeted customer segments to develop target personas for potential buyers. You can use different metrics, eg demographics or need.
Communication channels: Use this part of the canvas to lay out how your business plan thinks of customer channels. This could be eg websites or social media - whatever you decide on, communication with customers is key.
Expenses: This block helps you look at all the costs required to keep your business model running. This can include eg advertising, maintaining relationships, and creating valuable products.
Revenue: This block helps you define the different revenue streams you are expecting to generate. This section will be scrutinized by investors.
Resources: This is where you lay out the resources required for your business's daily operations. This doesn't stop at capital, but also includes physical property, online spaces, and intangible assets.
Partners: Define what suppliers you will use and any strategic partnerships lined up.
Innovation is key and you need to be comfortable with how your business idea is incorporated into the model. You can refer to each area of the business model canvas when designing your framework. By fitting your model into this user-friendly template, you can quickly communicate your business model to others. It’s a useful visual aid for board meetings, investment presentations, and company workshops alike. It may be helpful to look at other companies' business model examples to see innovative business models in action.