How to design a business model? Describe your idea as a business

Once you have decided what business to start you need to organize that idea. Maybe your idea sounds great, but you still need to find out if it has possibilities to work out. The best way to organize your startup idea is with a business model.

I know, this sounds a little hard to do and very boring, but it’s not what you think. Business models can help you describe your idea and see if it is sustainable in the future since you can discuss different options to optimize your business. This will not only enable you to see better if the profits exceed your expenses but also value creation. Besides, there’s good news, you no longer need to write a 20-page-long  report. There’s a very simple way to make your business model and this tool is essential for every entrepreneur who needs to put the ideas in order.

This instrument I’m talking about is the Business Model Canvas designed by Strategyzer AG (Strategyzer.com). This is a business model template, which means that it is a standard model you can fill up with your startup’s characteristics. In order to better understand it, get familiar with the empty chart and then let’s understand what each section actually means.

Business Model Canvas

Business Model Canvas by Strategyzer AG (Strategyzer.com)

This is the template you should fill with your startup’s information. It is composed of 9 areas that will help you understand your business organization, besides mapping your entire business model in only one image.

Let’s analyze in depth each of the sections from the canvas.

Customer Segments

This is your market niche or your target audience and there’s a post on how to segment the clients. These are the people you will be offering your product or service. You will create value for them.

Value Proposition

This is what will differentiate your idea from the competition. Why should people buy from you? What features makes your offer unique and highly valuable? Is this solving people’s problems and satisfying their needs.

You will have a different value proposition for each of your segments.

Channels

The ones you are using to communicate with your audience, to deliver your products and the advertising to announce your startup. These are the touch points you’ll use to interact with your customers.

Customer Relationships

Which is the type of relationship you establish with your customers? These are the monetary resources and time you are employing to establish this relationship between the brand and the clients. The effect that the business will cause within your clients.

Revenue Streams

These are the ways in which the business is getting paid. Similar to the post about the income streams you can find the Online Businesses section. These are the real and tangible monetary contribution that people make.

This makes clear through which pricing mechanism is your startup capturing value and the payment methods used by your audience.

Key Resources

The most important assets that you will need which are indispensable. Describe the infrastructure you will need in order to create, deliver and capture value.

Key Activities

These are the strategies and tasks that will enable you to offer a product. These will help you create value.

Key Partners

In this first section, you should list the strategic partners that will help your business achieve its own goals. For example, the suppliers, possible partners or any expert that could work with the startup. It could be an influencer you have networked with.

These are the people who will help you leverage your business model.

Cost Structure

Finally, you have the cost structure of the business. This will enable to optimize and minimize as much as you can the costs. Since you need to create an efficient and scalable business model through time.

Do you really need a business model?

It’s not true that you can’t start without one, but that doesn’t mean it’s not helpful. Keep in mind that this will help you see which parts of your startup need an improvement and if you can profit with it. You can have a deeper look on your value proposition. This will help you answer the question: “Why would people choose to buy from me instead of the competition?”.

Finally, this is not a hard thing to do and it has so much value despite its simplicity. Besides, according to Strategyzer, this can help not only startup entrepreneurs but senior executives as well.

In order to apprehend these new concepts, which means to internalize this knowledge, here you have Strategyzer’s video explaining the canvas:

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