Starting a Business and the Importance of Business Models

When it comes to building a business, one has to be very deliberate about the process. the day you get your great idea is only a first step towards the success or failure of that business.

When sharing your Ideas with investors, friends or persons you wish to partner with, some ask about your business plan, and even more in recent times we hear talks of the business model. studies have shown that instead of writing a lengthy business plan (usually takes days to produce) focus on building and testing your business model as it is the most efficient way to think about all the pieces of a business.

A business model is best presented using a business model canvas which will illustrate how your company/business creates, captures and delivers value by presenting the interactions between the different parts of the company.

Let's break these down briefly;

1) Value proposition:

What are you building and which needs are you meeting or what problem are you solving for who?
its not really about the great features of your product or service but the solution it is bringing.

2) Customer Segments:

Who are my customers and why would they buy/pay for my product/service.
It is important to know also that the customers do not exist to buy, but you (the business) exists for them. Therefore you need to find out who your customers are their demographics, social characteristics, archetype or persona, etc. with reasons why they would pay, you must be very conscious of this and you should observe how it changes when the business starts as you don't always get this 100% at the beginning.

3) Channels:

How will you deliver/convey the value to the consumers. or simply how does your product or service get to your customer. Pre 1990s it was primarily via physical medium, today we have virtual channels, web, mobile, cloud, etc. So you need to know how will I sell or distribute.

4) Customer relationships:

How do I get customers? How do I keep them? and How do I grow them?
What do I do to get my customers to spend more or to come again.

5) Revenue Streams:

What is the strategy to capture value? How do you actually make money?
Will you do Direct sales, Freemium model (give them free and use other means to earn), licence or Subscription model, thereafter the actual pricing comes in.

6) Key Resources:

What are the most important assets you need to make the business model work?
It could be financial; that is capital or line of credit, etc.
It could be physical; specialized machinery, vehicles, etc.
It could be Intellectual; patents, customer lists, etc.
It could be human; Designers, Developers, Scientists, etc.

7) Key partners:

Who are the Key Partners and Suppliers needed to make the business model work?
Here you need to know what you are acquiring from them (what they bring to the table).
What activities would they perform and when? It is important to note that the partners you need at the beginning of a business may not be the same as the ones you will have 5 years down the line. So you start with the ones absolutely needed now.

8) Key Activities:

These are the most important things the company must do to make the business model work. Production, Supply chain, problem solving, escrow, etc
These are the key activities your company has to be good at.

9) Costs and Expenses:

What is the cost to operate the business model?
what are the most important resource we need to spend on? what key resource are most expensive?
Are there fixed cost? variable cost? economies of scale? etc.

here's a great video explanation of a business model...

It is important that as you start your business you fully plan using a business model and remember the saying about how those that fails to plan, they plan to fail.
I hope this was helpful.

I remain your local blogger who found his STEEM!