Create a business model: How do you stand out?

The business model – or the economic model – allows you to describe the operating logic of your project and explain how your business will create value for your customers, deliver that value and in return capture value. Why is it so important to define your business model? Does the concept of business model replace the concept of strategy? What is the difference between the business model and the business plan? What are the different types of business models? Nathalie Carré, Entrepreneurship Project Manager CCI France, brings us highlight the importance of the business model and gives us characteristics of the latter.

Why is it so important to define your business model?

Born at the same time as the internet bubble arrived, the business model is a support for the entrepreneur’s creativity. It allows the latter to organize his project. This is the prerequisite for the market research, that is, the latter will allow the business creator to validate and study the assumptions stated in his business model. The business model also serves to convince the people affected by the project of its added value. It answers the following questions:

What does the company sell?

What is the added value of the products and / or services offered compared to the competitors?

What will its commercial policy be to achieve its goal?

What are its main financial indicators?

What are the means to start the activity?

In summary, it answers the question: how to make money?

Examples of business models

There are various examples of business models today, depending on the nature of the business, its goals and resources, including:

The models Auction which allows customers to set the price of the product or service themselves.

The models Freemiuma newer web model that appeared in 2006, such as free applications and newspapers.

The model of the subscription where the income is generated through a time-limited subscription to, for example, magazines.

The models discount which is based on cost control at each level of the chain at lower prices than those of competitors.

The payment model to use or access adopted by more and more cafes.

What is Canvas’ business model?

In 2004, Alexander Osterwalder, researcher, Swiss entrepreneur chose the business model as the theme for his thesis. This thesis became a book: Business Model: New Generation, co-created by more than 400 entrepreneurial professionals, distributed in 45 countries and translated into about thirty languages.

The Canvas business model is made up of 9 blocks that describe the finances of a company and cover the 4 main dimensions of a company: customers, supply, infrastructure and financial viability.

Customer segmentation : Identify target customer segments. Remember that a customer segment is a homogeneous group of people or companies that have the same needs that you can serve through the same channel, that will be sensitive to the same communication, that will agree to pay the same price, and with whom you will have the same type of relationship.

Value proposition : What will your company offer your customers? What is your added value? What are your strengths relative to your competitors? What combination of product and / or service do we offer for each target customer segment?

Distribution channels : How do you intend to sell your product / service? How will you help your customer choose your products over the competition? The distribution channels can be direct, such as sales on the Internet, or indirect, such as sales to wholesalers.

Customer relations : What type of relationship do you want for your goal? How will you communicate with your potential or current customers? Are your customer relationships personal or automated?

Income flow : How will you create your revenue streams? How does the money get into the company’s coffers? Will customers pay you by subscription, according to plan, at auction or on a one-time basis?

Key resources : What human, financial and material resources are essential for the launch of your project? When you think of a resource (equipment, premises, machinery, etc.), ask yourself the question to find out if that resource is really crucial to your activity. If so, this really is a key resource. These resources should generate the least possible fees and costs.

Main activities : What are your company’s key activities?

Key partners : Do you need external service providers to promote your product / service, to complete your service offering? Who are the main suppliers and distributors, without whom your company can not survive?

Cost structure : What are the different types of costs for your project? Fixed costs, variable costs, most expensive resources …

The business model’s innovation journey

  • Write your business model Canvas
  • Examine trends, context and environment
  • Identify your customers
  • Define your value proposition
  • Challenge your business model
  • Find an innovation
  • Adjust your business model
  • Examine your competition
  • Adjust your business model
  • Test your business model with your customers
  • Adjust your business model
  • Write your business plan

What are the mistakes one should not make?

  • The concept of business model does not replace the concept of strategy. The business model makes it possible to operate a strategy that is defined in advance.
  • Do not confuse business model and business plan. The business model describes the overall logic between the service offering, the customers, the revenue, the company’s partners … The business plan – or business plan – is the concrete, operational and quantified implementation of the business model.

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