But wait! What exactly is a Business Model?
It is an exercise that’ll help you decipher clearly and categorize various processes in an orderly manner to be able to launch any new business successfully.
To help you build a robust business model, we’ve broken it down in 9 categories:
1. Customer Segment: Who are your real customers? Who will use your product or service? The ones who believe your product solves their problem.
2. Value Proposition: This is the most critical part of your business. What value are you offering to your customers, so they choose your solution over all others?
3. Channels: This category is about reaching your customer most simply and cost-effectively. Have you decided how and where can you can get prospects for your business? It will directly determine the operating cost for your company hence determining the margin of profit.
4. Customer Relationships: Your job as a business owner does not end at launching a product or service. It is a success only if you can get many customers and retain them while adding other new customers. Building a customer base and maintaining an excellent relationship with them is crucial to your business and the key to it understanding the wants, needs, and desires of your consumer perfectly.
5. Pricing Strategy: How will you price your product or service for your consumer? Are you offering a unique solution with no competition? In this scenario, your pricing strategy will be very different from your pricing strategy when dealing with a market with similar products.
6. Key Resources: What are the resources you have chosen that will enable you to deliver your product or services to your target audience? What are the resources you’ll use to connect and maintain relationships with your customers regularly?
7. Key Activities: It includes business processes such as marketing, which will help you reach the eye of the customer. Financial activities will help you understand the cash flow of your business and take into account the profit or loss you’re making against your operating cost. These activities have a ripple effect on all other aspects of your business.
8. Key Partnerships: No Business can work in isolation. If you have a product, you will need to work with manufacturers to obtain materials to create the product, and if you’re offering a service, you will require a trained sales personnel to present the same in front of your target consumers. There are multiple departments behind a successful product. You will have key partners who will provide their expertise so you can deliver the best offering. Who will they be? Have you had talks with them? What resources will they provide? How will they contribute to your success story? What’s in it for them?
9. Cost Structure: One of the most critical parts of this entire exercise is the cost of your offering. What is the price you are incurring to make your product accessible to the consumer? Is your margin enough for you to build a sustainable business if not a highly profitable one? A low-cost, high price business is the dream for any business owner, but to translate the cost into reality is very difficult.
Answer the above questions in the box below in context to your business to see if you’ve created a profitable business model for your product or service: