Make a Business Model: How to stand out?

The business model – or economic model – allows you to describe the operating logic of your project and to explain how your company will create value for your customers, deliver this value and return, capture the value. Why is it so important to define your business model? Does the notion of business model replace the notion of strategy? What is the difference between the business model and the business plan? What are the different types of business model? Nathalie Carré, Entrepreneurship Project Manager CCI France, we provide shed light on the importance of the business model and gives us the 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 creativity of the entrepreneur. It allows the latter to fix his project. This is the prerequisite for the market study, that is to say that the latter will allow the business creator to validate and study the assumptions indicated in his business model. The business model also serves to convince the people concerned 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 competition?

What will be its commercial policy to reach its target?

What are its main financial indicators?

What are the means to launch the activity?

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

Examples of business models

There are different examples of business models today, depending on the nature of the company, its objectives and its resources, including:

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

The model Freemiuma recent web model, which appeared in 2006, such as free applications and newspapers.

The model of the subscription where the income is generated through a fixed term subscription to magazines for example.

The model Low cost which is based on cost control at each level of the chain for lower prices than the competition.

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

What is the 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 entrepreneurship professionals, published in 45 countries and translated into around thirty languages.

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

Segmented clientele : Identifier of targeted customer segments. Remember that a customer segment is a homogeneous group of people or companies who have the same needs, whom you can serve via the same channel, who will be sensitive to the same communication, who 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 compared to the competition? What product and/or service association do we indicate for each targeted customer segment?

Distribution channels : How do you intend to sell your product/service? How are you going to help your customer choose your products over those of the competition? Distribution channels can be direct, such as selling on the internet, or indirect, such as selling to wholesalers.

Customer relationship : What type of relationship will you have with your target? How will you communicate with your potential or current customers? Are your customer relationships personalized or automated?

Income stream : How will you create your revenue streams? How will the money arrive in the coffers of the company? Will customers pay you by subscription, by plan, by auction or on a one-off basis?

Key Resources : What are the human, financial and material resources essential to the launch of your project? Whenever you think of a resource (equipment, premises, machines, etc.), ask yourself the question to find out if this resource is really essential for your activity. If so, this is indeed a key resource. These resources must generate the least possible charges and costs.

Main activities : What are the key activity(ies) of your company?

Key Partners : Do you need external service providers to promote your product/service, to complete your service offer? Who are the key suppliers and distributors without your business can’t persist?

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

The business model innovation journey

  • Write your business model Canvas
  • Study trends, context and environment
  • Identify your customers
  • Define your value proposition
  • Challenge your business model
  • Find an innovation
  • Adjust your business model
  • Study 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 not to make?

  • The notion of business model does not replace the notion of strategy. The business model makes it possible to serve a strategy defined beforehand.
  • Do not confuse business model and business plan. The business model describes the overall logic between the service offer, the customers, the revenues, the partners of the company… The business plan – or business plan – is the concrete, operational and quantified implementation of the business model .

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