What building blocks do you need for your business model?

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Date: 6 July 2020

Two businesspeople build a tower of wooden blocks

Starting an enterprise is a huge undertaking. There are numerous aspects you need to consider. But, take it from somebody who been there before: it may seem arduous, but formulating your business model should be one of the first things you do before starting your business.

Business models are simple plans that enable your business to operate successfully. There are many types of business model. Together these types can be mapped onto a physical chart called an enterprise model canvas. The business model canvas can be split into nine segments:

  • Customer - This part describes the groups of individuals your business intends to target and serve. Clients are at the heart of all enterprise models. Without valuable clients, your business cannot survive.
  • Client relationships - This section should describe the kind of relationship you want to build with each client segment. Bonds can vary from individual to automated. So, how do you intend to keep solid relationships with your customer segments?
  • Value propositions - Your value proposition refers to the products your business is producing and who you are creating them for. Your proposition should fix a client's issue or satisfy a client's needs. This segment should explain why your products are of value to your customers. It's the main rationale why clients will choose your business over another.
  • Channels - Your channels are the avenues you use to deliver your products to your customers (for example, direct sales via a physical store, ecommerce or via a sales agent). Learning how to reach your clients is essential to your business.
  • Income streams - Your income streams are how you will make cash from your value proposition. It is not about how you actually value your product but how you will capture your revenue.
  • Essential resources - These are the essential assets you need for your business model to work. They allow your business to generate and provide a value proposition and make profits.  Essential resources can include physical assets (such as a factory to produce the goods), monetary resources (eg start up finding), technological resources (for example, your ecommerce store or technical research that enables innovation) or human assets (your employees).
  • Essential activities - Your essential activities detail the most significant actions your businesses must perform to make your enterprise model work. Every business model demands several vital operations. Your operations are what you require to become an expert and succeed in your business.
  • Essential partners - This segment details the people and organisations that will help you expand your business. Firms create alliances to get access to resources, to minimise risks or to optimise their enterprise models.
  • Cost structure - Your expense structure are the costs you will incur to keep your enterprise running. It is crucial you consider all costs, or it's likely you will underestimate the prices you must charge and the volume of sales you will need in order to become profitable. Therefore, you must think beyond the obvious expenses like your rent, materials, and payroll to ensure you include everything. 

Producing and delivering a noteworthy product or service, generating income, and maintaining client relationships will all incur costs. You can calculate such costs quickly once you have established your essential resources, key partners, and vital activities in your business model.

Whether you are just starting out or you're an established company: a well-thought-out business model can enable you to reach your goals.

Copyright 2020. Article made possible by Bijoy Hembram, Link Builders Team

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