We published how to develop and validate your business idea on this platform. If you missed it, please read up before this. It deals with how you can move from the idea stage to the next stage. Once your business idea is validated, the entire business must be looked at as a body. That means that every part of the business has to function properly for the whole to work. This you can achieve by creating a business model and one template that works for most businesses is the Business Model Canvas developed by Alexander Osterwalder.
The business model is how you create value as a start-up business and deliver that value to your customers. It is a chain that is entwined and must be completed. Like I mentioned, one of the templates used to achieve this process is the Business Model Canvas.
Let’s create your business model for you today
The business model canvas is made up of nine (9) basic building blocks. These nine (9) building blocks of the business model canvas will help you understand your business.
Over the years when people talk about their organisation, you hear them say things like the engineering department, sales department, marketing department etc. The way businesses are run has evolved.
Organisations are no longer looked at as department by department but as an entity. The Business Model Canvas helps you understand how the organisation fits together. It brings to your knowledge how the pieces are interlocked and related. It is just like the human body, when any part is in pain, it affects the functioning of the other parts.
Uses Of The Business Model Canvas
- Understand your current business and make changes for growth
- Develop an entirely new business
- Help your team buy-in and understand your business
- Team on-boarding
- Mergers and acquisitions
There is no limit to the use of the business model canvas. It is used by large organisations like Apple. The business model canvas is a tool that a small two-man start-up starting from the garage can use.
Nine Building Blocks Of The Business Model Canvas
This is the value you intend to create. You should either be creating a value or solving a problem. You must ask yourself these questions– What value am I creating? What problem am I solving? It is not about your technology. Your technology means nothing if you are not solving a problem.
You don’t just have it in your head that you are creating value. You have to step out of the building and get information from your customer segment. Be sure that they see what you are offering as value and that they are willing to pay for it.
The value that I am creating, who am I creating it for? Am I going to attend to the mass market or niche market? The customer segment and the value proposition work hand in hand. You must be relieving your customers pain with your value proposition. In other words, there must be a gain for the customer. Remember, if there is no value, the customer will not be willing to part with their money.
How will I deliver my value to my customer segment? There are different channels of sale – traditional and virtual. Tailor your channel to your market and also use multiple channels at the same time. Channel here does not just refer to the distribution, it is about all the ways you can reach your customers. Do you sell through your website, social media, or physically? All the means you deliver your value to your customer is defined as a channel.
How do you get, keep and grow your customer base? How do they behave? Which means of communication is best applied? Will they need a personal assistant or will they be fine applying the Do-It-Yourself (DIY) technique?
You also want to think about how you retain existing customers. The goal of every business should be to constantly reduce the cost of acquiring customers as the business grow. If the cost of customer acquisition remains unchanged or increases as the business grows, then there is something fundamentally wrong with the entire value chain of your business.
How will your customers pay for the value you are delivering? Which means will you apply to get your payments? How do you ensure that there is steady inflow of income that will exceed expenses?
The mistake some businesses make is not having a valid revenue model right from the beginning of the idea stage. You have to decide from the beginning if you are going to be an NGO or a profit-making business. Even NGOs have sources of revenue stream.
This can be infrastructural, physical, intellectual or human depending on your industry. They are the important resources without which you cannot run your business. What you consider a key resource will also be dependent on your industry.
For instance, for Uber, their key resource will be their technology and for ReDahlia Workspaces, our key resource will be electricity and the internet because, without electricity and the internet, we are not solving the key problem we set out to solve. It is also advisable to own your key resource as it will give you a competitive advantage.
These are the people you need to be successful. They have to be delivering value or absorbing risk for your business. Any partner who is not absorbing risk or delivering value better than your business can, should not be considered as a key partner.
People start out thinking that they need partnerships from day one. The truth is, you need different kinds of partnerships at different stages of your business. Always ensure they are strategic partnerships and that you are getting value from them.
These are the activities that need to happen efficiently on a regular basis for your business to be successful. The type of activity will also depend on your industry. The App has to be working optimally for Uber to function daily, ReDahlia has to have constant light and internet to function as a co-working space in Nigeria. Entrepreneurs.ng have to deliver content and solutions to entrepreneurs to function daily.
The key resources, key partners and key activities make up bulk of the cost of a business. These consists of fixed costs, overhead costs, variable costs, etc. To run a lean start-up, you need to understand the cost elements of your business and know which ones are important and which ones are unnecessary. A good business model will always consistently reduce cost and increase revenue.
You may have a great product but someone who has a winning business model with a ‘not so great’ product will win you any time.
Let’s create your business model today.
This is a transcript of one of the sessions I discussed on Instagram.com/redahliabiz. Our live videos and audios are free relevant marketing tools for your business. These and lots more (interviews, photoshoots, video shoots, etc) you should do at ReDahlia Workspaces. Additionally, we help you register your business so, pop into our office at 43B Emina Crescent, off Toyin Street, Ikeja. Book a FREE tour of our facility today.
1 thought on “Business Model Canvas – A Tool For Designing Business Models”
Thanks so much, this is very helpful and detailed.