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How to develop a Business Model?


How to develop a Business Model?

The same products, services, or technologies can fail or succeed depending on the business model you choose.


Great Business Model is based on developing qualities that helps business succeed. These qualities include: finding high-value customers, offering significant value to customers, and delivering significant margins. Great Business models also avoid the factors that can undermine the business activities. These factors include: Difficulties in satisfying customers, trouble maintaining market position, and problems generating funding for growth.
• Finding high-value customers:

High value customers are deemed to meet the following criteria: are easy to locate, allows business to charge profitable prices, are willing to try business’s product after only small amount of marketing expenses, and can generate enough business to meet one’s sales and profits.

• Offers significant value to customers:

Significant values to the customers can be offered in the following ways: providing unique advantages in features and benefits, focusing on better distribution through retail and distribution, providing more complete customer solutions through alliances with other companies. Also providing lower priced product/services through manufacturing efficiencies, providing other special features such as faster delivery, broader product line, and customization offers.

• Delivering significant margins:

Higher margins come from having a product that can be made from an improved process or by having features that provide significant value and allow you to charge more. A business can achieve high margins with other tactics, including the following: using more efficient distribution channels, having and industry-leading lean manufacturing process, offering complementary products and services for a specific revenue without increasing its cost.

• Provide for customer satisfaction:

Some of the ways through which businesses can provide high customer satisfaction include: extensive technical support, extensive customer service, and high warranty costs.  The most common way of dealing with this activity is by outsourcing it to the most reliable companies.

• Maintaining market position:

A good business model uses its resources to improve its market position, adding new products, features and customers or expanding into new applications.  A business must determine the changes in market condition so that they can apply right strategies so that they can maintain market position.

• Funding the business:

Funding is available only for the right plan and the right model. A business will find money available only if their Return on Investment is right and if a business has financial leverage, which means their initial investment will allow you to double or triple sales without requiring any more funding. Thus a Business must develop proper financial goals and objectives in order to fund a business in a right manner.

Components of Business Model Canvas:

business model-canvas

• Key Partners:It includes the following:

Who are our key partners? Who are our key suppliers? Which key resources are we acquiring from our partners? Which key activities do partner perform?

• Key Activities: It includes the following:

What key activities does our value proposition require? Who are our distribution channels? How is our relationship with customers? What are our Revenue streams?

• Key Resources: It includes the following:

What key resources does our value proposition require? Who are our distribution channels? How is our relationship with customers? What are our Revenue streams?

• Value Proposition: It includes the following:

What value do we deliver to our customers? Which one of our customers’ problems are we working to solve? What bundles of products and services are we offering to each segment? Which customer needs are we satisfying? What is the minimum viable product?

• Customer Relationships: It includes the following:

How do we get, keep, and grow customers? Which customer relationships have we established? How are they integrated with the rest of our Business model? How costly are they?

• Channels: It includes the following:

Through which channels do our customer segments want to be reached? How do other companies reach them now? Which ones work best? Which ones are the most cost efficient? How are we integrating them with customer routines?

• Customer Segments: It includes the following:

For whom are we creating value? Who are our most important customers? What are the customer archetypes?

• Cost structure: It includes the following:

What are the most important costs inherit to our business model? Which key resources are most expensive? Which key activities are most expensive?

• Revenue streams: It includes the following:

For what value are our customers really willing to pay? For what do they currently pay? What is the revenue model? What are the pricing tactics?