Business Model Development

Business Model Development

Business model development is the process of designing and refining the framework that outlines how a company creates, delivers, and captures value. It’s the blueprint that guides a company’s operations, defines its revenue streams, and determines its sustainability and profitability.

Business Model Canvas: https://cdn.prod.website-files.com/64830736e7f43d491d70ef30/65d36b6f31059e94e2ff517c_A3-Business%20Model%20Canvas-2023.pdf

Business Model Canvas: https://media.nesta.org.uk/documents/Resources_2017_version_01.pdf

Business Model Canvas Explained: https://www.bauer.uh.edu/undergraduate/documents/Business_Model_Canvas_Explained.pdf

1. The Business Model Canvas This video emphasizes the importance of searching for a business model. The presenter says, “Great products are becoming a commodity. The combination of great products and a great business model will keep you ahead of the competition in the coming decade.”
2. Business Model Canvas Explained Capture and test your startup business model using the business model canvas template. This video begins with a definition of the business model and then provides an overview of the 9 sections of the business model canvas.

Key Components of a Business Model

1. Value Proposition: What unique value does your product or service offer to customers? How does it solve their problems or meet their needs better than existing alternatives?
   1. Value Proposition and Customer Segments Value is the core of any business, and it directs all future decisions, innovations, and customers that get targeted. Even if we’ve thought about the big picture, why should anyone pay attention if we can’t explain how an idea makes someone’s life better?
   2. Explaining the Value Proposition Canvas
   3. A Value Proposition Canvas Example This value proposition canvas example provides a simple example of how to use the canvas to capture your assumptions – so you can validate your value proposition.
   4. Value Proposition Canvas: https://cdn.prod.website-files.com/64830736e7f43d491d70ef30/65d312b307da4cc1368095f6_A3-Value%20Proposition%20Canvas-2023.pdf
2. Target Market: Who are your ideal customers? What are their demographics, psychographics, and behaviors? Understanding your target market is essential for tailoring your offering and marketing strategies.
   1. Understanding Customer Needs Before developing a value proposition, you must understand key stakeholder needs. What is each person trying to achieve with the project from a corporate perspective? Which criteria do they use to select the best vendor and solution? What personal goals need to be considered?
   2. How to Identify Target Audience for Business Marketing Understand and “identify target audience” before investing money in business marketing strategies and advertising campaigns. Get a better return on investment by identifying your business target audience.
3. Revenue Streams: How will your company generate revenue? What are the different pricing models or payment methods you will utilize? This component outlines the various ways your business will make money.
   1. Revenue Streams Profit, revenue, income, assets, cash flow – all these words mean money, but they all have specific uses. Money is essential to us in business, and we want to describe it as accurately as possible.
   2. Business Model Canvas Revenue Streams and Pricing Use the Business Model Canvas Revenue Sources segment to document your hypotheses around your startup business model revenue sources – how exactly you will charge customers to create revenue.
4. Cost Structure: What are the key costs associated with running your business? This includes expenses related to production, marketing, distribution, and operations. Understanding your cost structure is crucial for pricing and profitability.
   1. What is Cost Structure? This video discusses the cost structure so that you can set the groundwork to make proper strategic business decisions, considering the relevant costs. You will see what variable costs are, what fixed costs are, what direct costs are, and what indirect costs are. You will also know how to determine which of these categories each cost belongs to (how to distinguish variable vs. fixed costs and direct vs. indirect costs).
   2. Business Model Canvas Cost Structure A credible financial plan is another critical requirement for successful startups, and understanding your cost structure is vital to your financial plan. In the cost structure section of the canvas, you’ll want to document the nature of all those costs – including your hypotheses about your variable costs, fixed costs, economies of scale, and economies of scope.
5. Key Activities: What core activities must your company perform to deliver its value proposition? This could involve manufacturing, research and development, marketing, or customer service.
   1. The Core of a Business – Key Activities & Resources So much goes into keeping a company running smoothly.
   2. Business Model Canvas – Key Activities How do you identify the Key Activities for your business?
6. Key Resources: What are the essential assets, knowledge, or partnerships your company needs to operate effectively? This could include physical resources like equipment, facilities, intellectual property, or human capital.
   1. Business Model Canvas Key Resources What key resources will you need for your business to grow and thrive? This video provides a structure for thinking through the various categories of resources, from financial to physical, human capital, and intellectual property.
7. Channels: How will you reach your customers and deliver your value proposition? This involves choosing the proper distribution, marketing, and sales channels to connect with your target market effectively.
   1. Business Model Canvas Channels The Business Model Canvas Channel section documents your business model channel hypotheses, including your go-to-market strategy. In particular, how you will do your startup’s sales, marketing, and customer support.
8. Customer Relationships: What kind of relationship do you want to establish with your customers? Will it be transactional, long-term, or based on personal assistance? Defining your customer relationship strategy is crucial for customer satisfaction and retention.
   1. Business Model Canvas Customer Relationships The Customer Relationship is one of nine sections in the Business Model Canvas, which is an integral part of your business model that touches virtually every other section of the canvas.

The Importance of Business Model Development

• Clarity and Focus: A well-defined business model provides clarity and focus for your team, aligning everyone around a common goal and strategy.
• Risk Mitigation: By thoroughly analyzing your business model, you can identify potential risks and challenges early on, allowing you to develop mitigation strategies.
• Attracting Investment: A solid business model is essential for attracting investors and securing funding. It demonstrates the viability and potential profitability of your venture.
• Adaptability: A flexible business model allows you to adapt to changing market conditions, customer preferences, and technological advancements.

Developing Your Business Model

1. Brainstorm and Ideate: Start by brainstorming different ideas for your business model. Consider various revenue streams, target markets, and value propositions.
2. Research and Analyze: Conduct thorough market research to understand your target audience, competitors, and industry trends. This will help you refine your business model and identify potential gaps in the market.
3. Experiment and Iterate: Don’t be afraid to experiment with different business models and test them in the real world. Gather feedback from customers and stakeholders and iterate on your model until you find a winning formula.
4. Seek Expert Guidance: Consult with experienced entrepreneurs, mentors, or business advisors to gain valuable insights and guidance throughout development.

Investing time and effort in developing a robust business model can lay the foundation for a successful and sustainable venture.

Activities

Workshops on market segmentation, pricing strategies, and financial projections.

Deliverables

A completed Business Model Canvas and initial financial forecasts.