There’s a reason why so many startups and small businesses fail: they are lacking a solid business model. One Statistics Canada study cited that only 68% of new micro-enterprises (1-4 employees) survive for two years. If you’re willing to sink money into your business idea, what’s the harm in taking a few hours to think things through and discover the potential obstacles sooner rather than later? These tips and tools will help you create the foundation of your business, i.e. your business model, helping you be one of those companies that overcomes the odds to make it beyond those crucial first few years. The good people at Strategyzer.com have created this great video that beautifully summarizes the business model concept and provide a downloadable version of the business model generator canvas, a tool I recommend and use with all my clients.
As described in the video, there are nine key parts to a business model:
- Value Proposition: What value does your business offer? What problem can you solve?
- Customer Segments: Who will appreciate what your business offers? Who has that problem? See an example here.
- Channels (Marketing and Distribution): What will you say? How will you get the message to customers? How will you get your product or service to customers?
- Customer Relationships: How will your business keep customers happy?
- Key Resources: What does your business need in order to produce your product or service?
- Key Activities: What things will your business need to do or need to have in place in order to produce what your product or service?
- Key Partnerships: What other expertise or resources does your business need access to? Who has that expertise?
- Revenue Streams: How will your business make money? What will customers pay for?
- Cost Structure: How much will it cost your business, in terms of resources and activities, to produce your product or service?
The foundation of the business model is comprised of a solid value proposition and the people who will see and appreciate that value. These two pieces of the business model puzzle are the most difficult to figure out, but are the most important. Start with them. When you understand the value you offer, or the problem you can solve and who will care, focusing your marketing efforts will be so much easier, as you’ll know exactly what you need to communicate, and to whom. This means you can more accurately deliver your message directly to the people who will care about what you’re offering, and avoid those who won’t, saving you time and money and getting you results.
Once you’ve completed the nine parts of the business model canvas outlined above, you will have the core of your business. Your business plan takes these nine parts and asks you to investigate some additional topics including:
- Industry research
- Assessment of the competition
- Vision and mission
- Legal structure
- An outline of scheduled achievements
- Experience of the management team and delegation of responsibilities
- Risk and how to mitigation plans
- Details about operations and staffing
- Financial statements
The business plan is the complete picture of your business, which is why it can be useful for you, your team, banks and investors. There are tons of free business plan templates available online. Here are some free templates that cater to a variety of industries.
Start with the value proposition and customer segments of the business model canvas. Ask for help and validate both parts as early as possible before you sink in too much time and money. If you get these two parts right, you’ll be far more likely to be in that 68% that make it!
This article was syndicated from Business 2 Community: A 5-Minute Guide to Business Models and Business Plans
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