A business model is a conceptual structure that supports the viability of the business & explains who the business serves to, what it offers, how it offers it, and how it achieves its goals…Peter Drucker said that the business model is supposed to answer:
- Who your customer is:
- The customer forms the heart of a business model.
- It answers who the company plans to sell its offerings.
- A business usually groups the customers into different segments with certain homogeneous needs, characteristics, or behavior.
- It then defines one or more customer segment that it serves or wants to serve, followed by an answer to why it plans to serve this segment.
- What value you can create/add/deliver to the customer:
- What are the jobs the customer wants to be done?
- What are their pain-points in doing the job?
- What do they gain by doing the job?
- Once these questions are answered, the business answers another set of questions that relates business to the customers:
- How does business get the job done?
- How does the business relieve the customer’s pain?
- How can the business help the customer get the gains?
- How you can do that at reasonable costs:
- How business operates;
- Key Activities: What all offerings does the business sell to the customers.
- Key Partners: Who all help the business in delivering value to the customers.
- Key Resources: What all resources does the business use to develop and deliver its offerings.
- Key Channels: What channels does the business use to deliver its offerings to the customers.
- Customer Relationships: What type of relationships does the business maintain with its customers.
- Does the business make money — Sustainability…This component of the business model focuses on elaborating on the financials & how the business makes money. It’s called the revenue model of the business & has two components:
- The cost structure includes all the expenses that the business incurs in creating & delivering value to the customers.
- Revenue streams include all primary & non-primary revenue streams that the business utilizes…tickets, subscriptions, donations, and school registrations
- How business operates;
The business model acts as the blueprint of the business and a roadmap for its success (or failure). It is the only documentation that makes clear:
- The business concept – the market opportunity the business capitalizes on and the industry fit.
- The target market the business caters toward.
- The problems the business intends to solve.
- The solution the business offers and how it creates customer value. How the business gets its customers.
- The operating model the business follows.
- How the business makes money and what are the costs incurred to get the same.
- Moreover, the business model gives a reason for the customers to choose the offering over others in the market.
- People chose Facebook because it helped them connect and chat with other people around the world (operating model) and it didn’t even charge for it (revenue model).
- Netflix’s business model was preferred over others as it provided value in the form of consistent on-demand content instead of the usual TV streaming business model.
- Business Model Examples:
- Manufacturer;
- Distributor;
- Retailer
- Brick & mortar
- e-Commerce
- Bricks & clicks
- Nickel & dime
- Freemium (basic services free & charge for add-ons)
- Subscription
- Aggregator — business model is a recently developed model where the company various service providers of a niche and sell their services under its own brand. The money is earned as commissions. Examples – Uber, Airbnb, Oyo.
- Etc.
For more information about developing a business concept model, view the free video entitled Roadmap For Starting Your Business. If you are planning to start a business or are thinking about scaling an existing one, be sure to read the ebook “Customer Centric Business Planning: A Guide to Optimizing Your Business for Maximum Success”. It is an essential book for business owners, managers, and entrepreneurs looking to leverage real-time insight to start and improve their business operations. Learn how proper customer centric business planning can assess risk and opportunity, and create an actionable roadmap for success.
Copyright ©John Trenary 2021
One response to “What Is A Business Concept Model”
[…] For more thoughts on refining your business concept, you might read: https://smallbusinessthoughts.com/2021/02/15/startup-business-concept-refinement/ or https://smallbusinessthoughts.com/2021/06/18/what-is-a-business-concept-model/. […]