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How To Create A Business Model In Seven Steps

Define the problem you’re going to solve, then define the customers for which the problem will be solved. Next, identify the customer and the problem. After that, define a set of possible solutions. After, define a set of possible monetization strategies for that solution, test, and choose your business model .

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A business model design in seven steps

Time needed:  1 day

How to create a business model in one day and seven simple steps

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The most valuable asset any organization has is its business model .

Indeed, that is the way all the moving parts of the organization fit together to create a value chain.

The aim of the value chain is value creation for several players in that industry, market, and so on.

The business model is not static, it changes and evolves along with the scale of the organization.

The type of  business model you designed for your company will not work if your company scales. You’ll need to rethink and redefine it.

This is even more evident in companies that are trying to innovate.

When those organizations create a new technology or an innovative approach to existing industries, it is critical to understand who are the players involved in that industry and how you’re creating value for them.

In this blog, we covered the business models  of many organizations.

For instance, Google’s massive success is strictly connected to its business model .

The company managed to create a balance between several players in the publishing and information industry where each of those players gets back some value (economic and not) from having a relationship with Google .

Where do you start when it comes to creating a business model ?

Related : Successful Types of Business Models You Need to Know

It’s all about business model design

The primary aim of a business model is to create a sustainable chain, able to unlock value for several players in a market, industry, or niche .

Therefore, this value chain will start from a value proposition , a promise you make to the key players and partners in that market, industry, or niche depending on where you start.

For instance, when PayPal started out it didn’t look to dominate the whole market. It started from a niche .

As Pether Thiel put it in his book, Zero to One:

The most successful companies make the core progression—to first dominate a specific niche and then scale to adjacent markets—a part of their founding narrative.

Indeed, PayPal began by identifying its most valuable partner, what at the time they called “power user.”

That was a choice driven by its business model design .

Therefore, instead of focusing on generically offering a service for everyone, PayPal focused on acquiring and attracting as many power users as possible.

Those power users were mostly on another platform that had already scaled up: eBay.

Thus, PayPal focused all its effort on acquiring those power users from eBay , fast!

Only after PayPal had drafted, tested, and validated a clear value proposition for a small , yet critical group of power users, it could move on to take larger and larger segments of that market.

What is a value proposition?

At its most basic level, a value proposition is a promise you make as an organization to deliver something (either monetary or advantage) to a critical player you have in our industry.

For instance, when Google started it showed right away it was capable of offering 10x of search results, at a faster speed and more relevant to users.

However, had Google kept its search engine primarily focused on providing paid results, it would not have taken off.

Instead, Google focused on offering relevant paid results but also a bunch of organic results.

In short, Google managed to index and rank the web pages from blogs, journals, news sites and any other website that made those pages available to Google for its index.

In exchange for that content, Google offered back visibility as qualified traffic toward those sites.

Indeed, search engines back then (at the end of the 1990s) were not focused on offering quality traffic.

Thus, most of the audience you got back to your site might have been quite relevant to your business.

Google instead, with its dominant search engine allowed publishers, and businesses (small and large) to gain customers.

That sealed an implicit deal “Me (Google) will send you qualified traffic that helps you grow your business if you (publisher, business, or whoever publishes on the web) offer me your content to be indexed.”

We might call that an implicit contract, which is the beginning of a value chain.

In fact, from this sort of contract part of the Google business model has been built. Imagine the scenario where Google was not attractive enough to provide qualified traffic to content producers.

They would have stopped offering their content for free by blocking access to the search engine.

Instead, they allowed Google to index their pages because the visibility they got was too attractive.

A business model is also about how you make money but how you make money isn’t your business model

One of the biggest misconceptions of the business model is to confuse it with the monetization strategy or the revenue model of the company.

While this is an essential piece of the puzzle, it is just one of the components of a successful business model .

In this blog, we’ve discussed at great length how companies make money  as a way to start the discussion of a business model .

However, a business model implies the understanding of

operations, customer acquisition and retention, supply chain management, and the cost above and revenue aspects

According to the business model you designed over the years for your organization there will be a piece that plays a more critical role compared to others.

For instance, a vital component of the Coca-Cola business model is its distribution strategy .

For other companies like McDonald’s, the key to its business model success is the heavily franchised restaurants that helped the company scale up all over the world.

Each company will develop a unique  model  among the many types of business models which is what makes it thick in the long run!

What principles should I follow to create and design a business model?

Developing a deep understanding of your business model implies asking a few critical questions. For instance, some of those questions might be:

  • What value do I offer my potential customers? Or what problem do I solve with my product/service?
  • How do I charge my customers?
  • What does my acquisition cost look like?
  • What channels can I tap into to find my ideal customer?
  • Did I create a predictable revenue stream ? If not what can I do to generate that?

Your business model will be based on a few critical assumptions about who your customers are, how your product or service should look like, what are the favorite channels to reach them, and a few others.

Those assumptions will be tested as soon as you start kicking off your operations.

Your main concern should be just that. You need to check those assumptions as quickly as possible. 

Steve Blank has identified 17 principles in his  Customer Development Manifesto :

  • There Are No Facts Inside Your Building, So Get Outside
  • Pair Customer Development with Agile Development
  • Failure is an Integral Part of the   Search for the Business Model
  • If You’re Afraid to Fail You’re Destined to Do So
  • Iterations and Pivots are Driven by Insight
  • Validate Your Hypotheses with Experiments
  • Success Begins with Buy-In from Investors and Co-Founders
  • No Business Plan Survives First Contact with Customers
  • Not All Startups Are Alike
  • Startup Metrics are Different from Existing Companies
  • Agree on Market Type – It Changes Everything
  • Fast, Fearless Decision-Making, Cycle Time, Speed and Tempo
  • If it’s not About Passion, You’re Dead the Day You Opened your Doors
  • Startup Titles and Functions Are Very Different from a Company’s
  • Preserve Cash While Searching. After It’s Found, Spend
  • Communicate and Share Learning
  • Startups Demand Comfort with Chaos and Uncertainty

I suggest you read this manifesto over and over again. This should be the first step!

What tools can you use to design and create your business model?

One of the most used tools to design and create a business model has revolved around the customer development manifesto above.

However, it is essential to keep in mind that this manifesto was the fruit of an era where venture capital had become scarce compared to the dot-com bubble at the end of the 1990s.

Those tools for business modeling have been developed in that context. Thus, those are not a one-size-fits-all toolbox but rather work better in a context where capital is scarce, and you need to test your business model assumptions as quickly as possible. In that context three primary tools are:

  • Business model canvas.
  • Lean startup canvas.
  • Customer development canvas.

Those tools can be used by entrepreneurs in the phases of the business model generation:

  • Map the business model hypotheses.
  • Test these hypotheses with customer feedback.
  • Iterative this process.

The result will be an incremental development of a product that will reach a minimally viable version .

The better the product, based on customer feedback, the larger the audience it will reach.

Lean makes sense when capital is scarce and when you need to keep burn rates low.

Lean was designed to   inform the founders’ vision  while they operated frugally at speed. It was not built as a focus group for consensus for those without deep convictions .

Is the lean startup still a valuable model?

As Steve Blank has pointed out in an HBR article entitled “ Is the Lean Startup Dead? “

I realized it was time for a new startup heuristic: the amount of customer discovery and product-market fit you need to find is inversely proportional to the amount and availability of risk capital.

In other words, the more risk capital that is available on the market the least the lean startup model might work.

The reason is, that if you have massive risk capital, you won’t need to test all your assumptions.

Quite the opposite, you’ll need to execute them fast.

Also, one of the primary logic of the lean startup is to burn cash at the slowest rate possible, while evolving (so-called pivoting) your business model .

If money is not an issue, then why go for the lean startup?

Steve Blank went further:

Rather than the “first mover advantage” of the last bubble ,  today’s theory is that  “massive capital infusion owns the entire market.”

Therefore, if you secured a massive injection of money, then your aim might be primarily toward growth , rather than profits.

In that context, the lean startup might not work!

Are capital moats sustainable?

blitzscaling-business-model-innovation-canvas

When a company or startup has a substantial capital allocate for growth , that is when this injection can become a short-term competitive advantage.

However, as companies finance growth through artificial injection of capital, those also become extremely risky, because many of the assumptions underlying the business model can’t be tested organically, thus leaving the company’s foundations weak.

An example of this excess of use of capital as a competitive moat has been WeWork , which has proved one of the most disastrous business endeavors of the last decade.

Thus, capital moats and technological moats need to be balanced with careful business model testing and organic validation in the marketplace!

Key Highlights

  • This step is the foundation of your business model . It involves identifying a specific problem that your product or service aims to solve.
  • Problems can be functional (solving a practical need) or emotional (addressing a psychological desire or pain point).
  • Defining the problem clearly helps you focus on delivering value to your target audience.
  • Once the problem is defined, it’s important to identify the individuals or groups who are facing this problem. These are your potential customers.
  • Group your potential customers into categories, keeping it to a maximum of three types. Each type may have distinct characteristics and needs.
  • From the categories of potential customers and the identified problems, narrow your focus to one key customer type and one specific problem.
  • This step helps prevent spreading your resources too thin and allows you to concentrate on understanding your primary audience and addressing their primary need.
  • Brainstorm a range of solutions that could address the key problem for your chosen customer type.
  • List up to ten solutions. Then, evaluate these solutions based on feasibility, cost, time, and resources required.
  • Narrow down the list to three solutions that are viable given your constraints.
  • For the solution you’ve chosen, consider how you’ll monetize it. Determine how your business will generate revenue from providing the solution to your target customers.
  • Brainstorm up to five potential monetization strategies. These could include subscription models, one-time purchases, freemium offerings, etc.
  • Focus on the two strategies that can be tested quickly and efficiently.
  • This step involves practical validation of your selected solution and monetization strategies.
  • Test your product or service with real customers to gather feedback. Evaluate how well your monetization strategies perform in real-world scenarios.
  • Based on the feedback and data collected, choose the most effective solution and monetization strategy combination.
  • With a validated solution, monetization strategy , and a clear understanding of your target audience, you have the foundation of your business model .
  • Your business model is the blueprint that outlines how your company will create, deliver, and capture value in the market.
  • Continuously monitor and refine your business model as you gather more insights from customers and adapt to changing market conditions.

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Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

how to make a business model

The term business model refers to a company's plan for making a profit . It identifies the products or services the business plans to sell, its identified target market , and any anticipated expenses . Business models are important for both new and established businesses. They help new, developing companies attract investment, recruit talent, and motivate management and staff.

Established businesses should regularly update their business model or they'll fail to anticipate trends and challenges ahead. Business models also help investors evaluate companies that interest them and employees understand the future of a company they may aspire to join.

Key Takeaways

  • A business model is a company's core strategy for profitably doing business.
  • Models generally include information like products or services the business plans to sell, target markets, and any anticipated expenses.
  • There are dozens of types of business models including retailers, manufacturers, fee-for-service, or freemium providers.
  • The two levers of a business model are pricing and costs.
  • When evaluating a business model as an investor, consider whether the product being offered matches a true need in the market.

Investopedia / Laura Porter

A business model is a high-level plan for profitably operating a business in a specific marketplace. A primary component of the business model is the value proposition . This is a description of the goods or services that a company offers and why they are desirable to customers or clients, ideally stated in a way that differentiates the product or service from its competitors.

A new enterprise's business model should also cover projected startup costs and financing sources, the target customer base for the business, marketing strategy , a review of the competition, and projections of revenues and expenses. The plan may also define opportunities in which the business can partner with other established companies. For example, the business model for an advertising business may identify benefits from an arrangement for referrals to and from a printing company.

Successful businesses have business models that allow them to fulfill client needs at a competitive price and a sustainable cost. Over time, many businesses revise their business models from time to time to reflect changing business environments and market demands .

When evaluating a company as a possible investment, the investor should find out exactly how it makes its money. This means looking through the company's business model. Admittedly, the business model may not tell you everything about a company's prospects. But the investor who understands the business model can make better sense of the financial data.

A common mistake many companies make when they create their business models is to underestimate the costs of funding the business until it becomes profitable. Counting costs to the introduction of a product is not enough. A company has to keep the business running until its revenues exceed its expenses.

One way analysts and investors evaluate the success of a business model is by looking at the company's gross profit . Gross profit is a company's total revenue minus the cost of goods sold (COGS). Comparing a company's gross profit to that of its main competitor or its industry sheds light on the efficiency and effectiveness of its business model. Gross profit alone can be misleading, however. Analysts also want to see cash flow or net income . That is gross profit minus operating expenses and is an indication of just how much real profit the business is generating.

The two primary levers of a company's business model are pricing and costs. A company can raise prices, and it can find inventory at reduced costs. Both actions increase gross profit. Many analysts consider gross profit to be more important in evaluating a business plan. A good gross profit suggests a sound business plan. If expenses are out of control, the management team could be at fault, and the problems are correctable. As this suggests, many analysts believe that companies that run on the best business models can run themselves.

When evaluating a company as a possible investment, find out exactly how it makes its money (not just what it sells but how it sells it). That's the company's business model.

Types of Business Models

There are as many types of business models as there are types of business. For instance, direct sales, franchising , advertising-based, and brick-and-mortar stores are all examples of traditional business models. There are hybrid models as well, such as businesses that combine internet retail with brick-and-mortar stores or with sporting organizations like the NBA .

Below are some common types of business models; note that the examples given may fall into multiple categories.

One of the more common business models most people interact with regularly is the retailer model. A retailer is the last entity along a supply chain. They often buy finished goods from manufacturers or distributors and interface directly with customers.

Example: Costco Wholesale

Manufacturer

A manufacturer is responsible for sourcing raw materials and producing finished products by leveraging internal labor, machinery, and equipment. A manufacturer may make custom goods or highly replicated, mass produced products. A manufacturer can also sell goods to distributors, retailers, or directly to customers.

Example: Ford Motor Company

Fee-for-Service

Instead of selling products, fee-for-service business models are centered around labor and providing services. A fee-for-service business model may charge by an hourly rate or a fixed cost for a specific agreement. Fee-for-service companies are often specialized, offering insight that may not be common knowledge or may require specific training.

Example: DLA Piper LLP

Subscription

Subscription-based business models strive to attract clients in the hopes of luring them into long-time, loyal patrons. This is done by offering a product that requires ongoing payment, usually in return for a fixed duration of benefit. Though largely offered by digital companies for access to software, subscription business models are also popular for physical goods such as monthly reoccurring agriculture/produce subscription box deliveries.

Example: Spotify

Freemium business models attract customers by introducing them to basic, limited-scope products. Then, with the client using their service, the company attempts to convert them to a more premium, advance product that requires payment. Although a customer may theoretically stay on freemium forever, a company tries to show the benefit of what becoming an upgraded member can hold.

Example: LinkedIn/LinkedIn Premium

Some companies can reside within multiple business model types at the same time for the same product. For example, Spotify (a subscription-based model) also offers a free version and a premium version.

If a company is concerned about the cost of attracting a single customer, it may attempt to bundle products to sell multiple goods to a single client. Bundling capitalizes on existing customers by attempting to sell them different products. This can be incentivized by offering pricing discounts for buying multiple products.

Example: AT&T

Marketplace

Marketplaces are somewhat straight-forward: in exchange for hosting a platform for business to be conducted, the marketplace receives compensation. Although transactions could occur without a marketplace, this business model attempts to make transacting easier, safer, and faster.

Example: eBay

Affiliate business models are based on marketing and the broad reach of a specific entity or person's platform. Companies pay an entity to promote a good, and that entity often receives compensation in exchange for their promotion. That compensation may be a fixed payment, a percentage of sales derived from their promotion, or both.

Example: social media influencers such as Lele Pons, Zach King, or Chiara Ferragni.

Razor Blade

Aptly named after the product that invented the model, this business model aims to sell a durable product below cost to then generate high-margin sales of a disposable component of that product. Also referred to as the "razor and blade model", razor blade companies may give away expensive blade handles with the premise that consumers need to continually buy razor blades in the long run.

Example: HP (printers and ink)

"Tying" is an illegal razor blade model strategy that requires the purchase of an unrelated good prior to being able to buy a different (and often required) good. For example, imagine Gillette released a line of lotion and required all customers to buy three bottles before they were allowed to purchase disposable razor blades.

Reverse Razor Blade

Instead of relying on high-margin companion products, a reverse razor blade business model tries to sell a high-margin product upfront. Then, to use the product, low or free companion products are provided. This model aims to promote that upfront sale, as further use of the product is not highly profitable.

Example: Apple (iPhones + applications)

The franchise business model leverages existing business plans to expand and reproduce a company at a different location. Often food, hardware, or fitness companies, franchisers work with incoming franchisees to finance the business, promote the new location, and oversee operations. In return, the franchisor receives a percentage of earnings from the franchisee.

Example: Domino's Pizza

Pay-As-You-Go

Instead of charging a fixed fee, some companies may implement a pay-as-you-go business model where the amount charged depends on how much of the product or service was used. The company may charge a fixed fee for offering the service in addition to an amount that changes each month based on what was consumed.

Example: Utility companies

A brokerage business model connects buyers and sellers without directly selling a good themselves. Brokerage companies often receive a percentage of the amount paid when a deal is finalized. Most common in real estate, brokers are also prominent in construction/development or freight.

Example: ReMax

There is no "one size fits all" when making a business model. Different professionals may suggest taking different steps when creating a business and planning your business model. Here are some broad steps one can take to create their plan:

  • Identify your audience. Most business model plans will start with either defining the problem or identifying your audience and target market . A strong business model will understand who you are trying to target so you can craft your product, messaging, and approach to connecting with that audience.
  • Define the problem. In addition to understanding your audience, you must know what problem you are trying to solve. A hardware company sells products for home repairs. A restaurant feeds the community. Without a problem or a need, your business may struggle to find its footing if there isn't a demand for your services or products.
  • Understand your offerings. With your audience and problem in mind, consider what you are able to offer. What products are you interested in selling, and how does your expertise match that product? In this stage of the business model, the product is tweaked to adapt to what the market needs and what you're able to provide.
  • Document your needs. With your product selected, consider the hurdles your company will face. This includes product-specific challenges as well as operational difficulties. Make sure to document each of these needs to assess whether you are ready to launch in the future.
  • Find key partners. Most businesses will leverage other partners in driving company success. For example, a wedding planner may forge relationships with venues, caterers, florists, and tailors to enhance their offering. For manufacturers, consider who will provide your materials and how critical your relationship with that provider will be.
  • Set monetization solutions. Until now, we haven't talked about how your company will make money. A business model isn't complete until it identifies how it will make money. This includes selecting the strategy or strategies above in determining your business model type. This might have been a type you had in mind but after reviewing your clients needs, a different type might now make more sense.
  • Test your model. When your full plan is in place, perform test surveys or soft launches. Ask how people would feel paying your prices for your services. Offer discounts to new customers in exchange for reviews and feedback. You can always adjust your business model, but you should always consider leveraging direct feedback from the market when doing so.

Instead of reinventing the wheel, consider what competing companies are doing and how you can position yourself in the market. You may be able to easily spot gaps in the business model of others.

Criticism of Business Models

Joan Magretta, the former editor of the Harvard Business Review, suggests there are two critical factors in sizing up business models. When business models don't work, she states, it's because the story doesn't make sense and/or the numbers just don't add up to profits. The airline industry is a good place to look to find a business model that stopped making sense. It includes companies that have suffered heavy losses and even bankruptcy .

For years, major carriers such as American Airlines, Delta, and Continental built their businesses around a hub-and-spoke structure , in which all flights were routed through a handful of major airports. By ensuring that most seats were filled most of the time, the business model produced big profits.

However, a competing business model arose that made the strength of the major carriers a burden. Carriers like Southwest and JetBlue shuttled planes between smaller airports at a lower cost. They avoided some of the operational inefficiencies of the hub-and-spoke model while forcing labor costs down. That allowed them to cut prices, increasing demand for short flights between cities.

As these newer competitors drew more customers away, the old carriers were left to support their large, extended networks with fewer passengers. The problem became even worse when traffic fell sharply following the September 11 terrorist attacks in 2001 . To fill seats, these airlines had to offer more discounts at even deeper levels. The hub-and-spoke business model no longer made sense.

Example of Business Models

Consider the vast portfolio of Microsoft. Over the past several decades, the company has expanded its product line across digital services, software, gaming, and more. Various business models, all within Microsoft, include but are not limited to:

  • Productivity and Business Processes: Microsoft offers subscriptions to Office products and LinkedIn. These subscriptions may be based off product usage (i.e. the amount of data being uploaded to SharePoint).
  • Intelligent Cloud: Microsoft offers server products and cloud services for a subscription. This also provide services and consulting.
  • More Personal Computing: Microsoft sells physically manufactured products such as Surface, PC components, and Xbox hardware. Residual Xbox sales include content, services, subscriptions, royalties, and advertising revenue.

A business model is a strategic plan of how a company will make money. The model describes the way a business will take its product, offer it to the market, and drive sales. A business model determines what products make sense for a company to sell, how it wants to promote its products, what type of people it should try to cater to, and what revenue streams it may expect.

What Is an Example of a Business Model?

Best Buy, Target, and Walmart are some of the largest examples of retail companies. These companies acquire goods from manufacturers or distributors to sell directly to the public. Retailers interface with their clients and sell goods, though retails may or may not make the actual goods they sell.

What Are the Main Types of Business Models?

Retailers and manufacturers are among the primary types of business models. Manufacturers product their own goods and may or may not sell them directly to the public. Meanwhile, retails buy goods to later resell to the public.

How Do I Build a Business Model?

There are many steps to building a business model, and there is no single consistent process among business experts. In general, a business model should identify your customers, understand the problem you are trying to solve, select a business model type to determine how your clients will buy your product, and determine the ways your company will make money. It is also important to periodically review your business model; once you've launched, feel free to evaluate your plan and adjust your target audience, product line, or pricing as needed.

A company isn't just an entity that sells goods. It's an ecosystem that must have a plan in plan on who to sell to, what to sell, what to charge, and what value it is creating. A business model describes what an organization does to systematically create long-term value for its customers. After building a business model, a company should have stronger direction on how it wants to operate and what its financial future appears to be.

Harvard Business Review. " Why Business Models Matter ."

Bureau of Transportation Statistics. " Airline Travel Since 9/11 ."

Microsoft. " Annual Report 2023 ."

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Business Model Canvas: Explained with Examples

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Got a new business idea, but don’t know how to put it to work? Want to improve your existing business model? Overwhelmed by writing your business plan? There is a one-page technique that can provide you the solution you are looking for, and that’s the business model canvas.

In this guide, you’ll have the Business Model Canvas explained, along with steps on how to create one. All business model canvas examples in the post can be edited online.

What is a Business Model Canvas

A business model is simply a plan describing how a business intends to make money. It explains who your customer base is and how you deliver value to them and the related details of financing. And the business model canvas lets you define these different components on a single page.   

The Business Model Canvas is a strategic management tool that lets you visualize and assess your business idea or concept. It’s a one-page document containing nine boxes that represent different fundamental elements of a business.  

The business model canvas beats the traditional business plan that spans across several pages, by offering a much easier way to understand the different core elements of a business.

The right side of the canvas focuses on the customer or the market (external factors that are not under your control) while the left side of the canvas focuses on the business (internal factors that are mostly under your control). In the middle, you get the value propositions that represent the exchange of value between your business and your customers.

The business model canvas was originally developed by Alex Osterwalder and Yves Pigneur and introduced in their book ‘ Business Model Generation ’ as a visual framework for planning, developing and testing the business model(s) of an organization.

Business Model Canvas Explained

What Are the Benefits of Using a Business Model Canvas

Why do you need a business model canvas? The answer is simple. The business model canvas offers several benefits for businesses and entrepreneurs. It is a valuable tool and provides a visual and structured approach to designing, analyzing, optimizing, and communicating your business model.

  • The business model canvas provides a comprehensive overview of a business model’s essential aspects. The BMC provides a quick outline of the business model and is devoid of unnecessary details compared to the traditional business plan.
  • The comprehensive overview also ensures that the team considers all required components of their business model and can identify gaps or areas for improvement.
  • The BMC allows the team to have a holistic and shared understanding of the business model while enabling them to align and collaborate effectively.
  • The visual nature of the business model canvas makes it easier to refer to and understand by anyone. The business model canvas combines all vital business model elements in a single, easy-to-understand canvas.
  • The BMC can be considered a strategic analysis tool as it enables you to examine a business model’s strengths, weaknesses, opportunities, and challenges.
  • It’s easier to edit and can be easily shared with employees and stakeholders.
  • The BMC is a flexible and adaptable tool that can be updated and revised as the business evolves. Keep your business agile and responsive to market changes and customer needs.
  • The business model canvas can be used by large corporations and startups with just a few employees.
  • The business model canvas effectively facilitates discussions among team members, investors, partners, customers, and other stakeholders. It clarifies how different aspects of the business are related and ensures a shared understanding of the business model.
  • You can use a BMC template to facilitate discussions and guide brainstorming brainstorming sessions to generate insights and ideas to refine the business model and make strategic decisions.
  • The BMC is action-oriented, encouraging businesses to identify activities and initiatives to improve their business model to drive business growth.
  • A business model canvas provides a structured approach for businesses to explore possibilities and experiment with new ideas. This encourages creativity and innovation, which in turn encourages team members to think outside the box.

How to Make a Business Model Canvas

Here’s a step-by-step guide on how to create a business canvas model.

Step 1: Gather your team and the required material Bring a team or a group of people from your company together to collaborate. It is better to bring in a diverse group to cover all aspects.

While you can create a business model canvas with whiteboards, sticky notes, and markers, using an online platform like Creately will ensure that your work can be accessed from anywhere, anytime. Create a workspace in Creately and provide editing/reviewing permission to start.

Step 2: Set the context Clearly define the purpose and the scope of what you want to map out and visualize in the business model canvas. Narrow down the business or idea you want to analyze with the team and its context.

Step 3: Draw the canvas Divide the workspace into nine equal sections to represent the nine building blocks of the business model canvas.

Step 4: Identify the key building blocks Label each section as customer segment, value proposition, channels, customer relationships, revenue streams, key resources, key activities, and cost structure.

Step 5: Fill in the canvas Work with your team to fill in each section of the canvas with relevant information. You can use data, keywords, diagrams, and more to represent ideas and concepts.

Step 6: Analyze and iterate Once your team has filled in the business model canvas, analyze the relationships to identify strengths, weaknesses, opportunities, and challenges. Discuss improvements and make adjustments as necessary.

Step 7: Finalize Finalize and use the model as a visual reference to communicate and align your business model with stakeholders. You can also use the model to make informed and strategic decisions and guide your business.

What are the Key Building Blocks of the Business Model Canvas?

There are nine building blocks in the business model canvas and they are:

Customer Segments

Customer relationships, revenue streams, key activities, key resources, key partners, cost structure.

  • Value Proposition

When filling out a Business Model Canvas, you will brainstorm and conduct research on each of these elements. The data you collect can be placed in each relevant section of the canvas. So have a business model canvas ready when you start the exercise.  

Business Model Canvas Template

Let’s look into what the 9 components of the BMC are in more detail.

These are the groups of people or companies that you are trying to target and sell your product or service to.

Segmenting your customers based on similarities such as geographical area, gender, age, behaviors, interests, etc. gives you the opportunity to better serve their needs, specifically by customizing the solution you are providing them.

After a thorough analysis of your customer segments, you can determine who you should serve and ignore. Then create customer personas for each of the selected customer segments.

Customer Persona Template for Business Model Canvas Explained

There are different customer segments a business model can target and they are;

  • Mass market: A business model that focuses on mass markets doesn’t group its customers into segments. Instead, it focuses on the general population or a large group of people with similar needs. For example, a product like a phone.  
  • Niche market: Here the focus is centered on a specific group of people with unique needs and traits. Here the value propositions, distribution channels, and customer relationships should be customized to meet their specific requirements. An example would be buyers of sports shoes.
  • Segmented: Based on slightly different needs, there could be different groups within the main customer segment. Accordingly, you can create different value propositions, distribution channels, etc. to meet the different needs of these segments.
  • Diversified: A diversified market segment includes customers with very different needs.
  • Multi-sided markets: this includes interdependent customer segments. For example, a credit card company caters to both their credit card holders as well as merchants who accept those cards.

Use STP Model templates for segmenting your market and developing ideal marketing campaigns

Visualize, assess, and update your business model. Collaborate on brainstorming with your team on your next business model innovation.

In this section, you need to establish the type of relationship you will have with each of your customer segments or how you will interact with them throughout their journey with your company.

There are several types of customer relationships

  • Personal assistance: you interact with the customer in person or by email, through phone call or other means.
  • Dedicated personal assistance: you assign a dedicated customer representative to an individual customer.  
  • Self-service: here you maintain no relationship with the customer, but provides what the customer needs to help themselves.
  • Automated services: this includes automated processes or machinery that helps customers perform services themselves.
  • Communities: these include online communities where customers can help each other solve their own problems with regard to the product or service.
  • Co-creation: here the company allows the customer to get involved in the designing or development of the product. For example, YouTube has given its users the opportunity to create content for its audience.

You can understand the kind of relationship your customer has with your company through a customer journey map . It will help you identify the different stages your customers go through when interacting with your company. And it will help you make sense of how to acquire, retain and grow your customers.

Customer Journey Map

This block is to describe how your company will communicate with and reach out to your customers. Channels are the touchpoints that let your customers connect with your company.

Channels play a role in raising awareness of your product or service among customers and delivering your value propositions to them. Channels can also be used to allow customers the avenue to buy products or services and offer post-purchase support.

There are two types of channels

  • Owned channels: company website, social media sites, in-house sales, etc.
  • Partner channels: partner-owned websites, wholesale distribution, retail, etc.

Revenues streams are the sources from which a company generates money by selling their product or service to the customers. And in this block, you should describe how you will earn revenue from your value propositions.  

A revenue stream can belong to one of the following revenue models,

  • Transaction-based revenue: made from customers who make a one-time payment
  • Recurring revenue: made from ongoing payments for continuing services or post-sale services

There are several ways you can generate revenue from

  • Asset sales: by selling the rights of ownership for a product to a buyer
  • Usage fee: by charging the customer for the use of its product or service
  • Subscription fee: by charging the customer for using its product regularly and consistently
  • Lending/ leasing/ renting: the customer pays to get exclusive rights to use an asset for a fixed period of time
  • Licensing: customer pays to get permission to use the company’s intellectual property
  • Brokerage fees: revenue generated by acting as an intermediary between two or more parties
  • Advertising: by charging the customer to advertise a product, service or brand using company platforms

What are the activities/ tasks that need to be completed to fulfill your business purpose? In this section, you should list down all the key activities you need to do to make your business model work.

These key activities should focus on fulfilling its value proposition, reaching customer segments and maintaining customer relationships, and generating revenue.

There are 3 categories of key activities;

  • Production: designing, manufacturing and delivering a product in significant quantities and/ or of superior quality.
  • Problem-solving: finding new solutions to individual problems faced by customers.
  • Platform/ network: Creating and maintaining platforms. For example, Microsoft provides a reliable operating system to support third-party software products.

This is where you list down which key resources or the main inputs you need to carry out your key activities in order to create your value proposition.

There are several types of key resources and they are

  • Human (employees)
  • Financial (cash, lines of credit, etc.)
  • Intellectual (brand, patents, IP, copyright)
  • Physical (equipment, inventory, buildings)

Key partners are the external companies or suppliers that will help you carry out your key activities. These partnerships are forged in oder to reduce risks and acquire resources.

Types of partnerships are

  • Strategic alliance: partnership between non-competitors
  • Coopetition: strategic partnership between partners
  • Joint ventures: partners developing a new business
  • Buyer-supplier relationships: ensure reliable supplies

In this block, you identify all the costs associated with operating your business model.

You’ll need to focus on evaluating the cost of creating and delivering your value propositions, creating revenue streams, and maintaining customer relationships. And this will be easier to do so once you have defined your key resources, activities, and partners.  

Businesses can either be cost-driven (focuses on minimizing costs whenever possible) and value-driven (focuses on providing maximum value to the customer).

Value Propositions

This is the building block that is at the heart of the business model canvas. And it represents your unique solution (product or service) for a problem faced by a customer segment, or that creates value for the customer segment.

A value proposition should be unique or should be different from that of your competitors. If you are offering a new product, it should be innovative and disruptive. And if you are offering a product that already exists in the market, it should stand out with new features and attributes.

Value propositions can be either quantitative (price and speed of service) or qualitative (customer experience or design).

Value Proposition Canvas

What to Avoid When Creating a Business Model Canvas

One thing to remember when creating a business model canvas is that it is a concise and focused document. It is designed to capture key elements of a business model and, as such, should not include detailed information. Some of the items to avoid include,

  • Detailed financial projections such as revenue forecasts, cost breakdowns, and financial ratios. Revenue streams and cost structure should be represented at a high level, providing an overview rather than detailed projections.
  • Detailed operational processes such as standard operating procedures of a business. The BMC focuses on the strategic and conceptual aspects.
  • Comprehensive marketing or sales strategies. The business model canvas does not provide space for comprehensive marketing or sales strategies. These should be included in marketing or sales plans, which allow you to expand into more details.
  • Legal or regulatory details such as intellectual property, licensing agreements, or compliance requirements. As these require more detailed and specialized attention, they are better suited to be addressed in separate legal or regulatory documents.
  • Long-term strategic goals or vision statements. While the canvas helps to align the business model with the overall strategy, it should focus on the immediate and tangible aspects.
  • Irrelevant or unnecessary information that does not directly relate to the business model. Including extra or unnecessary information can clutter the BMC and make it less effective in communicating the core elements.

What Are Your Thoughts on the Business Model Canvas?

Once you have completed your business model canvas, you can share it with your organization and stakeholders and get their feedback as well. The business model canvas is a living document, therefore after completing it you need to revisit and ensure that it is relevant, updated and accurate.

What best practices do you follow when creating a business model canvas? Do share your tips with us in the comments section below.

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FAQs About the Business Model Canvas

  • Use clear and concise language
  • Use visual-aids
  • Customize for your audience
  • Highlight key insights
  • Be open to feedback and discussion

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Amanda Athuraliya is the communication specialist/content writer at Creately, online diagramming and collaboration tool. She is an avid reader, a budding writer and a passionate researcher who loves to write about all kinds of topics.

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  • Business planning

What is a business model? (Plus, how to define yours)

Last updated: March 2024

Business models distill the potential of a business down to its essence. Companies across every industry and at all stages of maturity need business models. Some rely on lengthy processes to build complicated models, while others move quickly to articulate the basics and take action. Either way, having the discipline to work through this planning tool forces internal alignment.

You must build something that real people with real needs will find value in and pay for — otherwise you do not have a lasting business. Brian de Haaff Aha! co-founder and CEO

For established enterprises, a business model is often a living document that is reviewed and adapted over the years. For companies launching products and services or entering new markets, a business model helps ensure that decisions are tied back to the overall business strategy . And for early-stage startups, a simple one-page business model enables founders to explore the mechanics of a business and how you anticipate it will be successful.

Defining and documenting a business model is an essential exercise. Whether you are starting a new venture, expanding into a new market, or shifting your go-to-market strategy , you can use a business model to capture fundamental assumptions about the opportunity ahead and tactics for addressing challenges.

Forward-thinking companies integrate their business model into all aspects of the organization — from recruiting talent to motivating employees. That is why many choose tools that make it possible to quickly build and share a business model. In Aha! software, for example, there are multiple ways to build a model and connect it to everyday work. One of the quickest ways is by using our whiteboard template — featured below.

Get this business model whiteboard template — with a free trial .

Business model large

Start using this template now

You can also try a similar template that is built into the product strategy section of Aha! Roadmaps . Or you can download free Excel and PowerPoint business model templates in this guide .

This article covers the basics of business models, from core concepts to best practices. Jump ahead to any section:

Definition of a business model

Business model components

Business model vs. business plan.

Different types of business models

Pros and cons of different models

Analyzing competitor business models

Business model templates

How to build a business model

What is the definition of a business model?

A business model defines how a company will create, deliver, and capture value.

A business model answers questions that are crucial for strategic decision-making and business operations. Creating a business model for your startup or product means identifying the problem you are going to solve, the market that you will serve, the level of investment required, what products you will offer, and how you will generate revenue. Pricing and costs are the two levers that affect profitability within a given business model.

A business model is part of your overall business strategy. Some business models extend beyond economic context and include value exchange in social or cultural terms — such as the intangible impact the company will have on a community or industry. The process of constructing and changing a business model is often referred to as “business model innovation.”

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This is why innovation programs fail

There are three main areas of focus in a business model: value proposition, value delivery, and value capture. The proposition outlines who your customers are and what you will offer. The delivery details how you will organize the business to deliver on the proposition. And the capture is a hypothesis for how the proposition and delivery will align to return value back to the business.

how to make a business model

The components of a business model include everything the organization needs to document and internalize so that the team can implement all three value focuses. This includes the market in which you operate, organizational strengths and challenges , essential elements of your product or products, and how you will generate revenue.

Below are some components to include when you create a business model:

Vision and mission : Overview of what you want to achieve and how you will do it.

Objectives: High-level goals that will support your vision and mission, along with how you will measure success.

Customer targets and challenges: Description of target customers (written as archetypes or personas ) and their pain points.

Solution: How your offering will solve customer pain points.

Differentiators: Characteristics that differentiate your product or service.

Pricing: What your solution will cost and how it will be sold.

Positioning and messaging: How you will communicate the value of your offering to customers.

Go-to-market: Proposed approach for launching new offerings and services.

Investment: Resources required to introduce your offering.

Growth opportunity: Ways that you will grow the business over time.

Positioning vs. messaging

  • What is value-based product development?
  • What is a go-to-market roadmap?

What is a business roadmap?

Business models and business plans are both elements of your overall business strategy. But there are key differences between a business model and a business plan.

A business model is seen as foundational and will not usually be reworked in reaction to shorter-term shifts — whereas a business plan is more likely to be updated based on changes in the economy or market.

Related: Business plan templates

What is the benefit of building a business model?

Innovation is about more than the products or technologies that you build. The way that you operate your business is a critical factor in how you stand apart in a crowded marketplace. The benefit of building a business model is that you can use the exercise to expose and exploit what makes your company unique — why choosing your offering is better for customers than any alternatives and how you will grow the business over time.

Many people associate business models with lengthy documents that describe a company’s problem, opportunity, and solution in the context of a two-to-five-year forecast. But business models do not need to be a long treatise.

A one-pager is just as effective for distilling and communicating the most important elements of your business strategy. The concise format is useful for sharing with broader teams so that everyone understands the high-level approach. Done right, a business model can become a touchstone for the team by outlining core differentiators to promote and defend in the market.

Related: A more comprehensive business model builder

What are the different types of business models?

There are many different types of business models. Below are some of the most common business models with example companies for reference (take note of the companies that appear in several categories):

Did you keep track of the companies that appeared in several of the business model examples? Good. You now have a grasp of how complex enterprises with vast portfolios of products and services often employ many business models within the same organization.

Consider a company like Apple, which manufactures and sells hardware products as well as offering cloud-storage, streaming subscriptions, and a marketplace for other applications. Amazon, whose offerings range from retail (with the acquisition of Whole Foods) to marketplace (Amazon.com) to subscription services (Amazon Prime and Amazon Music) to affiliate, also features in different categories. Each division or vertical will have a distinct business model that reflects the nuances of how it operates while also supporting the corporate business model.

Related: The product manager vs. the portfolio product manager

Pros and cons of different business models

Some types of business models work better for certain industries than others. For example, software-as-a-service (SaaS) companies often rely on freemium business models. This makes it easy for potential users to experience the value of the product and incentivizes paid conversions via access to additional features.

Many social media platforms make money through advertising. By providing full access to the platform for free, these companies attract more users. In turn, this creates a more valuable audience for advertisers and increases revenue for the business.

How do you analyze a competitor’s business model?

Business analysts and investors will often evaluate a company’s business model as part of due diligence for funding or market research . You can apply the same tactics to analyze a competitor’s business model — with a few caveats.

Public companies are subject to reporting requirements. This means that the business must regularly disclose financial and performance data to the public — these disclosures occur quarterly and annually. The data includes everything from gross revenue, operating costs and losses, cash flow and reserves, and leadership discussions of business results. Designed to protect and inform investors, these reports can provide you with the information you need to understand the basics of the company’s business model and how well it is performing against the model.

Private companies are not required to reveal business data publicly. Investors or partners may be privy to certain aspects of the company’s performance, but it can be difficult to understand exactly what is happening from the outside. Some analysts or business websites will attempt to “size” a business or market by looking at a variety of factors — including the number of employees, volume of search terms related to the core offering, estimated customer base, pricing structure, partnerships, advertising spend, and media coverage.

Once you have identified relevant alternatives to your offering and gathered all of the information that you can find, a good way to analyze a competitor’s business model is to conduct a competitive analysis.

You do not want to spend too much time thinking about other companies when you could be focused on your own. A simple SWOT analysis is a helpful way to map out strengths, weaknesses, opportunities, and threats that were revealed during your research.

Competitor analysis templates

  • How to price your product
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Below are three types of business model layouts available in Aha! software that you can use to succinctly assess what is possible and what challenges could arise for your business.

Whiteboard business model template

Articulate the foundation of your product or service in a whiteboard-style format. The focus is on capturing key elements like why the solution is worth buying (messaging), pain points of the buyers (customer challenges), and ways you will grow the business (growth opportunities).

Business model canvas

This business model canvas included in Aha! Roadmaps uses drag-and-drop components within a flexible layout. You can rename or hide components as needed. And you can create as many strategic models in your workspace as you would like.

How to craft a product strategy in Aha! Roadmaps

How to use the strategic model template in Aha! Roadmaps

Free Excel and PowerPoint business model templates

Aha! Roadmaps helps businesses map out their strategy directly within the software. This is an example of a business model created in Aha!

  • Lean canvas

Similar to the business model canvas, the lean canvas in Aha! Roadmaps takes a problem-focused approach to create an actionable business plan. It is most commonly used by startups and entrepreneurs to document business assumptions. The focus is on quickly creating a concise, single-page business model. It documents nine elements, including customer segments, channels used to reach customers, and the ways you plan to make money.

Aha! Roadmaps helps businesses map out their strategy directly within the software. This is an example of a lean canvas created in Aha!

How to build a business model in 10 steps

Crafting a business model is part of establishing a meaningful business strategy. But a business model is essentially a hypothesis — you need to test yours to prove that it will actually provide value. Many startup founders especially underestimate the costs and timeline for reaching profitability.

1. Identify your target market

Who will benefit from your offering? What characteristics do prospective customers share?

2. Define the problem you will solve

What is the problem that you are solving? What are the pain points of your potential customers?

3. Detail your unique selling proposition (USP)

What will you build and how will you support it?

4. Create a pricing strategy

How much will you charge for your offering? What factors will go into choosing your price point?

5. Develop a marketing approach

How will you market your product and reach target customers? What channels will you choose for go-to-market?

6. Establish operational practices

How will you streamline processes and procedures to reduce overhead and fixed costs?

7. Capture path to profitability

How will your business generate revenue? What level of investment will be required and what fixed costs exist?

8. Anticipate challenges

Who are your competitors? What opportunities and threats exist for your business?

9. Validate your business model

Was your hypothesis correct? Does your business model solve a problem the way you thought it would?

10. Update to reflect learnings

What can you do differently in the future to ensure greater success?

Your business model will ultimately guide your organization and influence your product roadmap. Give it the deep thought it deserves — questioning your core assumptions about how you will generate value and how your team will work towards achieving shared goals.

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  • What is a product?
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  • What is product development?
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What is a Business Model and How to Choose One

Interconnected cogs working together. Represents deciding on a business model that will generate revenue.

3 min. read

Updated January 5, 2024

How will your business make money? 

You aim to answer that by selecting and outlining your business model.

Let’s go over the basics, common types, and how to choose the right option for your business.

  • What is a business model?

A business model describes how your company plans to make money. It outlines what you sell, who you sell to, and your expenses.

If you’re a new business , use a business model to determine if your business idea is viable, attract investors, and guide your overall management strategy. 

If you’re an existing company , use it as the foundation for forecasting and reviewing your business plan.

What are the key components of a business model?

A business model can be broken down into three parts:

  • Everything it takes to make something: Design, raw materials, manufacturing, labor, etc.
  • Everything it takes to sell that thing: Marketing, distribution, delivering a service, and processing the sale.
  • How and what the customer pays: Pricing strategy, payment methods, payment timing, etc.
  • Types of business models

Don’t reinvent the wheel. Start with a common or industry-specific business model and adjust to your needs.

17 common business model examples

Advertising, affiliate, brokerage, concierge, crowdsourcing, franchising, leasing, pay-as-you-go, and freemium are just a few examples. Learn about these and eight other common business models.

Subscription models

Learn what it takes to set up a subscription-based revenue stream for your business.

Online business models

Is your business fully online? Here are the best business model options to consider.

Business models for social media startups

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  • How to choose the right business model

Follow this process to create a business model that aligns with your business goals and the needs of your target customers.

1. Revisit the market and your competitors

Focus your research efforts on how your business can provide value in the market. What features will help you stand out and sell more? 

This will require you to take a thorough look at your competitors. What opportunities exist for you to do something new, different, or better? 

Lastly, review how they are selling their products. Is it successful? Are there business models in other markets that could work here instead?

Want to learn more? Click here for more on market research . 

2. Understand how your customers buy

How you sell needs to align with customer needs and expectations.

Dive deep into your customer’s purchasing behavior. 

  • Do they prefer one-time purchases or subscription models? 
  • Online or in-store?
  • Free trials or money-back guarantees?

Understanding their preferences allows you to tailor your business model to align with established buying habits.

3. Focus on the problem and your solution

Every successful business solves a problem. 

Clearly define the problem and how your product or service provides a unique solution. 

  • What makes you different?
  • How does that affect costs? Pricing?

With customer preferences in mind, consider “what is the best way to deliver your solution?” This should bring you closer to a business model that aligns customer needs with your business goals.

4. Experiment and test multiple business models

Don’t be afraid to try different models. Start with a hypothesis, test it in the market, gather feedback, and refine it. 

Through trial and error, businesses often find the model that fits best. Ideally, you’ll end up with multiple revenue streams that can strengthen your business performance.

How do you know if your business model will be successful?

A successful business model must collect more money from customers than it costs to make the product. This is your profit—simple as that.

Remember, you don’t need to invent a new business model. Instead, take an existing business model and tune it to fit the needs of your customers.

Once you do, you can dig deeper into the next step for starting your business—selecting a pricing strategy.

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Content Author: Kody Wirth

Kody Wirth is a content writer and SEO specialist for Palo Alto Software—the creator's of Bplans and LivePlan. He has 3+ years experience covering small business topics and runs a part-time content writing service in his spare time.

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Table of Contents

  • Components of a business model
  • Will your business model be successful?
  • Resources and tools

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How to make a great Business Model Canvas

how to make a business model

Most of us are familiar with business models, which are a company’s plan for making a profit. A typical business model identifies the products or services that the company intends to sell, the target market, and any possible expenses.

Since a business model is so high-level, it can be hard to visualize how it might work in practice. It can be even harder to connect an organization’s everyday roles, responsibilities, projects, and functions to the overall business model. That’s where the business model canvas comes in.

This blog will introduce you to the business model canvas, a strategic tool that allows you to visually develop and display your business model. By the end of the blog, you’ll have a deeper understanding of what makes a business model canvas so important and how to create your own.

  • What is a Business Model Canvas?

The business model canvas was first developed by Alexander Osterwalder in his book Business Model Ontology . Osterwalder broke down the segments that form a basic business model into a one-page canvas.

A business model canvas is a strategic tool that enables you to look systematically at your business model, understand how it works, and keep everyone in your organization aligned. Think of it as a North Star that outlines everything that makes your business tick: key partners and activities, your value proposition, customer relationships and segments, resources, distribution channels, cost structures, and revenue streams.

The Business Model Canvas Explained

Whether you’re at a new business or an established one, a well-thought-out business model is crucial for success. Business models help developing businesses attract investors, recruit talent, onboard new hires, and align employees. They help established businesses stay ahead of trends and anticipate challenges. A good business model can compel investors or partners to work with a company they’re interested in supporting.

The problem, though, is that a business model is a lot to digest. That’s why the business model canvas is such a useful tool.

The business model canvas is a snapshot of all the key components of a business model. It enables you to take those key components and organize them into a format that’s easily digestible. A business model canvas zooms in on a particular product or service to break down how exactly the company expects to derive value from it.

  • Business Model Canvas or Lean Canvas?

People often use “business model canvas” and “lean business model canvas” interchangeably, but there are a few differences. The business model canvas focuses on a specific product or service that generates revenue. A lean canvas focuses on a specific problem that the organization is looking to solve.

Lean canvases are popular with startups because they enable you to zoom in on a problem, iterate on potential solutions, and move quickly to the next challenge. Whereas the business model canvas defines the infrastructure, costs, and revenue streams that go into running a business, the lean canvas focuses on the channels that enable you to troubleshoot a specific problem. The broader business model canvas pays close attention to customer segments, channels, and relationships, while the lean canvas deemphasizes these elements.

  • What is Included in a Business Model Canvas?

Although you can adapt the business model canvas to your needs, they generally contain nine core components. Here are the building blocks of a business model canvas.

  • Key partners. Every business model canvas lists the partners and suppliers that your business leverages for success. The canvas includes any motivations for the partnerships — i.e. what exactly you get out of them.
  • Key activities. The canvas summarizes the activities that your business must undertake in order to support your value proposition. It lists the activities that are most important for distribution channels, customer relationships, and revenue streams.
  • Value proposition. The value proposition is the core value you aim to deliver to your customer. Think of it as two key components: the need you are serving for your customer, and how that’s different from what your competitors are doing.
  • Customer relationships. These include any relationships you have with customers, including how you interact with them, how interactions differ between customers, what needs your customers have, and how you integrate those needs into your business in terms of cost and format.
  • Customer segments. These are the ideal customer personas that your value proposition is designed to benefit. A basic business model canvas outlines the potential differences between segments and steps in the customer journey.
  • Distribution channels. The canvas details how you reach customers, provide services, and deliver your value proposition. This portion of the canvas answers crucial questions about your customers, such as: Which channels work best for reaching them? How much do they cost? How can you integrate these channels into your workflows and your customers’ routines?
  • Cost structures. A business model canvas identifies the primary costs that go into operating your business and providing services. It shows the relationship between those costs and other business functions, including which resources or activities are the most expensive.
  • Key resources. These are the resources that your business uses to operate distribution channels, provide services, maintain customer relationships, and build revenue streams.
  • Revenue streams. The canvas describes how your business generates revenue by delivering on your value proposition. How do your customers pay? How much does each revenue stream contribute to your overall revenues? And what are you customers willing or unwilling to pay for?
  • How to Create a Business Model Canvas

To create a business model canvas, start with your overall business model. At its core, a business model is simply:

  • The products and services you plan to sell,
  • the expenses you will incur in delivering those products and services, and
  • how you expect to make a profit.

Once you have those core components in place, you can break them down even further in your business model canvas. Spell out the partners, activities, resources, and propositions that define your business and allow you to offer your products or services. From there, articulate the relationships you have with your customers, including your customer segments and the channels you use to reach them. Finally, you can spell out the cost structure and revenue streams associated with your business.

  • Creating Your Own Business Model Canvas

Want to get started on your own business model canvas? Miro’s free template makes it easy to customize and share a business model canvas with your collaborators. Get started today!

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2X

MANAGEMENT • 4 MIN READ

How To Create The Perfect Business Model In 8 Steps

image-of-business-man-creating-a-perfect-business-model

Get your Business Model wrong…

And you’re %&$#?@!

But if you get your Business Model right, Things become WAY easier.

After working with hundreds of entrepreneurs and business owners over the past few years, I’ve realized:

Nearly everyone is making their business model…

  • Too complex …
  • Horrible for cash flow (which is kind of important; more on that later) …
  • Creating a job for themselves (and not a real business) …
  • And trying to combine multiple business models into one …

Long story short, they’re setting themselves up for failure right from the start.

My focus with this article (and what we do at 2X ) is to help get your Business Model dialed in so you have the best odds of accomplishing your goals – freedom, profit, impact, growth .

This is why it’s the FIRST STEP we take when working with a new client.

image-of-2x-triangle-focusing-strategy

Strategy sits at the core of our 2X Formula , and your business model is a huge part of this. So if there’s ONE thing we can get right when working with a new client, it’s making sure they create a simplified, focused, and VERY strategic business model!

Yet, I’m guessing YOUR business model is far from optimized.

How do I know this?

Well… We work with a lot of successful entrepreneurs at 2X.

These are not people who have just started out; these are 6 and 7-figure business owners, and although they’re already having some success…

100% of Them Had An Unoptimized Business Model!

That’s right! Even though these are already successful businesses, EVERY SINGLE ONE OF THEM needed a more simple, more focused, more strategic business model… and in today’s article I’d like to show you how we help them do this.

So if you feel like you’re doing everything “right”, but you’re not:

  • Seeing the traction you would like …
  • Experiencing the growth and numbers you planned for …
  • Getting the most out of your team, or your own time management …

And you’re generally working harder and longer than ever, and beginning to think you’re stuck in ‘hustle mode’… there’s a very good chance it comes back to your business model.

I have 8 Business Model tips for you, which I’ve discovered after working with dozens of entrepreneurs and CEOs, so you can:

Scale and grow easier (and faster) … Get A LOT more productivity out of your team … Have more time to work “on” your business (instead of being stuck inside it) … Finally remove yourself as the bottleneck …

So let’s dive into the first tip, although if you prefer to watch, here’s an accompanying training video…

1. Cash Flow… The Lifeblood Of Your Business.

When you’re coming up with your strategy, you NEED to take cash flow into account. No exception, no matter who you are — whether you run a 7-figure business or are just starting out.

It blows my mind how few entrepreneurs think about cash flow when creating their business model, and it’s an issue we run into again and again when working with clients at 2X.

They come to us with a really solid business, and they are great at what they do, but they’re stuck on the six-figure hamster wheel because they don’t have a hold on their cash flow.

And this isn’t just about how much money you have in your account. This is important, sure, but what’s more important is that you have more money coming in than what’s going out. Not only that… the money coming in should come in quickly, whereas the money going out should leave over a period of time.

Take how we approach cash flow at 2X…

The majority of our clients pay in full, up front. Whereas a good portion of our team gets paid later based on results.

This means we always have really healthy cash flow, because the majority of our expenses come on the back of great results, which allows us to reinvest into our team and business, so we can acquire more customers… who give us more money up front… and this whole epic cycle continues.

It really is a beautiful thing, but we were VERY intentional about this when building our business model.

image-of-quote-its-not-only-how-much-money-is-going-in-and-out

And doing this is easy, but so few entrepreneurs do it.

Take one of our recent 2X clients : a great agency run by Thomas and Catherine, who produce amazing results for their clients.

They should have grown month-on-month, but didn’t. They’ve been flat for a while and struggled to get to the next level because they never had enough cash flow . This wasn’t surprising, because they:

  • Charged a small fee up front…
  • A few weeks later, charged a ⅓ of the project fee…
  • And then, at the end of the project ( often two months down the line ) charged the rest…

This meant they didn’t get paid the majority of their fee until AFTER they did all the work.

Well… we helped them fix this straight away!

Once they did, they more than doubled their business ( practically overnight ), and did this while Catherine went on maternity leave ( and the whole family went on a big vacation ).

2. Make YOU Replaceable… Don’t Be Your Own Bottleneck.

Last year I sat around a table of entrepreneurs, sharing stories, challenges and ideas.

Five of us were all around the same level, but two of the guys were way ahead in term of success and business size. It was a talented table, and everyone around it shared great ideas.

But I noticed something important when we all answered this question:

“What’s the number one thing that’s holding you back at the moment?”

We went around the table, and one person said cash flow and another said acquiring customers, and we all had our own excuses.

But then it got to the two most successful guys, and they both said without hesitation,

“ME! I’m The Bottleneck.”

The biggest bottleneck ( almost without exception, in any business ) is the CEO.

The reason is, most businesses are built around the founder. They rely on them to come up with the ideas and scale and grow, and often to even get everything done. When you’re at the beginning this is fine…

But the most successful businesses are those that create a business model that does the opposite: uses the founder as leverage instead of as a bottleneck .

The entrepreneurs I know who are making the biggest strides and growing the fastest are those who have designed their business model so it can scale without them (not rely on them to do all the work).

This means…

You need to make sure you’re replaceable. You have to hire a team and create processes that allow you to work “on” the business, not in it.

And a good way to gauge this is to ask yourself:

image-of-what-would-happen-to-your-business

For most, just thinking about that creates a lot of anxiety, so if your answer isn’t that it would survive and thrive without you, then you DO NOT have a business model designed for true, scalable growth.

3. Focus On ONE Audience… Stop Chasing Three.

The saying goes that the “person who chases two rabbits catches neither.”

The same applies to business, but it’s crazy how many entrepreneurs I speak to that tell me about their different offers and products … and really, all they’re saying is that they have 3 different audiences who all want and need 3 different solutions.

This is crazy.

image-of-serve-one-audience-and-do-it-well

It’s easy to try and please everyone, but in the same way you can’t catch two rabbits at once, you cannot truly impact more than one audience at any one time.

So let me ask you… what would happen if:

  • You focussed on one audience…
  • You knew this audience on a deep level…
  • You communicated to, and built messages specifically for them…
  • You designed a specific solution that creates true transformation…

You would make a massive impact, right? Of course you would, and your business would go through the roof!

This is how powerful it is when you design your business model around ONE audience, because when you build ONE offer they need, you create magic. This leads us to the next step…

4. Build ONE Core Offer… And Be Known For That.

Once you know who your ONE audience is, the next step is to build ONE core offer for them.

Sounds simple, and honestly… it is!

But the reality is that most entrepreneurs struggle with this because they worry about niching down and committing to the wrong audience or offer.

You have to fight this.

The business model your company needs should be SIMPLE. It should be specific to one type of person, and solves their problem in a specific way.

image-of-become-know-for-your-flagship-offering

Because as soon as you offer more than one solution, you dilute your marketing and message, and you create a ‘paradox of choice’ where your audience doesn’t know what they should choose — so they do nothing because it’s easier than trying to figure out the “right” answer.

This doesn’t help them and it doesn’t help you, so figure out what your ONE offer is for your ONE audience, and build your entire business model around this.

We Practice This At 2X, Because We Have ONE Core Offer For One Type Of Business Owner.

Our core offer that everyone knows us for is our 2X Accelerator program . It’s the same price for everyone, and it offers the same guarantees to all members. This keeps things SIMPLE, and helps us drive better results by optimizing and mastering ONE offer.

(we’ll do 7-figures in our first year with high profit margins, largely in part to this laser-focus on one core offering)

Most entrepreneurs think that ‘new’ and ‘more’ will save them. Often times, it won’t. Double down and make something great and you’ll be much better off.

image-of-a-simple-successful-business-model

5. Own A Phrase… Become The “Go To” Expert.

Once you have your ONE audience, you want to remove all competition and become the only “go to” expert they need (or even think about).

The best way to do this is to…

… OWN A PHRASE!

Let me explain…

Your ONE audience needs to see you as the ONLY solution to their problem, and the best way to do this is to own a relevant phrase so you remain top of mind, all the time.

I saw how crucial this is first-hand with one my previous businesses: From 6 to 7-Figures.

We intentionally built our business model around becoming the “go to” solution for self-published, non-fiction, business authors when launching their book.

So We Began To Own The Phrase… “Book Launch”

Everything we did focussed on “Book Launch”:

  • Marketing …
  • T-Shirts we wore …
  • Copy (both inside our marketing, and sales pages ) …
  • Program names …
  • Talks / Events / Networking …
  • Internal communications and team meetings …

Everything we did focussed around the phrase, “Book Launch”.

And before long, anybody who had a friend who mentioned their book launch, and they were:

  • Self-Published.
  • Non-Fiction.
  • Business Author.

… straight away they would say, “you need to speak to Austin at Epic Launch.”

We owned this phrase, and it lead to consistently qualified ‘hot’ leads every single week.

But this didn’t just happen. We consciously focussed on our ONE audience with ONE core offer, and made sure we became ‘top of mind’ by owning a relevant phrase so they saw us as the only solution.

These Three Elements: Audience + Offer + Phrase = Insane Results, And A Business Model That Works!

So once you know your audience and what your core offer is, think about the phrase you can own that will keep you top of mind with them.

  • What phrase will help you attract the right people?
  • What phrase is both memorable and relevant to you?
  • What phrase creates a positive association between your core audience and core offer?
  • And how can you become the go-to for this phrase?

6. Define Your Core Marketing Channels… And OWN Them.

This is one of the biggest mistakes we see entrepreneurs make when it comes to their business model…

… They go all in, into one platform.

I love the focus and you should dial in one core lead source at a time… … but putting all your faith into (and relying solely on) ONE marketing channel…?

A disaster waiting to happen!

A buddy of mine experienced this a couple of years ago…

He owned an ecommerce business that was on fire, growing quickly month-on-month.

But then his fast growth fell to zero as soon as his Facebook advertising costs doubled with some changes outside his control.

This, along with lower conversions and higher competition forced him to make some major investments in other forms of marketing.

image-of-those-major-investments-did-not-work-out

All this stemmed from an over reliance on a single channel, and I’ve seen countless others do the same with Google, one JV partner, etc.

But what happens if an advertising source changes their algorithm? What happens if a company goes away altogether?

You’ll wish you had multiple sources of leads … ( just like multiple sources of income is one of the keys to personal wealth ).

Please, do not back yourself into a corner like this.

A successful business model does not rely on a single platform, form of marketing, partner or client. Invest in 2-3 marketing channels that drive consistent leads, and for each one you need:

  • A great strategy — so you get the best results for the least effort…
  • A system / process — so you can repeat and consistently scale with ease…
  • An owner — someone on your team who takes charge and owns this channel…
  • KPIs & tracking — so you know the numbers, and can keep your team accountable…

7. Get Your Numbers Dialed In… From The Very Beginning.

As CEO, your decision making determines everything. But you can only make right decisions if you understand the numbers and dial them in.

And here’s the honest truth… The first time you do this, it may sting.

Honestly, most entrepreneurs don’t understand their numbers, and in the beginning when you’re hustle and grinding, you can get away with it.

But as you evolve from hustling entrepreneur into successful CEO… you need to know your numbers!

You need this dose of reality, and you need to objectively base your decisions on the:

  • Financial numbers…
  • Core KPIs and measurables…
  • Key data points…

This is why NUMBERS play a fundamental role in the work we do at 2X …

image-of-2x-triangle-focusing-numbers

When we work with a new client, we start with their vision and goals and what they plan to accomplish, but then dive into their numbers and figure out if what they’re doing will help them achieve this.

And I’m afraid to say, most of the time the numbers don’t add up.

So do the math! Does it add up to your goals?

If not, you need to change your strategy and business model, and you need to dial in your numbers so everything aligns.

Knowing your numbers is one of the most important things you will ever do as a CEO, although nothing we’ve talked about so far matters unless you do this final thing …

8. Align ALL This With Your Vision!

Building the perfect business model means nothing unless it aligns with your vision.

This is why the first thing we do with a new client is dive into what they TRULY want…

  • Want a million bucks…? Great.
  • Want more time with your family…? Fine.
  • Want to travel the world and work from a laptop…? Sure.

Whatever your vision is… build the business model that will make this happen!

Use the other seven tips we talk about in this article, sure… but none of that matters unless you:

  • Have a specific vision (that gives you purpose).
  • Align your business model to this vision.

This is why this final tip is the most important of all, because unless you get this right, everything else will fall apart as you grow and scale your business.

Which is why VISION is central to our entire 2X Formula .

image-of-2x-formula

If you align your business model with your vision, you WILL build something amazing.

We’ve seen how powerful this process is at 2X.

We work with talented people each day who have a great business, but struggle to scale to the next level (and are burning out because all they know is to hustle and grind).

Yet within 90 days we help them 2X their business, and:

  • Increase their revenue and profits like Ryan and Erik , who went from $6.5 million before they joined 2X, to more than $35 million while in the 2X program…
  • Remove their key bottlenecks holding them back like Alex did, who learned how to leverage his time and team properly while working with us, and tripled his business in just 42 days …
  • Optimize their team and improve their operations like Willem …
  • Save them time so they can work “on” the business (instead of “in” it) like Thomas and Cathrine , who scaled their business while Cathrine was on maternity leave, giving them the work/life balance they desired …

We do this by guiding them through the 2X Formula, offering them 1-on-1 business coaching and mentorship . You’ve seen part of this process in today’s article, but it only scratches the surface.

So if you want to see the entire 2X Formula in action, we’ve recorded an in-depth training that goes through it step-by-step.

how to make a business model

The Playbook To 7+ Figures

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Einstein and the Quantum Beer Keg

The us opaque control over the internet, openmind books, scientific anniversaries, why is autumn yellow in europe and red in north america, featured author, latest book, what is a business model and how to make it effective.

The concept of  business model  changed substantially over the last few years. It can no longer be defined as the way a company generates money or a person attracts clients. Its definition has gone farther and now refers to the pure needs of users and clients.

How is it possible that the largest private transportation company does not own a single vehicle? How is it possible that the largest accommodation company in the world does not own a single hotel?

Alex Osterwalder,  in his book “Business Model Generation” , states that innovation in business models consists in  creating value for companies , clients and society in general, i.e. in  replacing obsolete models.

“A business model describes the rationale of how an organization creates, delivers and captures value for the client”

Alex Osterwalder

These are some examples of the new business models: the digital player iPod and the online store iTunes.com , which Apple used to create an innovative business model that made it the undisputed leader in online music. Skype offered international calls at very low rates as well as free calls between service users with an innovative business model based on P2P technology.

With the help of  Zipcar , residents in many cities no longer need to own a vehicle; instead, they can rent any car for a few hours or days in exchange for a membership fee. This business model results from  the new needs of users  and the worrying environmental conditions.

Three mandatory elements in a Business Model

  • Profitability:  No business is created to lose money; consequently, it must be profitable.
  • Scalability:  Being able to create one now, another tomorrow and so on and so forth until you have a model that takes over the market.
  • Repeatability:  Being able to standardize them to be able to replicate them anywhere, e.g. franchise products.

In other words, when you release a product or service , it must feature the three elements that should guarantee its market success: Desirable, Viable and Profitable.

How to create value with a business model

By being close to the client. By creating very close relationships from the very beginning so as to know the client’s needs or problems, while always listening to them and co-creating with them. And once the product has been released, it must be possible to receive feedback to be able to discern the model that allows clients to find the added value it brings.

“Customers comprise the heart of any business model. Without customers, no company can survive for long”

Alexander Osterwalder

Flexibility is the key to a business model’s success . For this reason, we highly recommend the Canvas Model because, using this method, you employ nine blocks to test whether you are targeting your product at the right segment or whether your value proposition really meets the needs of your clients.

“Businesspeople mistake objectives, mission and vision for strategy. And strategy is the path toward being unique,” Michael Porter. / Image: Daria Nepriakhina on Unsplash

How can I offer added value when compared to my competition?  By providing a better solution to an existing need (adding value to your client) and improving how you deliver this solution. As a consequence, a good business model means finding a different way of competing.

9 Business models recommended by  Guy Kawasaki

  • Multicomponent.  A good example is  Coca-Cola , which is sold in supermarkets, neighborhood stores and vending machines. The same product is sold in different settings, for different prices and with different presentations.
  • Market leader.   Apple  is the personification of a market leader that creates innovative and attractive products for its clients.
  • Valuable component.   Intel  manufactures valuable elements for other products; these elements are not sold directly to the client but they differentiate the company from its competitors.
  • Switcher.   De  Beers   controls the supply of diamonds; this model involves several challenges: to win control of supply and to convince the consumers that this control is desirable.
  • Printer and Toner.  Also called Bait and Hook. This business model consists in selling a product that needs consumables, such as  Nespresso machines.
  • Freemium .  Consists in giving services away up to a certain limit; after that, the clients need to pay. For example,  Evernote, Spotify, Dropbox , etc.
  • Eyesballs .  Consists in offering a platform to create or share content that attracts visitors, normally selling advertising, e.g.  Facebook, Huffington and Instagram .
  • Virtual products.  Consists in selling digital codes for products with almost nil costs and maintenance in terms of inventory. For example, Candy Crush and other videogames.
  • Handcrafted.  Furniture is an example of this business model that prioritizes quality and handcraftsmanship.

Other business models in the market:

  • Affiliation:   A company that wishes to sell a product and defines some kind of reward for suppliers, companies or people that attract clients or orders for its products.
  • Long tail:   The long tail business model is innovative because it offers a wide range of little sought-after items that may become profitable businesses and generate profit on the basis of a large volume of small sales.
  • Franchising or licensing.  This business model allows entrepreneurs to “exploit” a proven business that works and is replicated where it does not exist yet.
  • Subscription.  This business model consists in having the user pay a subscription in exchange for a value proposition. Classic examples are subscriptions for paid TV, magazines, newspapers and Netflix.

Netflix seems to make less profit with its content than other companies. However, this comparison does not take into account the value of data that are used to reduce the cost of buying new content. Source: Investopedia

It should be noted that the axis of a business model is the Value Proposition , which consists in knowing what you have that others do not have and that people are willing to pay for. The best enterprises happen when the entrepreneur has first-hand experience of the need they wish to meet and offers a solution.

Consequently, if entrepreneurs and businesspeople want to dominate the market, rather than worrying about creating the ideal product they should worry about designing the “Business Model” that allows them to have profitable companies over time and that survives with residual income while making them the leaders in demand among their clients and consumers.

Guiovanni Quijano

@MktQuijano

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Geopolitics, global economy, comments on this publication.

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How to Create a Business Model Canvas (With Template)

May 19, 2021 - 10 min read

Yuvika Iyer

Do you want to create a simple business plan? Something comprehensive, flexible, and easy to scribble on a napkin? You can do that with a business model canvas.

Every business has ever-changing, diverse interests. Illustrating all of this on a single sheet of paper may sound challenging — but by using a business model canvas template, your team can focus on the key elements of your business to ensure nothing slips through the cracks.

Business model canvas explained

"Lengthy business plans often increase the risk of failure," wrote Alex Osterwalder in his 2008 book “Business Model Generation.”

The business model canvas offers a way to avoid this, providing a simplified version of a business plan. A business model canvas is a simple, visual framework that helps teams outline the most fundamental elements of a business.

As a handy business tool, teams can use a business model canvas to map the nine core areas of a business, such as customer needs, value proposition, and platforms for customer acquisition.

This article will explain the business model canvas, its benefits, and how it can help your team develop a successful high-level business strategy and actionable roadmap .

How can a business model canvas help your business?

Many teams are so overwhelmed with operational issues that they don’t have time to focus on the core business strategy .

Utilizing the business model canvas helps create a unified framework that depicts this strategy alongside an action plan that teams can follow.

But how do you know if you need a business model canvas? If you are starting a business or even toying with an idea, a BMC can create a powerful visual representation of your concept. A business model canvas can also be a handy reference for your team as they move towards successful business outcomes. Here are five more ways in which a business model canvas can help your company.

It’s simple and easy to follow

Whether you have a business idea or are managing a large enterprise, having an easy-to-follow business plan can be immensely helpful. As a precise one-page document, teams can modify specific business model canvas elements as they go along without completely redoing a 50- or 100-page document.

Focused on being actionable 

Every business plan needs to be actionable. Using a business model canvas helps you accurately define your organization’s core value proposition and keep it aligned to your business strategy.

Your focus could be to achieve profitability in the first year or gain a large market share. Stay competitive by defining actionable steps for your team within the business model canvas.

Flexible and scalable as the business evolves 

No business stays the same forever but evolves as it interacts with diverse market dynamics, competitors, product innovations, and changing consumer needs.

To take your idea to market, you need a tool that connects the dots between what your customers want, your business's unique offering, and the desired profitability streams.

By creating a business model canvas template, you instantly get an edge over other market players engrossed in lengthy business plan documents.

How to Create a Business Model Canvas (With Template) 2

Puts the customer first

Ignoring customers sets businesses up for failure . Companies flounder if they direct their energies solely towards making a great product or service. With a business model canvas template, your focus stays on the ultimate end-users of your product. 

Having a business blueprint will force team members to think about what customers want, the primary issues they need help with, and how your product or service can do that. 

Helps get team and executive buy-in

23% of businesses fail without the right team on their side. Every company needs team members with a diverse mix of skills, experiences, and talents.

Companies require a solid business blueprint for hiring team members or bringing in investors. Having a business model canvas can help get everyone on board with your organization’s core vision. Potential employees and investors can visualize how the different organizational parts interact and see how they can become an integral part of the company.

Promotes focus on the unique value proposition of your business

19% of companies fail due to being outperformed by their competitors. If there's no difference between your product and one from another firm, why should customers come to your company? Every business needs a clear value proposition that helps them stand out — that's where a business model canvas template comes in.

When you look at the nine core elements of a business model canvas (explained below), you'll quickly notice some factors are controllable to a certain extent, while others are more fractious.

Your company's core value proposition sits right in the middle. It acts as the central pillar around which all other elements exist, defining the fundamental nature of the business.

What goes into each segment?

To fill out a business model canvas, you should know what goes into each of the nine fundamental segments.

Have a business model canvas template ready before you and your team start brainstorming on each of these elements (you'll find one below) and then add the research and data into the relevant sections. 

Customer segments In this fundamental business area, teams identify the core individuals they will help with their product or service. To do this, they create two to three buyer personas — potential customers that a business seeks to serve.

A buyer persona is a simple but detailed description of a prospective business customer. It assists with capturing the customer’s real-life problems and motivations, helping the business deliver what they want.

Value proposition The value proposition is the ultimate value that a customer will get from your product or service. It seeks to answer the question, “Why will a customer buy?” Here are a few popular value propositions for any organization:

  • Customization ability
  • Unique product design
  • Innovation in product or service
  • Exceptional service or product status
  • Affordable pricing and clear pricing model definition

Channels In a business model canvas, channels are the platforms through which a company sells its product or service to end-users. To identify the best channel for your business, look at how you plan to connect with your customers.

A few possible channels can be:

  • A self-owned retail store
  • Direct sales staff
  • Affiliate marketing platforms
  • Google Adsense

A business can either own its channels or partner with other companies that have their own channels.

Customer relationships Customer relationships in a business model canvas define how the company will obtain, retain, and increase new customers. Let's take a look at how customer relationships are built:

  • Identify how to obtain customers and from which platforms (e.g., Google, Facebook ads)
  • Gain clarity on how to retain existing customers using different techniques (e.g., exceptional customer service)
  • Discover how to increase the customer base of the business (e.g., sending text or email notifications to prompt website visits)

Revenue streams Revenue streams help the business owner decide how to generate revenue and achieve their predefined organizational goals . Key decisions with revenue streams include:

  • Choosing from a one-time payment model or monthly subscriptions
  • Keeping a free plus paid model or a wholly paid product or service with a free trial
  • How payment from customers will be received — website payments, PayPal, or in-store

Key resources Key resources in your business model canvas represent the assets that are vital to your company’s operation. Business assets can include anything from the below categories:

  • Physical assets , including machines, buildings, IT hardware, and vehicles
  • Intellectual assets , including patents, copyrights, partnerships, brands, and employee skills
  • Human assets , including talented employees in knowledge industries such as IT, law, and content marketing
  • Financial assets , like cash balances in the bank or lines of credit

Key activities Want to make your business canvas model work? Make sure to list the key activities that will help expand the business's core value proposition. Key activities can come from any of the below categories:

  • Production: How you will deliver your end product to the customers. You may need to order more stock or upgrade materials
  • Platform: For example, the software used to sell your product, which may require upgrades or maintenance
  • Problem-solving: For example, designing innovative solutions for issues that your customers face

Key partners Every business has some non-core activities that should preferably be outsourced. Key partners are the companies or individuals that complete these non-core activities.

Take a company like Facebook, for example — its key activity is to upgrade and maintain its platform. It doesn't create its own ads, so it also needs to strike deals with companies that wish to advertise on its platform. 

Similarly, it doesn’t create its content — the users do. The primary reasons for choosing key partners can be:

  • Achieving economies of scale
  • Mitigating risk and unpredictability in business
  • Acquiring resources and advertisements for its business (e.g., ads for Facebook)

Cost structure Once the key activities are outlined on the business model canvas, it's time to assign cost structures. Be clear and precise with the estimated business costs of the planned activities to ensure you reach your profitability goal.

Business model canvas example and template

How to Create a Business Model Canvas (With Template) 3

  • Customer segments: Facebook's customers can be divided into two distinct categories — advertisers and platform users
  • Value proposition: The primary reasons platform users come to Facebook. Users feel connected to friends and families, while companies get more leads through advertising on the platform
  • Channels: The website where all data is stored
  • Customer relationships: Facebook incentivizes users to stay on the platform through notifications and new features, leading more companies to advertise on it
  • Revenue streams: Facebook earns money through advertising, while companies gain new customers from Facebook ads
  • Key resources: Facebook's key resources are its platforms — Facebook.com, the Messenger application, and Facebook Ads Manager for advertisers
  • Key activities: Maintaining the website and its infrastructure are two of Facebook’s key strategic activities
  • Key partnerships: Facebook's key partners are its users and advertisers
  • Cost structures: Major costs incurred by Facebook include managing the software, backend engineering operations, product development, regular operations, and staff salaries

How to create a business model canvas (with template)

Ready to create your business model canvas? Before you begin, take some time to brainstorm answers to these questions related to the nine core fundamental areas of the canvas. Here's a simple business model canvas template exercise that can help your team get started.

  • Customer segments: Can you identify your potential customers?
  • Channels: Once the product or service is ready, how will customers discover it?
  • Key partnerships: Can any non-core business activities be outsourced?
  • Customer relationships: How will your business generate leads and retain and increase your customer base?
  • Cost structures: Can the business classify its main costs and expenses into fixed and variable? Is there a way to align costs with the core value proposition and planned revenues?
  • Revenue streams: Has the business decided on a profit margin? How will it make money?
  • Key resources: Which core resources are critical for the business to succeed?
  • Value proposition: Why will customers choose your business? Does the company satisfy any particular need with its product or service?
  • Key activities: Are there any activities that help your business deliver its unique value proposition to customers?

Do I need a lean model canvas? 

If your business is still an idea or in its infancy, choosing a lean model canvas makes more sense.

Inspired by the business model canvas, the lean model canvas was created by Ash Maurya . It is a one-page business plan template that distills the lean startup methodology into the original business model canvas. 

Lean model canvas assimilates multiple essential data points to develop a simpler, start-up optimized version of a business model canvas. It adds four more building blocks to the business model canvas, namely:

  • Problem: Identify the problem faced by the customer and focus on solving it
  • Solution: Start with a minimum viable product that helps solve the customer problem effectively
  • Unfair advantage: List the barriers to entry in a specific sector and your company’s competitive advantages
  • Key metrics: Focus on one goal at one time to ensure you’re doing a good job

Lean model canvas drops four elements from the original business model canvas — key partners, key activities, key resources, and customer relationships. 

While the original illustrates a more comprehensive business approach, the lean model canvas has a sharper customer orientation. Many start-ups prefer the lean model canvas to a traditional business plan for building an actionable roadmap.

The lean model canvas is a great fit for younger companies or those working with a tight time frame or budget to market with a more targeted problem resolution approach.

Why you should use Wrike to build a business model canvas 

The business model canvas’ nine building blocks clearly illustrate the core business areas and their interrelationships. Whether you're trying to figure out the model for a company with three employees or 50,000, a business model canvas can be very useful.

Begin by mapping out the most crucial information about your business, then link the blocks to ensure every value proposition is linked to a revenue stream and a specific customer segment.

Using Wrike to build your business model canvas template, you can iterate faster, communicate with ease, and enable organization-wide success . With a centralized hub, your teams can configure custom dashboards easily and produce better quality work using premade templates . Implement what you've learned about the business model canvas by trying out a free two-week trial of Wrike today.

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Yuvika Iyer

Yuvika is a freelance writer who specializes in recruitment and resume writing.

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What Is Business Process Outsourcing? A Guide

What Is Business Process Outsourcing? A Guide

As businesses scale and grow, they often have requirements that cannot be addressed internally — whether because of resource or budgetary constraints. Business process outsourcing (BPO) can be a solution that enables organizations to grow and scale effectively. But exactly what is business process outsourcing? What are the risks associated with the practice, and how can corporate leaders use business process as a service (BPaaS) to their advantage?  BPO meaning: What is business process outsourcing? Business process outsourcing describes a practice where specific tasks, functions, or processes within a company are contracted out to third-party organizations and vendors. These outside organizations have expertise in their specified area, which allows them to manage tasks and processes on behalf of other businesses.  For example, a marketing agency, during their resource planning process, may choose to outsource their payroll and accounting functions in order to focus on the core competencies of their organization.  There are three types of business process outsourcing: offshore, nearshore, and onshore outsourcing.  Offshore outsourcing: The function is managed by an operator or vendor in a different country (often far away and in another time zone) Nearshore outsourcing: The function is managed by an operator or vendor in a neighboring/closeby country Onshore outsourcing: The function is managed by an operator or vendor within the same country — but could be in another state or region  Business functions ideal for outsourcing may include admin, customer service, PR, data entry, HR, content moderation, and more.  Business process outsourcing can improve efficiency and present significant cost savings for companies that may not have the resources to hire a team of in-house customer service specialists or payroll professionals, for example.  In fact, Deloitte research indicates that 59% of companies who outsource say they do so with cost savings as a primary motivator. What is business process as service (BPaaS)? Business process as a service enables BPO by managing specific functions through cloud-based delivery systems. The global BPaaS market is extensive and expected to reach a value of $77.8 billion by 2023. Some well-known names in BPaaS include Accenture and IBM.  BPaaS can help manage:  Finance and accounting  IT services  eCommerce Customer service processes BPaaS leverages the capabilities of infrastructure as a service (IaaS), software as a service (SaaS), and platform as a service (PaaS) solutions in order to help companies manage and address their business objectives.  Business process as a service also relies on automation in many cases, reducing the need for manual intervention. Who needs business process as a service (BPaaS)? Business process as a service can be beneficial for organizations across sizes and industries. For example, instead of hiring an outside firm to manage their finance and accounting needs, a company might instead execute this function via a cloud-based platform licensed through a monthly subscription model.  This naturally brings costs down and offers a more flexible and scalable way of managing operations.  Any company looking to manage processes without the costs associated with hiring, training, and managing an internal team or department may find that BPaaS is an effective solution.  What are the benefits of outsourcing business processes? There are many benefits associated with outsourcing business processes. These benefits include cost and time savings, efficiency gains, the ability to focus on core business competencies, and more. Be sure to keep these in mind when contemplating outsourcing professional services key success factors, and which professional services agency is right for you.Cost savingsHigh costs associated with labor, training, management, and infrastructure can be a barrier as an organization scales and grows its operations. Outsourcing non-core processes can enable businesses to meet their objectives and operational needs while minimizing these internal costs and time commitments. Access to expertise and improved efficiencyBPO gives businesses access to vendors that have the necessary expertise, equipment, and personnel needed to execute a project or function on their behalf. This expertise means they are better equipped to provide cutting-edge, compliant, and effective services.  Ability to focus on key business competencies As a company grows and scales, there is often a need for growth or expansion in other areas of the business.  For example, a high-growth eCommerce company may need increased customer support capabilities to provide quality assistance to customer queries and issues. In this instance, outsourcing customer support staff to an agency or outside vendor allows the business to focus on its main competencies while also addressing customer challenges that can impact the bottom line.  As is the case with most things, business process outsourcing can have its set of challenges and risks. Are there risks to business process outsourcing? Risks in business process outsourcing can include lower than expected or inconsistent quality of service, lack of visibility and collaboration with the vendor, and security considerations. Inconsistent delivery We’ve all been there. A service looks good on paper, but the results turn out to be inconsistent or of a lower standard than expected. This is always a risk, especially when outside vendors are involved.  Lack of visibility and collaboration When handing over the keys to a business function, visibility and communication allow those within the organization to accurately track progress, success, and any challenges. Lack of visibility is a huge risk and could mean that a lower standard of service is inadvertently being passed on to customers.  Privacy and security concerns Privacy and security are a top concern in business process outsourcing. In most cases, BPO will involve some degree of handling sensitive or confidential internal data. Engaging a vendor with lax digital security policies may make an organization vulnerable to breaches or attacks.  As Deloitte notes, the tax implications of business process outsourcing should also be a consideration and factored into any business case. How to choose the right BPO vendor Choosing the right vendor can help avoid headaches, losses, and disputes. Here are some tips for choosing the right BPO partner for your business.  Due diligenceDue diligence will involve researching the vendor and their reputation to determine if they have success and experience with your industry, project type, or company size. Understand costsWhile cost-saving is a major factor when establishing a BPO partnership, unexpected fees may make outsourcing pricier than initially thought. Evaluate security infrastructureWhen determining the suitability of a vendor, be sure to assess their ability to manage and protect sensitive information.  Communicate clear objectives and KPIsClearly communicate objectives, expected outcomes, and KPIs and ensure they have the capacity to deliver.  Ensure stabilityOutsourcing a business function can be risky if the third party is in a financially, legally, or otherwise unstable position. Overreliance on unstable vendors can be a unique challenge to overcome.  How to organize your BPO with Wrike Streamline and simplify your business process outsourcing with Wrike. With Wrike, you can:  Create and manage a risk register for your vendor and the outsourced function Invite vendors as external collaborators to share reports and status updates Share and store vendor meeting minutes using our actional meeting notes template Integrate data from 400+ applications like Salesforce, Marketo, and more  Take advantage of the cost savings, time savings, and expertise that BPO and BPaaS can afford your business. Be sure to track and manage progress, communication, and risk using Wrike.  Sign up for a free two-week trial and discover why 2 million+ people trust Wrike to manage and execute their tasks and projects.  

The Ultimate Guide to Business Process Modeling

The Ultimate Guide to Business Process Modeling

Struggling to optimize your business processes? Find out process modeling benefits and techniques for executing business process modeling projects successfully.

What Is Business Forecasting? Why It Matters

What Is Business Forecasting? Why It Matters

What is business forecasting? Forecasting helps organizations strategize and, when done right, can give you a competitive advantage. Read on to learn more.

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7 Steps for Establishing the Right Business Model Building a product may be the easy part of a startup. Don't forgot about the other, equally important half of the equation.

By Martin Zwilling • Jan 30, 2015

Opinions expressed by Entrepreneur contributors are their own.

Most technical entrepreneurs focus hard on building an innovative product, but forget that an elegant solution doesn't automatically translate into a successful business. Businesses require an equally elegant business model, with the right price, messaging and delivery channel to the right target customers to keep the dream alive and growing.

Defining the right business model requires the same diligence as designing the right product, but the approach and skills required are different. That's why investors acknowledge that two co-founders are often better than one -- with one focusing on the technical solution, and the other focusing on defining and building the business model. These two jobs need to be done in parallel.

Related: 6 Great Business Models to Consider for a Startup

This dual-leadership approach would have avoided the frustration I felt in a startup a few years ago where beta customers loved our software solution as a free prototype, but we couldn't sell one in the first few months for a price that seemed reasonable for all our work and innovation. The founder had simply not done the work to validate a price and customer segment.

In the investment community, this work is called proving the business model. It starts with validating a business opportunity (a large customer segment willing to pay money to solve a real problem), in much the same way as your proof of concept or prototype validates your technical solution. Here are seven steps I recommend for establishing the right business model:

1. Size the value of your solution in the target segment.

Customers often complain that existing approaches are not intuitive or integrated, but old solutions may be familiar and locked in. Estimate your costs, including a 50 percent gross margin, as a lower bound on a price. Products too expensive for the market won't succeed, and prices too low will leave you exposed. Match with competitor prices and market demographics.

2. Confirm that your product or service solves the problem.

Once you have a prototype or alpha version, expose it to real customers to see if you get the same excitement and delight that you feel. Look for feedback on how to make it a better fit. If it doesn't relieve the pain, or doesn't work, no business model will save you.

3. Test your channel and support strategy.

Now is the time to pitch the entire business model to a group of customers or a specially selected focus group. This is not just a product pitch, but must include all elements of your pricing, marketing, distribution and maintenance. Here again is your chance to make pivots for almost no cost.

4. Talk to industry experts and investors.

A small advisory board of outside people with experience in your domain can give you the unbiased feedback you need, as well as connections for setting up distribution and sales channels. It's also valuable to talk to potential investors for their views, even if you are bootstrapping the effort.

Related: 5 Things You Must Do to Successfully Launch a Business

5. Plan and execute a pilot or local rollout.

Good traction on a limited rollout is great validation of a business model. It allows you to test costs, quality and pricing in a few stores or a single city, with minimum jeopardy and maximum speed for recovery and corrections. Save your viral campaign and major inventory buildup for later.

6. Focus on collecting customer references.

Give extra attention to those first few customers, and ask for publishable testimonials and word-of-mouth support in return. If you can't get their support, even with your personal efforts, take it as a red flag that the business will probably not scale at the rate you projected.

7. Target national trade shows and industry association groups.

You need positive visibility, credibility and feedback from these organizations as a final validation of your business model, as well as your product model, in the context of major competitors. This may also be a great source for leads as a key part of that final rollout and scale-up effort.

Your business model can be a better sustainable competitive advantage than your product features, or it can be your biggest risk exposure. Too many of the business plans I see are heavy on competitive product features, but light on business model details and innovations.

If you or someone on your team hasn't spent at least the same effort on the business model as on the product service, you are only half prepared for the real world of business today. It's hard to win by doing half the job, especially if that is the easier half.

Related: 5 Tips for Building Adaptivity Into Your Business Model

Veteran startup mentor, executive, blogger, author, tech professional, and Angel investor.

Martin Zwilling is the founder and CEO of  Startup Professionals , a company that provides products and services to startup founders and small business owners. The author of  Do You Have What It Takes to Be an Entrepreneur?  and  Attracting an Angel, he writes a daily  blog  for entrepreneurs and dispenses advice on the subject of startups.

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Starting your own business can be exciting, but also terrifying. You might have a great idea, but not know how to turn it into a profitable venture. This is where a business model comes in.

Introduction: Getting Started with a Startup Idea & Why You Need a Business Model?

A business model can help you define your ideas regarding who will purchase your product, how they will pay for it, and what features they desire. Additionally, it can assist you in estimating the amount of money required for starting up and determining if the company is worth the investment. This section will provide you with all the necessary information about what a business model is and how to create one for your validated startup idea .

What is a Business Model?

A business model is a set of systematic ways to create, deliver, and capture value. It is a blueprint for how your company will make money. A startup business model describes how a company earns income and profits from its operations. Startups mostly go for highly scalable business models that allow them to operate with few assets, zero heavy investments, and cheap capital expenditures.

In the digital age, the number of businesses that have a clear and well-tested business model is on the decline. This may be because it seems like you don't need one as long as you have an idea that has gone viral, or because people think they can create anything without having to worry about making money.

Importance of a Business Model

According to statistics, 90% of startups fail , with 10% failing within the first year and only 50% of businesses making it to their fifth year . A properly designed business model can help avoid these issues. A business model aids in targeting a company's consumer base and helps in the development of marketing plans, as well as income and expense projections, taking into account the various business models and clienteles. In order to learn about the potential accessible targets in the market, a business model should be designed. Understanding and choosing the appropriate business model allows companies to better understand the financial contributions they can make in the initial stage of their business. By evaluating a company's business model, a person can learn more about its products, as well as the business tactics it can use to grow and sustain future prospects. The other benefits of business models include the following:

  • A good business model gives a company a competitive advantage and helps them understand their own operations better.
  • A powerful business model gives the company a good reputation in the market and enables the owner to carve out a space for the company.
  • Making a good business model from the outset leads to a well-established finance plan, which results in increased cash flows and rapid profit growth.
  • A pre-developed startup business plan enhances the organization's financial stability.

Infographic: Business Model: The Complete Guide to a Startup Business Model

Types of Business Models

In the market, startups are categorized into different types based on the business models they choose to pursue. However, not all of these models are necessarily profitable. Some of the most common business models used today are low-risk startup models.

Low Risk/High Reward Model

A low-risk model is one where there is minimal risk involved in starting up the company. These businesses require little capital to get started, have fewer obstacles to entry than other company models, and have high-profit potential, making them an excellent alternative for people who wish to start their own business without risking everything. For example, a company may sell its product with no upfront costs to them or their customers. This can include selling consultancy services, freelancing (selling skills), and much more. This type of model works great for people who want to sell products that they think will sell well in the market with very little investment on their part.

High Risk/High Reward Model

The most common business model is the high risk/high reward model, where the entrepreneur invests a lot of time and energy to build something that they hope will be successful. To achieve such a high degree of accomplishment, these people had to take significant risks. Successful entrepreneurship is inextricably linked to taking risks. Regardless of how strong your cash flow is or how much effort or time you put in, the end result might be positive or negative. You must be prepared for the physical, financial, and psychological stress that comes with establishing a business and keep believing in yourself and working hard to see the fruit of your efforts. This is what you typically see with startups like Facebook or Microsoft. These tech giants undertook high risks and invested their time and resources in creating exceptionally unique and highly demanded platforms. Taking risks surely leads to miraculous evolutions in the history of the business world.

Infographic: Types of Business Models

Best Startup Models

There are two different types of best startup models:

  • Bootstrapping is when an entrepreneur starts a business with their own time, skills, and resources. This self-funded business does not rely on the support of common financing methods, such as crowdfunding, investment, or loans from banks.
  • Scaling up is when an entrepreneur starts with a small business and then invests in making it bigger. To scale a business means opening the door to more work duties and creating opportunities while remaining cost-effective and meeting your company's demands without suffering or overstretching. It's all about adjusting to the increasing workload, clients, or users, and then delivering.

Perks of Choosing Bootstrap Business Model

  • Retaining Full Ownership: This business model allows the owner to fully own their business with zero shares in equity. When anyone starts a business based on investors' funding, they often ask for a huge share in equity and have a say in decision making. This is why Bootstrap is ideal in the longer run. You have control, and you get to do whatever you want.
  • Gets Rid of Unnecessary Burden: When you start a business through a loan or investment, there is a burden on your shoulders to return it. Instead of designing a complete and long-term lasting business model, you focus on earning revenue even if that disturbs the essence of your business. However, with the bootstrap business model, you feel a sense of freedom. You focus on maintaining the essence of your business and strategically develop ways to increase cash flows.
  • Empowers Business Owner: Starting a business on your own empowers a person. Building it from scratch highly motivates a person to keep going and gain success. We recommend following our checklist for starting a business .

Perks of Using a Scaling Business Model

  • Creates Efficiency: When a business is ready to expand at the right time, it efficiently brings in more profit for the corporation. They are able to deal with different circumstances while still remaining rigorous.
  • Creates Growth Consistency: When the business has grown into a stable state, the owner makes sure to scale it to keep the growth factor consistent. Though it seems like staying in the same state is safe, businesses don't last long if they aren't growing. Scaling a business ensures that growth is gradually increasing with time. The owner makes sure never to stop at some level; they keep taking new steps on the ladder while ensuring they don't trip at any step.
  • Adaptable to Tough Situations: Creating flexibility ensures that the business is able to adapt to tough situations and thrive nonetheless. Businesses not only scale for growth but also to create new opportunities for income generation. The market is ever-changing, and one cannot entirely depend on a single business to maintain sustainability. Scaling your business to another aspect makes your corporation more adaptable to unplanned events. If a part of your business is disturbed by a change in the market, you can smoothly earn from another domain of your business.

Infographic: Best Startup Models

Sizes of Companies and Their Typical Business Models

Different types of companies operate at varying scales in different industries. Some start-ups operate in the early stages of their life cycle, for example, operating small brick-and-mortar shops but not yet an online store. Others begin with an online store and later expand to include physical stores, while some might take the opposite approach. There are also companies that do not have either brick-and-mortar or online stores, and instead focus on other channels like social media. A start-up can be of various types, but the most common categories are:

  • Technology-based
  • Business-to-business or B2B
  • Business-to-consumer or B2C

Technology-Based Start-ups

Technology start-ups focus on developing a new product or service with the aim of disrupting an existing market. Since technology is in popular demand nowadays, tech start-ups are now focusing more on innovativeness, scalability, and growth.

Business-to-Business (B2B)

Market research for startups is crucial in identifying potential customers and understanding their needs. A business-to-business start-up offers a product or service for sale to other businesses. Some B2B firms produce a component of a final product and sell it to distributors, who then sell it to their own customers. Moreover, a business-to-business deal can also occur when a company produces a product used as a component in another company's product. For example, Intel sells Apple processors for use in the Macbook Pro.

Business-to-Consumer (B2C)

Business-to-consumer (B2C) refers to the process of selling products and services directly to customers who are the end-users of the company's products or services. Consumer start-ups sell products and services directly to consumers. Some early-stage start-ups will have an initial product or service that they offer for free. They do this to acquire customers and improve the product before taking it live. They may also offer their customers other products and services in addition to their core offerings in order to generate revenue while they build up their main offering.

How to Choose the Perfect Business Model for Your Start-up?

Choosing the right business model is not easy. That is why there are tools available to help you with this choice. One such tool is the Business Model Canvas, which is a diagram used to create a visual representation of a start-up's business model. A blank canvas can be found online and needs to be filled in with five important components: value proposition, customer segments, key activities, channels, and revenue streams. Another tool is the St. Gallen Business Model Navigator, which can help you select the best model for your business needs and provide templates for all models you might need when starting your own company. If you want to start raising money, you should know how to make the most out of your pre-seed funding round.

Infographic: Sizes of Companies and Their Typical Business Models

Common Mistakes to Avoid When Developing a Business Model

Developing a business model can be tricky, especially for first-time entrepreneurs. Here are some common mistakes to avoid when developing a business model:

1. Failing to Understand Your Target Market

One of the biggest mistakes entrepreneurs make when developing a business model is failing to understand their target market. It's important to conduct market research and gather data about your target audience's needs and preferences before developing your business model. Without this information, you risk developing a product or service that no one wants or needs.

2. Focusing Too Much on Features and Not Enough on Benefits

Another common mistake entrepreneurs make is focusing too much on the features of their product or service and not enough on the benefits. Features describe the characteristics of your product or service, while benefits describe how those characteristics will help your target audience. By focusing on benefits, you can create a more compelling value proposition and increase the chances of success for your business. It is important to consider these benefits when conducting startup financial modelling and projecting your revenue streams.

3. Not Validating Your Business Model

Many entrepreneurs make the mistake of assuming that their business model will work without testing it first. It's important to validate your business model by conducting market research and getting feedback from potential customers. This can help you identify any flaws in your business model and make adjustments before launching your business.

4. Failing to Plan for the Future

Another common mistake entrepreneurs make is failing to plan for the future. It's important to consider how your business model will evolve over time and make plans for growth and expansion. This can help you stay ahead of the competition and ensure the long-term success of your business.

5. Ignoring Financial Projections

Financial projections are an important part of developing a business model. They help you estimate how much money you will need to start and grow your business, as well as how much revenue you can expect to generate. Failing to consider financial projections can lead to a lack of funding or an inability to sustain your business over time.

By avoiding these common mistakes, you can develop a strong and effective business model that will help you achieve your goals and succeed in the market.

Infographic: Common Mistakes to Avoid When Developing a Business Model

How to Test and Validate Your Business Model

Before launching your business, it is important to ensure that your business model is viable and will be successful in the market. Here are some steps to test and validate your business model:

1. Conduct Market Research

Market research is crucial in validating your business model. It involves gathering and analyzing data about the market, potential customers, and competitors. By conducting market research, you can gain valuable insights into the needs and preferences of your target audience, as well as identify gaps in the market that your business can fill.

2. Build a Prototype

Building a prototype allows you to test your product or service in the market and get feedback from potential customers. This can help you identify any issues or areas for improvement before launching your business.

3. Conduct User Testing

User testing involves getting feedback from potential customers on your product or service. This can be done through surveys, focus groups, or other forms of market research. By understanding what your customers want and need, you can develop a product or service that will meet their needs and stand out in the market.

4. Analyze Your Financial Projections

Analyzing your financial projections is crucial in validating your business model. This involves creating a financial plan that outlines your expected revenue and expenses, and then comparing it to industry benchmarks and competitors. By doing so, you can identify any potential issues and adjust your business model accordingly.

5. Seek Feedback

Seeking feedback from mentors, investors, and other business owners can be invaluable in validating your business model. They can provide valuable insights and advice based on their own experiences, which can help you identify potential issues and adjust your business model accordingly.

By following these steps, you can test and validate your business model to ensure that it is viable and will be successful in the market.

Infographic: How to Test and Validate Your Business Model

Tips for Creating a Successful Business Model Canvas

The Business Model Canvas is a popular tool for creating a visual representation of a start-up's business model. Here are some tips for creating a successful Business Model Canvas:

1. Start with a Value Proposition

The first component of the Business Model Canvas is the value proposition. This describes the unique value that your product or service provides to your customers. It's important to start with a clear and concise value proposition that communicates your product or service's benefits in a compelling way.

2. Identify Your Customer Segments

The next step is to identify your customer segments. This involves understanding who your target customers are and what their needs and preferences are. By doing so, you can tailor your product or service to meet their specific needs and develop targeted marketing strategies to reach them.

3. Define Your Key Activities

The key activities component of the Business Model Canvas describes the activities that are necessary to deliver your product or service to your customers. This includes everything from product design and development to marketing and sales. It's important to identify the key activities that are essential to your business and focus on optimizing them for maximum efficiency.

4. Choose Your Channels

The channels component of the Business Model Canvas describes how you will reach your customers. This includes everything from traditional marketing channels like advertising and public relations to digital channels like social media and email marketing. It's important to choose the channels that are most effective for reaching your target customers and focus on optimizing them for maximum effectiveness.

5. Determine Your Revenue Streams

The revenue streams component of the Business Model Canvas describes how your business will make money. This includes everything from product sales to advertising revenue. It's important to identify the revenue streams that are most important to your business and focus on optimizing them for maximum profitability.

6. Consider Your Cost Structure

The cost structure component of the Business Model Canvas describes the costs associated with running your business. This includes everything from product development and marketing to overhead costs like rent and salaries. It's important to identify the costs that are most important to your business and focus on optimizing them for maximum efficiency.

7. Keep it Simple and Clear

Finally, it's important to keep your Business Model Canvas simple and clear. Avoid using jargon or technical language that may confuse your audience. Instead, focus on communicating your business model in a way that is easy to understand and compelling to your target customers.

By following these tips, you can create a successful Business Model Canvas that effectively communicates your business model and helps you achieve your goals.

Infographic: Tips for Creating a Successful Business Model Canvas

The Role of Market Research in Developing a Business Model

Market research is a crucial step in developing a successful business model. It involves gathering and analyzing data about the market, potential customers, and competitors. By conducting market research, you can gain valuable insights into the needs and preferences of your target audience, as well as identify gaps in the market that your business can fill.

Market Analysis

The first step in market research is to conduct a market analysis. This involves gathering data about the overall market size, growth trends, and key players in the industry. By understanding the broader market landscape, you can identify opportunities and potential challenges for your business.

Customer Research

Once you have a good understanding of the market, the next step is to conduct customer research. This can involve surveys, focus groups, or other forms of market research to gather information about the needs and preferences of your target audience. By understanding what your customers want and need, you can develop a product or service that will meet their needs and stand out in the market.

Competitive Analysis

In addition to understanding the broader market landscape and the needs of your target audience, it's also important to conduct a competitive analysis. This involves gathering data about your competitors, including their strengths and weaknesses, pricing strategies, and marketing tactics. By understanding your competitors, you can identify ways to differentiate your business and develop a unique value proposition.

Iterative Process

Market research is an iterative process, meaning it requires ongoing analysis and adaptation. As your business grows and evolves, it's important to continue gathering data and refining your business model. By staying up-to-date with market trends and customer needs, you can ensure that your business remains competitive and successful.

In conclusion, market research is a critical step in developing a successful business model. By conducting a market analysis, customer research, and competitive analysis, you can gain valuable insights into the needs and preferences of your target audience, as well as identify opportunities and potential challenges for your business. By making market research an ongoing process, you can ensure that your business remains competitive and successful in the long run.

Infographic: The Role of Market Research in Developing a Business Model

How to Pivot Your Business Model When Things Aren't Working Out

Sometimes, even the best-laid business plans don't work out as expected. In these situations, it may be necessary to pivot your business model in order to adapt to changing market conditions or customer needs. Here's how to do it:

1. Identify the Problem

The first step in pivoting your business model is to identify the problem. What is not working in your current business model? Is it a lack of demand for your product or service? Are you not generating enough revenue to sustain your business? Are there new competitors in the market that are taking away your customers?

2. Brainstorm Solutions

Once you've identified the problem, it's time to brainstorm solutions. What changes can you make to your business model to address the issue? Can you change your target market or customer segments? Can you offer new products or services that better meet customer needs? Can you change your pricing model to better reflect the value of your offerings?

3. Test Your Ideas

Before making any major changes to your business model, it's important to test your ideas. This can be done through surveys, focus groups, or other forms of market research. Determine what your customers want and need, and test different ideas to see what works best.

4. Implement the Changes

Once you've tested your ideas and determined what works best, it's time to implement the changes. This may involve rebranding your company, changing your product offerings, or targeting a new customer segment. It's important to communicate these changes to your customers and stakeholders so that they understand why you are making them.

5. Monitor the Results

After implementing the changes, it's important to monitor the results. Are you generating more revenue? Are you attracting new customers? Are you meeting your business goals? If not, it may be necessary to pivot again or make further adjustments to your business model.

Remember, pivoting your business model is not a sign of failure. It's a necessary step in adapting to changing market conditions and customer needs. By identifying problems, brainstorming solutions, testing your ideas, implementing changes, and monitoring the results, you can successfully pivot your business model and ensure the long-term success of your company.

Infographic: How to Pivot Your Business Model When Things Aren't Working Out

The Importance of Flexibility in Your Business Model

Flexibility is an essential aspect of any successful business model. In today's ever-changing market, it is crucial to be able to adapt quickly to new technologies, customer needs, and market trends. A flexible business model will allow you to pivot your strategy when needed and take advantage of new opportunities as they arise.

One of the most significant benefits of a flexible business model is the ability to respond to customer feedback. By listening to your customers and their needs, you can adjust your product or service offerings to better meet their demands. This can lead to increased customer satisfaction and loyalty.

A flexible business model can also help you stay ahead of the competition. By continually innovating and adapting to new technologies and trends, you can differentiate yourself from other businesses in your industry. This can give you a competitive edge and help you attract new customers.

In addition to responding to customer needs, a flexible business model can also help you navigate economic downturns and other unexpected events. By being able to pivot your strategy and adjust your offerings, you can better position your business for success even in challenging times.

Overall, building flexibility into your business model is essential for long-term success. By being willing to adapt and change as needed, you can stay ahead of the competition and better meet the needs of your customers.

Examples of Successful Business Models in Different Industries

The following are some examples of successful business models in different industries that have been able to grow and sustain in today's competitive market.

Subscription Box Model

Subscription boxes are becoming increasingly popular in the e-commerce industry. This business model involves sending customers a box of products on a regular basis, such as monthly or quarterly, for a set price. The products in the box are curated according to the customer's preferences. Birchbox, a beauty subscription box, and Dollar Shave Club, a grooming subscription box, are two examples of companies that have successfully implemented this business model.

Freemium Model

The freemium business model offers customers a basic version of the product or service for free, with the option to upgrade to a premium version for a fee. This model is commonly used in the digital industry, particularly with mobile apps and online tools. Dropbox, a cloud storage service, and Spotify, a music streaming platform, are two examples of companies that have successfully used this business model.

Direct-to-Consumer (DTC) Model

The DTC business model involves companies selling their products or services directly to consumers, bypassing traditional retail channels. This model has become increasingly popular in the fashion industry, with companies like Warby Parker, an eyewear company, and Everlane, a clothing company, successfully implementing this approach.

Platform Model

The platform business model involves creating a platform that connects buyers and sellers, earning revenue through transaction fees or advertising. Airbnb, a home-sharing platform, and Uber, a ride-sharing platform, are two examples of companies that have successfully implemented this business model.

Membership Model

The membership business model involves charging customers a fee to gain access to exclusive content, products, or services. Amazon Prime, a membership program that offers free shipping and access to streaming services, and LinkedIn Premium, a subscription service that offers additional features for job seekers, are two examples of companies that have successfully implemented this business model.

Razor-Blade Model

The razor-blade business model involves selling a product at a low cost, then making a profit on the consumable products required to use the product. This model is commonly used in the printer and shaving industries. Gillette, a shaving company, and HP, a printer company, are two examples of companies that have successfully used this business model.

Crowdfunding Model

The crowdfunding business model involves raising funds from a large number of people, typically through an online platform, to finance a project or product. Kickstarter, an online crowdfunding platform, and Indiegogo, a similar platform, are two examples of companies that have successfully implemented this business model.

Pay-What-You-Can Model

The pay-what-you-can business model allows customers to pay what they can afford for a product or service. This model is commonly used in the restaurant industry, with some restaurants allowing customers to pay what they can for a meal. Panera Bread, a bakery-cafe chain, has implemented this model through its Panera Cares program.

These are just a few examples of successful business models in different industries. By understanding these models and how they have been implemented, entrepreneurs can learn how to create a sustainable and profitable business model for their own venture.

How to Choose the Right Pricing Model for Your Business

Choosing the right pricing model for your business depends on several factors, including your target audience, industry, and business goals. Here are some tips to help you choose the best pricing model for your product or service:

  • Know your target audience : Understand your target audience's willingness to pay and what they value in your product or service.
  • Research the competition : Analyze your competitors' pricing strategies and determine how you can differentiate yourself in the market.
  • Consider your business goals : Determine what your revenue targets are and which pricing model will help you achieve them.
  • Test and iterate : Don't be afraid to experiment with different pricing models and adjust as necessary based on customer feedback and market conditions.

Different Pricing Models

There are several pricing models that you can use to monetize your product or service, including:

  • Cost-plus pricing : This model involves adding a markup to the cost of producing your product or service to determine the selling price. It is a straightforward approach that ensures you cover your costs and make a profit.
  • Value-based pricing : This model involves setting a price based on the perceived value of your product or service to the customer. It requires a deep understanding of your target audience and their willingness to pay.
  • Subscription pricing : This model involves charging customers a recurring fee for access to your product or service. It is a popular model for software-as-a-service (SaaS) companies and other businesses that offer ongoing services.
  • Freemium pricing : This model involves offering a basic version of your product or service for free while charging for premium features or services. It is a common model for mobile apps and online tools.
  • Dynamic pricing : This model involves setting prices based on current market conditions, demand, and other factors. It is commonly used in the airline and hotel industries.

Infographic: How to Choose the Right Pricing Model for Your Business

How to Monetize Your Product or Service with Your Business Model

Creating a successful business model requires not only defining your value proposition and target customer segments but also determining how you will generate revenue. In this section, we will explore various ways of monetizing your product or service and how to choose the right pricing model for your business.

Once you have chosen the right pricing model for your business, it's time to start monetizing your product or service. Here are some ways to generate revenue:

  • Direct sales : Sell your product or service directly to customers through a website, online marketplace, or physical store.
  • Affiliate marketing : Partner with other businesses and earn a commission for promoting their products or services to your audience.
  • Licensing : License your product or service to other businesses for a fee.
  • Advertising : Sell advertising space on your website, mobile app, or other digital platform.
  • Sponsorship : Partner with other businesses to sponsor your product or service in exchange for exposure to your audience.

Monetizing your product or service is a crucial aspect of creating a successful business model. By understanding your target audience, researching the competition, and choosing the right pricing model, you can generate revenue and build a sustainable business.

The Role of Customer Feedback in Developing a Business Model

Customer feedback is a critical component of any successful business model. It provides valuable insights into how customers perceive your product or service, what they like and dislike, and what changes they would like to see. Incorporating customer feedback into the development of your business model can help ensure that you are meeting the needs of your target audience and delivering a product or service that they truly value.

One effective way to gather customer feedback is through surveys. Surveys can be conducted online or in-person and can provide valuable information about customer preferences, pain points, and satisfaction levels. Another method is to engage with customers through social media or email and encourage them to share their thoughts and opinions.

Once you have gathered customer feedback, it is important to analyze and interpret the data. Look for patterns and trends in the feedback to identify common themes and areas for improvement. Use this information to make informed decisions about how to adjust your business model to better meet the needs of your customers.

It is also important to continue gathering feedback and making adjustments over time. The needs and preferences of your customers may change, and your business model should be adaptable to these changes. By staying attuned to customer feedback and making adjustments as needed, you can ensure that your business remains relevant and successful in the long term.

Infographic: The Role of Customer Feedback in Developing a Business Model

Developing a successful business model requires careful consideration of several key factors. Conducting market research, understanding your target audience, choosing the right pricing model, and incorporating customer feedback are all essential components of creating a sustainable and profitable business. By following the tips and examples outlined in this guide, entrepreneurs can develop a strong and effective business model that will help them achieve their goals and succeed in the market.

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Key Takeaways

A successful business model starts with a clear and concise value proposition that communicates your product or service's benefits in a compelling way.

Identifying your target audience and tailoring your product or service to meet their specific needs is crucial for success.

It's important to choose the channels that are most effective for reaching your target customers and focus on optimizing them for maximum effectiveness.

Choosing the right pricing model for your business depends on several factors, including your target audience, industry, and business goals.

Customer feedback is a critical component of any successful business model. It provides valuable insights into how customers perceive your product or service, what they like and dislike, and what changes they would like to see.

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How To Create A Revenue-Generating Business Model From Scratch

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Creating a revenue-generating business model is essential because it forms the foundation of a sustainable business. It ensures that your company not only survives but thrives in a competitive market.

By establishing a solid plan for generating income, you secure the necessary funds to cover operational costs, innovate, and expand. Moreover, a profitable model attracts potential investors and partners by demonstrating the business's viability and potential for growth.

Without a revenue-focused approach, a business risks stagnancy or failure, missing opportunities to scale and succeed in its objectives.

Here are some straightforward steps to building a business model that not only sustains itself but also thrives:

1. identify a market need.

The first step in creating a successful business model is to identify a clear market need. Think about what problem you solve and who are you solving it for? Conduct market research, including surveys, focus groups, and competitive analysis to validate your idea and understand your target audience’s pain points and preferences. The key is to find a niche where you can uniquely position your product or service.

2. Develop Your Value Proposition

Now you need to highlight your value proposition. This is the promise of value to be delivered to your customers and a belief from the customer that value will be experienced. Your value proposition should be compelling, differentiating your offering from competitors and making it clear why customers should choose you.

Best High-Yield Savings Accounts Of 2024

Best 5% interest savings accounts of 2024, 3. design your business model.

Map out how your business will make money. This includes defining your revenue streams, pricing strategy , sales channels, and customer segments. Common revenue models include subscription services, selling physical or digital products, offering services, or a combination of these. Choose a model that aligns with your industry and target market while also considering scalability and sustainability.

4. Build a Minimal Viable Product (MVP)

Before going all in, develop a minimal viable product (MVP) – a version of your product with just enough features to satisfy early customers and provide feedback for future product development. This approach helps minimize upfront costs and market risks by allowing you to test the waters with your concept without fully committing extensive resources.

5. Test and Iterate

Launch your MVP and closely monitor how it performs. Gather feedback from users and be ready to iterate based on what you learn. This phase is critical as it often leads to pivoting or tweaking your model based on real-world insights and customer behaviors. Flexibility and responsiveness to feedback are key components in refining your business model.

6. Scale Your Operations

Once you’ve validated your business model and started generating consistent revenue, think about scaling . This could involve expanding your product line, exploring new markets, or increasing your marketing efforts. Scaling successfully requires solid operational infrastructure, so make sure your processes, team, and technologies are equipped to handle growth.

7. Foster Customer Relationships

Invest in building relationships through excellent customer service, engaging marketing strategies, and consistent value delivery. Consider loyalty programs, personalized communications, and regular product updates to keep your customers engaged and satisfied.

8. Monitor Your Financial Health

Carefully monitor your financials. Understand your key financial metrics like cash flow, profit margins , and customer acquisition costs. Use this data to make informed decisions and adjust your business model as needed. Regular financial analysis is crucial to ensure the sustainability and profitability of your business.

The bottom line is that building a revenue-generating business model from scratch requires a mix of strategic planning, customer understanding, and continuous improvement. By following these steps and remaining adaptable to market changes, you can create a business model that not only meets the current demands of your target market but also drives long-term profitability. Remember, the most successful businesses are those that evolve with their customers and never stop optimizing their operations.

Melissa Houston, CPA is the author of Cash Confident: An Entrepreneur’s Guide to Creating a Profitable Business and the founder of She Means Profit . As a Business Strategist for small business owners, Melissa helps women making mid-career shifts, to launch their dream businesses, and I also guide established business owners to grow their businesses to more profitably.

The opinions expressed in this article are not intended to

replace any professional or expert accounting and/or tax advice whatsoever.

Melissa Houston

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  • Winning with Digital Platforms

Digital Platforms: What They Are & How They Create Value

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  • 08 May 2024

Digital transformation and creating value through technology are priorities for organizations worldwide. According to market intelligence provider International Data Corporation , digital transformation spending should reach $3.9 trillion by 2027.

“Platform companies have become increasingly important to the global economy and are some of the largest and most valued companies today,” says Harvard Business School Professor Feng Zhu, who teaches the online course Winning with Digital Platforms .

If you want to help your organization respond to opportunities and inform its strategic planning , here’s an overview of digital platforms and how they create value.

Access your free e-book today.

What Is a Digital Platform?

Digital platforms are business models that use online infrastructure to facilitate interactions between groups. Examples include:

  • Social media channels
  • Online marketplaces
  • Crowdsourcing websites and apps

Digital platforms have several features that enhance their functionality and appeal.

For one, they can grow and accommodate transactions without significant cost increases. That scalability is essential to expanding market reach with minimal business infrastructure.

Accessibility is another important feature. Digital platforms operate continuously and are accessible regardless of time zone or geographic location. This boosts user engagement by enabling real-time interactions and transactions.

Digital platforms also streamline business processes and automate complex tasks—reducing the need for extensive manual labor, minimizing operational costs, and improving resource management.

These features allow digital platforms to generate substantial value. If you want to shift your organization to a digital platform business model, here are three ways it can enhance the user experience.

How Digital Platforms Create Value

Connect buyers and sellers.

Digital platforms have revolutionized how buyers and sellers connect. They've moved business interactions from traditional settings—like physical marketplaces and classified ads—to online environments, significantly increasing their reach and partnership opportunities.

To help users connect online, digital platforms use matching design —algorithms that link them based on criteria like their needs and preferences. According to Winning with Digital Platforms , there are two types of matching designs:

  • Centralized matching design: Automatically matches users with a seller according to the platform’s algorithm
  • Decentralized matching design: Offers multiple options to users who search all the options before choosing based on their preferences

Selecting the right matching design is crucial to optimizing the user experience and operational efficiency.

“When the preferences of users are easily identifiable, and buyers and sellers view each other as largely interchangeable, it makes sense for the platform to be designed so that search and matching is automated,” Zhu says in Winning with Digital Platforms . “This is efficient because centralized matching minimizes search costs without compromising the quality of matches.”

In the course, Zhu explains how ride-sharing companies use centralized matching.

“In the ride-sharing sector, the preferences of both drivers and riders are easily identifiable,” Zhu says. “Riders want a ride from point A to point B that’s as safe, fast, and inexpensive as possible. As long as these three criteria are met, riders don’t care much about which particular driver they're matched with. Drivers want to be matched with riders as soon as possible, and as close as possible to minimize idle time. They also want a rider to be respectful. This transparency of preferences explains why most ride-sharing platforms adopt a centralized matching design—with the added option of rejecting a match if need be.”

Alternatively, decentralized matching works best when predicting users’ preferences is challenging. For example, eBay allows sellers and buyers to connect directly on its platform with little interference—enhancing user autonomy and personalizing the buying experience.

Related: Understanding 3 Common Types of Customer Needs

Set Pricing

Digital platforms also add value through strategic pricing. Unlike traditional retailers, digital platforms collect and interpret large amounts of data to adjust prices in real time.

Common factors that affect pricing include:

  • Market demands
  • Supply chain conditions
  • Consumer behaviors

To meet users’ needs, align your matching design and pricing model.

Pricing models include:

  • Centralized pricing model: When your platform has enough information to ensure prices don’t deter buyers or sellers from using it
  • Decentralized pricing model: Prices set by individual sellers or through bargaining based on important information your platform doesn’t have

“Pricing decisions almost always go hand in hand with search and matching,” Zhu says in Winning with Digital Platforms . “If a platform has a centralized matching model, they’ll have a centralized pricing model. And if they have a decentralized matching model, they’ll often use a decentralized pricing model.”

Winning with Digital Platforms | Thrive in the age of digital platforms | Learn More

For example, online grocery delivery platform Instacart doesn’t allow users to choose “shoppers” and bases its design and pricing models on factors such as inventory availability and its “favorite shopper” feature . Conversely, platforms like house rental app Airbnb allow homeowners to set listing prices, giving them more control.

There are exceptions to this rule. For instance, ride-sharing companies use centralized matching designs, but drivers don’t have the high-level knowledge to determine prices. As a result, companies like Uber use dynamic pricing —setting flexible prices based on current market demands—by adjusting rates based on routes’ time and distance, traffic, and rider-to-driver ratio.

No matter your model, be transparent about how you set prices.

Establish Trust

Since the rise in e-commerce has led to fewer physical transactions, digital platforms now act as a credible intermediary to establish user trust.

In Winning with Digital Platforms , HBS Professor Krishna Palepu talks about how wholesale marketplace company Alibaba addressed trust concerns between geographically spread out buyers and sellers.

“The trust problem comes in two forms,” Palepu says. “One: The customers who are buying the product don't know whether the quality of the product is going to be according to what is advertised on the site, and also whether it’ll be delivered on time—and, in fact, whether it’ll be delivered at all. On the other hand, merchants are concerned about whether they’ll receive payment once the goods are shipped and they're delivered to the customer; the credit risk involved in collecting the payments. Both these issues have driven a lot of distrust. And this is just a common distrust that you will have in any marketplace.”

To overcome that issue, Alibaba introduced mobile and online payment platform Alipay, which uses an escrow account to safeguard transactions and protect buyers against undelivered goods and sellers from unpaid deliveries. The system ensures legitimate transactions by mandating Alipay accounts for all users, helping identify credible partners.

Establishing trust isn’t just about securing transactions; it also helps reduce online interactions’ perceived risk. By building credibility—as Alibaba did with Alipay—you can boost user satisfaction, the likelihood of repeat engagements, and platform reliability.

So You Want to Be an Entrepreneur: How to Get Started | Access Your Free E-Book | Download Now

Create Value with Digital Platforms

Transitioning to a digital platform business model isn’t easy and requires buy-in from employees and organizational leaders . To ensure your digital transformation efforts succeed, focus on creating an effective digital platform strategy.

One of the best ways to learn how to do so is by enrolling in an online course, such as Winning with Digital Platforms . Through real-world cases featuring industry leaders and interactive exercises, not only can you apply your knowledge but gain skills and insights that enable you to advance your career .

Do you want to learn more about the digital platform landscape and how to launch and scale a platform business? Explore our online course, Winning with Digital Platforms , and download our free entrepreneurship e-book to discover how you can take your career to the next level.

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Business-Focused Anti-Poverty Initiatives Can Have Unintended Consequences

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For Immediate Release

A new study of entrepreneurial small businesses created to address poverty in rural Africa found that the introduction of the entrepreneurial model led to unexpected social shifts that made the small business operators a source of friction and social discontent in their communities.

“This work was done in rural Kenya, in an area where society is collectivist – everyone is accustomed to sharing what they have and supporting each other to the best of their ability,” says Erin Powell, corresponding author of the study and an associate professor of entrepreneurship in North Carolina State University’s Poole College of Management. “It’s also an impoverished area, and the entrepreneurship program was designed to help members of the community pursue businesses that would allow them to prosper financially.

“This study was focused on understanding how people’s religious or faith backgrounds informed their approach to entrepreneurship – and we learned a lot about that,” Powell says. “But one of the key findings was that the entrepreneurship program had unintended consequences for both the entrepreneurs and other community members.”

For the study, researchers conducted in-depth interviews with 25 participants in the entrepreneurship program in rural Kenya. The interviews were conducted during six visits over the course of four and a half years, and one of the researchers also spent time in each of the villages to observe how the community interacted with the relevant small businesses.

“One of the things we found was that many community members were not happy that someone in their community was moving from the collectivist model – where everybody does what they can to help each other – to an entrepreneurial model, where goods or services have to be paid for at a specific rate and at a specific time,” Powell says. “This led to social friction. For example, entrepreneurs were threatened with being cursed – bad things would happen to them or their families.

“This friction led some of the participants in the entrepreneurship program to drop out, reverting to the collectivist lifestyle. However, others found ways to move forward with their entrepreneurship – and our findings suggest that their religious backgrounds played a significant role here.”

When the study participants initially became entrepreneurs, all of them were faced with threats of being cursed. One subset of study participants held to traditional religious beliefs in the region, and were afraid of the curses. Some of these study participants stopped their entrepreneurial practices. However, others were able to reconcile their entrepreneurship with their religious beliefs by drawing a line between their businesses and their personal lives.

“In other words, some study participants decided that as long as they were still willing to share the things that belonged to them personally, the curses would not apply to them – even if they continued to treat the business itself purely as a business,” Powell says.

A second subset of study participants identified as Christian, and felt that this protected them from the curses.

“Ultimately, we found that study participants who identified as Christian and study participants who held to traditional beliefs – but compartmentalized their business lives and their personal lives – adopted similar behaviors and were able to move forward with their small businesses and becoming entrepreneurs,” Powell says.

“One take-away message here is that organizations which oversee programs focused on introducing entrepreneurship in order to alleviate poverty really need to account for local cultures and contexts when developing those programs. You can’t assume that a program that works well in one place will work well in another, and taking a uniform approach across multiple cultural contexts can easily lead to unintended consequences. A program intended to help alleviate poverty only ended up helping some folks, while others were left behind and potentially worse off than before the intervention.”

The paper, “ To profit or not to profit: Founder identity at the intersection of religion and entrepreneurship ,” is published in the Journal of Business Venturing . First author of the paper is Jody Delichte, a former Ph.D. student at the University of Cape Town. The paper was co-authored by Ralph Hamann of the University of Cape Town; and by Ted Baker of Rutgers University.

Note to Editors: The study abstract follows.

“To profit or not to profit: Founder identity at the intersection of religion and entrepreneurship”

Authors : Jody Delichte and Ralph Hamann, University of Cape Town; E. Erin Powell, North Carolina State University; and Ted Baker, Rutgers University.

Published : May 6, Journal of Business Venturing

DOI : 10.1016/j.jbusvent.2024.106403

Abstract: For more than a century, discussion of the connections between religion and entrepreneurship has pointed to what we would now label questions of identity. Our study of 25 participants in a program in Northern Kenya that aimed to introduce and stimulate capitalist entrepreneurship within extremely poor pastoralist communities shows that differences in participants’ religious social identities strongly shaped whether or not they adopted new roles and role identities as capitalist entrepreneurs. This process also shifted the domains in which their religious and collectivist social identities were salient and helped to explain the emergence of important and contested changes in social and economic relations. We contribute to the development of founder identity theory by building research at the intersection of entrepreneurship and religion and at the intersection of entrepreneurship and poverty alleviation.

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Sportsline's racing model simulated the 2024 adventhealth 400 at kansas speedway 10,000 times and revealed its projected nascar leaderboard.

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Denny Hamlin has already won three NASCAR Cup Series races this season and he'll be gunning for his fourth this weekend at the 2024 AdventHealth 400. Sunday's race will be at Kansas Speedway, where Hamlin has finished inside the top five in each of his last five races, including a victory in 2023. He has racked up four career wins at Kansas and he's among the favorites to claim the checkered flag again on Sunday. The 2024 AdventHealth 400 is set to begin at 3 p.m. ET. 

According to the latest 2024 AdventHealth 400, Hamlin is listed at 9-2, just behind Kyle Larson (4-1). Other top contenders on the NASCAR at Kansas odds board include Tyler Reddick (6-1), Martin Truex Jr. (15-2) and William Byron (8-1). Should your 2024 AdventHealth 400 picks include backing one of the favorites, or should you target a longshot like Joey Logano (40-1), who's racked up three wins at Kansas Speedway in his career? Before making any 2024 NASCAR at Kansas predictions, be sure to  see the latest 2024 AdventHealth 400 picks from SportsLine's proven projection model .

Developed by daily Fantasy pro and SportsLine predictive data engineer Mike McClure, this proprietary NASCAR prediction model simulates every race 10,000 times, taking into account factors such as track history and recent results.

McClure's model was red-hot in 2023, nailing Martin Truex Jr.'s Clash win (20-1) as well as his win in New Hampshire (11-2), Joey Logano's Duel win (8-1), Kyle Busch's Fontana victory (10-1), Denny Hamlin's triumph in Kansas (6-1) and Kyle Larson's wins at Martinsville (6-1) and the NASCAR All-Star Race (13-2). The model correctly predicted winners in two of the playoff races as well, with Ryan Blaney scoring a 12-1 payout at Talladega and Larson winning at 9-2 in Las Vegas. 

Then it called its first winner of the 2024 season with Larson in Las Vegas for a 21-5 payout and predicted Hamlin's wins in Bristol at 5-1 and Richmond at 17-4. It also impressively nailed five of Larson's wins during his historic season in 2021. All told, the model has nailed a whopping 18 winners since 2021, including nine last year and three in the first seven races this season. Anyone who followed its lead on those NASCAR picks saw huge returns.

Now, the model simulated the 2024 AdventHealth 400 10,000 times. Head to SportsLine to see the complete projected NASCAR at Kansas leaderboard .

Top 2024 AdventHealth 400 predictions

For the 2024 AdventHealth 400, the model is high on Ryan Blaney, even though he's a 20-1 longshot in the latest 2024 NASCAR at Kansas odds. Blaney has had success at Kansas Speedway throughout his career, securing seven top-10 finishes in 18 career starts. 

Blaney has also fared well at speedways this season, finishing second in Atlanta and third in Las Vegas earlier this year. Blaney is the defending NASCAR Cup Series champion and he'll be eager to claim his first checkered flag of the season on Sunday afternoon. Blaney's recent form at speedways, plus his long odds, make him a valuable longshot to target at the 2024 AdventHealth 400.

Another massive shocker: Martin Truex Jr., who is second in the standings and listed as one of the top Vegas favorites, stumbles and fails to crack the top five. There are far better values in the 2024 Kansas NASCAR starting lineup.

Truex missed the NASCAR playoffs entirely in 2022 after his first winless season since 2014, but he followed that up with three wins in 2023. However, he still finished a disappointing 11th in the standings and even though he's been a better points racer early in 2024, he's still winless through 11 races. He finished 36th after a crash in his most recent start at Kansas and he's been outside the top 10 in three of his last four starts entering the weekend.  See which other drivers to avoid and the rest of the projected NASCAR leaderboard at SportsLine .

How to make 2024 NASCAR at Kansas picks

The model is also targeting two other drivers with 2024 NASCAR at Kansas odds of 20-1 or longer to make a serious run at the checkered flag. Anyone who backs these drivers could hit it big. You can see all of the model's NASCAR picks over at SportsLine .

So who wins the 2024 AdventHealth 400, and which longshots are a must-back? Check out the latest 2024 NASCAR at Kansas odds below, then visit SportsLine now to see the full projected 2024 NASCAR at Kansas leaderboard, all from the model that has nailed 18 winners, including three already this year .

2024 AdventHealth 400 odds, drivers, lineup

See full NASCAR at Kansas picks at SportsLine

Kyle Larson 4-1 Denny Hamlin 9-2 Tyler Reddick 6-1 Martin Truex Jr. 15-2 William Byron 8-1 Chase Elliott 10-1 Christopher Bell 10-1 Ty Gibbs 12-1 Bubba Wallace 12-1 Ryan Blaney 20-1 Alex Bowman 22-1 Ross Chastain 22-1 Kyle Busch 25-1 Joey Logano 40-1 Brad Keselowski 45-1 Chris Buescher 55-1 Chase Briscoe 100-1 Noah Gragson 100-1 Daniel Suarez 125-1 Michael McDowell 200-1 Carson Hocevar 250-1 Josh Berry 300-1 Erik Jones 300-1 Ryan Preece 300-1 Austin Dillon 300-1 Austin Hill 350-1 Ricky Stenhouse Jr. 350-1 Austin Cindric 500-1 Jimmie Johnson 500-1 Corey Lajoie 500-1 John Hunter Nemechek 500-1 Zane Smith 750-1 Harrison Burton 750-1 Daniel Hemric 1000-1 Justin Haley 2000-1 Todd Gilliland 2000-1 Riley Herbst 2500-1 Derek Kraus 5000-1

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