Prince Business Model; The Successor to The Business Plan

Image source: Google.com

What’s the new way of starting businesses? Especially in Africa. I described in my last post, how the business plan is no longer suitable for kick starting businesses in the world of entrepreneurship today. This does not mean that it is outdated, it just isn’t actionable and is best for latter stage businesses, fund raising and partnerships (which are infrequent in Africa). Hence, the need for a tool that entrepreneurs can use to their ideas out there quickly.

A business model is a description of how a business works. It describes the different techniques or strategies that a business can use to create value for its customers and in turn create value itself. It is exceptionally useful in describing your business idea visually on a single page unlike the 30 pages long business plan which usually gives for procrastinating.

The business model canvas was made popular by Alex Osterwalder and Yves Pigneur when they created the business model canvas in 2008. The canvas maps out the nine important aspects of every enterprise, described as building blocks. You can read more about the standard business model canvas here.

All nine segments of the business model are important and in this article, I would provide a step by step guide on how you can create your own business model in minutes. We would explore a Nigerian tech startup to give us a practical sense of the business model canvas.

Case Study: SettleIn.ng

An estimated 86 people immigrate into the Metropolitan city of Lagos everyday, in pursuit of different dreams, burning with different desires & aspirations. Leonard, an immigrant & the Founder of SettleIn, was almost stranded when he moved to the city and faced hell when searching for a suitable accommodation. The hustle of Lagos is hard and newbies to the city are the most susceptible to its dynamic nature. Leonard has set out on a journey to solve this problem, his first line of action is creating a simple business model.

Business Model Canvas

Image source: Google.com

Customer Segment

Every business exists for a customer, it is important to begin constructing your business model with clarity about who your customers are. When I asked a photographer friend of mine recently who his customers were, he replied confidently; Everybody! This is a common mistake, as even the biggest corporations in the world(Microsoft, Google etc) do not have ‘everybody’ as their customer. Be as specific as possible, listing out who your potential/current customers are and breaking them down into segments. Examples of customer segments would include; Married Women, Techies, bankers etcetera.

Case Study: SettleIn.ng is targeting the category of people whose circumstances make them move a lot. Its potential customer segments include; Expatriates, Newly Employed persons, Newly Married Couples and Businessmen.

Questions to Ask

  • Which category of customers are most affected by the problem I intend to solve?
  • Can I break them down into specific segments?
  • Broken into segments, which of them are most likely to use my product.

Value Proposition

This describes the solution you are providing to the customers you described above. Highlight your solution to the problem that your customers are facing, that no one else is currently solving, the way you intend to. A rule of thumb here is to have a unique solution/product, that makes you stand out from the pack.

Case Study: Leonard’s solution is to create an online agency that connects immigrants and visitors with accommodation and touring option of their choice upon arrival, while searching for the best fit accommodation to settle in. His unique selling point is a robust housing, traffic and recreational centers database.

Questions to Ask:

  • What is the problem I want to solve.
  • What is my solution and how is it better than the existing options in the market.

Channels

Your channels describe how you would deliver your product to your customers. Think of this as your road map to your customers; the platforms you would use to communicate & market your solution to them as well as how you would sell and deliver your products to your customers.

Case Study: SettleIn.ng would create awareness by leveraging on partnerships with institutions and organizations where their target customers can be found. They would also use social media and an active web presence to create awareness. Their customers would access the service via their web portal and verified agents.

Questions to Ask

  • What platforms can you use to raise awareness about your product?
  • How would you market your solution to your customers?
  • What platforms/methods would you use to sell your products.
  • How would you deliver your product to your customers.

Customer Relationships

This is my favorite part of the business model and often the most underutilized weapon of most businesses. The relationship you have with your customers is similar to the role the fertilizer plays in a farm, it nurtures your business and makes it bloom. Everyone has been subject to poor customer service before; that restaurant with rude waitresses or crappy customer care by your network provider. On the flip side, that loving supermarket madam who always smiles and asks after your family, makes you patronize the store every day and earns you the title ‘our customer’. Humans are emotional beings, what kind of relationship do you want to create with your customers.

Questions to Ask

  • What kind of relationship do I want to build with my customers.
  • Which platforms would I use to maintain and grow this relationship.
  • How would I leverage my loyal customers to increase my customer base
By simply capitalizing on core strengths and knowledge, companies and entrepreneurs can engage in an emerging business model that will enable them to create — and demonstrate — real, sustainable social impact in society.
Muhhammed Yunus -Grameen Bank

Key Resources

In place of magnificent budget in business plans, here, you outline the important things that you would need to get your business started and keep it running. They could vary between financial and human to technological and regulatory resources.

Case Study: Leonard has outlined the key resources he would need to execute his plans; Partnerships with hospitality businesses and housing agencies, Finance, Technological resources (Web&App development), a network of agents etc.

Questions to Ask

  • What are the things you need to get started.
  • While running your business, what resources would you need consistently to get stuff done.
  • Where would you get them from? Listing out where you would get your resources from would help you filter out excesses.
Image source : Aquaponics

Key Activities

The action verb of business is execution. To start a business and keep it running, you need to be able to get stuff done, really well! This is where you note down the stuff that needs to be done. They would include activities that are important in developing your product such as; marketing, building customer relationships, delivery of products, purchase and sales amongst others.

Case Study: Activities that Leonard outlined as important, include: Identification and Sealing of partnership deals, developing and management his website and app, creating a robust database and building an active social media presence.

Questions to Ask

  • What do you have to do to get started.
  • What are the things that would be done to create awareness and reach out to your customer.
  • What are the things that have to happen every time a customer buys or uses your product.
  • What activities take place after the sale.

Key Partners

They say no human is an island, neither is any business!. An entrepreneur might not possess all the skills needed to bring an idea to life and build it successfully, but must be skilled at pulling resources together (internally and externally). Think back to all aspects of your business that you would need external expertise for or resources that can only be acquired through partnerships.

Case Study: Leonard has identified Hospitality businesses, Property Listing Agencies, corporate organizations and embassies as some of the key partners he would have to get on board.

Questions to Ask

  • What aspect of my business would I need external inputs for?
  • Who can I partner with to get these inputs.
  • Where would I find these partners.

Revenue Streams

Cash is the lifeblood of any business. Many entrepreneurs do not explore all the possible options of generating revenue for their customers. A proven approach here is to meditate on ways in which you can create extra value for your customers, the more value you provide for your customers, the higher your revenue.

Case Study: Some of SettleIn.ng’s revenue sources include; commissions from renting or buying or apartments, commissions from tourist centers and sales of tickets to events.

Questions to Ask

  • What value do I currently provide to my customers?
  • In what ways do I make money?
  • What can I do to create more value for my customers? How can I make money from these?

Cost Structure

Remember the story of the Prodigal son in the scriptures? He had solid revenue streams but he spent lavishly. Your cost structure outline the expenses you would incur before starting the business and during the course of running it. Investopedia breaks down the different type of costs here, I would however, focus only on two below;

i. Fixed Cost: These are the expenses you would incur regardless of the volume of goods or services you produce.

ii. Variable Costs: These costs on the other hand, vary as the volume of goods or services you produce increase of decrease.

Case Study: SettleIn.ng would incur fixed costs such as web development, office space rental etc. These costs are incurred regardless of the number of people who use the service.

Transportation costs, Airtime costs and other utility costs are examples of costs that would vary based on the number of people who use Leonard’s service.

Questions to Ask

  • What are the things I need to get started.
  • What are the costs I would incur every time I offer my service or product to customers.
  • What are my fixed and variable costs.

How to build your business model in less than 30 minutes

Grab a sheet of paper, outline the 9 segments of the business model on it, go over each segment outlined above and answer the questions.

At the end of the exercise, you would have a simple document that you can use to explain and describe how your business works with partners, family, friends or potential investors. If you’re at the idea stage, it’s a very simple way to lay out several ideas on paper (which a lot of idea owners never do) and figure out if you are really onto something or not.

I have built a simple tool which provides tailored questions and native examples of how African entrepreneurs are using simple business models to create amazing solutions. The tool is free to use, If you’re interested, drop a ‘Yes’ in the comments section.

If you found this article useful, like the green heart and share with a friend who needs it.

Watch out for my next article: The Smart Business Model.

Cheers!