Tips to create a sustainable business model
This is the era of startups, its great, but the problem is that most of them don’t have a sustainable business model due to which most of the startups fail. Of course at the beginning most of them don’t have one, but they are altered after analysis and experiments. So, the question here is ‘How can the business model be more organised enough to make edits and to access data easily over time?’.
‘Business model canvas’ serves this purpose of making the business model more functional and the job of analysis gets simplified. In this story I have given a briefing about how to create a useful Business model Canvas.
The above picture shows the template for the Business Model Canvas, but ‘What does each sections mean?’.This story gives you the insights.
#1 Value Propositions:-
The value proposition answers the question ‘What are you building and for who?’. It’s not about how great and fancy your idea or product is, it’s about solving a problem or a need for a customer, its about what pain are you solving and what gain are you creating.
Value proposition is a fancy word for what product or service that you are building. This is where you will be listing your benefits and features.
But it’s not all about your technology, it is just a part of your value proposition because the customers don’t care about your technology and really don’t have to, they only care about their problems or need.
See there is difference between problems and needs.
Examples of problems:-
- Web Hosting
- Accounting
Examples of needs:-
- Entertainment
- Communication
Tip: The market for solving needs is huge in par with problems.
#2 Customer Segments:-
So the next thing is ‘who are my customer and why would they buy?’. Here you have to keep in mind that your customers does not exist to buy but you exist to serve.
You have to figure out your customer base and market size for your product by analysing the demographics, geography and social characteristics of the customers.
You could do this by creating customer/buyer personas. Most startups have three or more types of customers, it very crucial to know the customers in depth and a hypothesis about them is very dangerous for the startup.
You could learn more about customer/buyer personas here.
#3 Channels:-
Now ‘How will you reach your product reach your customer segment?’.
‘How will you be selling and distributing your product to the customers?’, ‘How will you reach them and get them to know about you?’
For this you could either use virtual channels or physical channels (physical stores) or even both.
Few Virtual channels are:
- Social media
- Web
- Affiliate marketing
- Cloud
These channels could be used to make your customer aware that you exist.
#4 Customer Relationship:-
Now what is the relationship between ‘How your product gets from your company to the customers?’
Customer relationship is the fourth part of your canvas.
This deals with figuring out,
- How do I get customers into my website of a physical store etc?
- How do I keep them around and and make them spend more money?
- Now, how do I grow my customer base to make them spend impulsively?
You will have a hypothesis about the customers on the day 1, but it changes eventually over time.
Tip: Never use chat bots on your websites at the beginning, it makes the customer feel “not well served”.
#5 Revenue Streams:-
Revenue streams is the next thing that you should concentrate on. This says ‘What value is the customer paying for?’ Here is where you use your strategies to capture that value.
You have to decide whether its a subscription premium or a freemium or is the customer going to pay for a product, it could be a software licence, direct sales etc.
Be clear, the revenue model is actually different form the pricing tactics. It’s just defining the stream of income and not the exact amount from the source. It is really essential to use a steady revenue model in order capture the value for your product.
This only way to figure the right revenue stream is by being able to interact with tens of thousands of customers.
#6 Resources:-
Here you have to deal with the resources or assets that you need to run the business. There are four types of resources, they are:-
- Financial resources: These are the resources such as capital, credit and all the money stuff needed in order to keep the company running.
- Physical resources: This refers to the resources like manufacturing plants, delivery vans, machinery etc… to create the product or service.
- Intellectual resources: Patents to protect the products, customer list etc will come under this type of resource.
- Human resources: You might need people specialised in various fields to do various tasks to run the business.
The interaction between each resources is important to make the workflow more effective and keep the business up and running.
#7 Partners:-
The next piece of a business is the partners. The are not the cofounders or the business partners. They are the services providers for the company to make your product live.
Before negotiating the deal with the partners, we have to realise ‘What exactly are we acquiring from our partners?’, ‘What are our gains?’, ‘What activities are they gonna perform?’ and ‘When?’.
The types of partnerships could be strategic alliances, joint ventures, regular resource suppliers and buyers.
#8 Activities:-
‘What are the most important things a company has to do to make the business model work?’ This is the question this section in the canvas deals with.
Production, Problem solving, supply chain management are some of the activities that you may perform. You must know the key activities that you must become an expert at.
#9 Costs:-
Costs are the expense to run the business. Here are some of the questions to ask yourself to fill out this section of cost structures in the canvas, they are:
- What are the total operating costs?
- What are the most important costs?
- What are the most expensive costs/resources?
- what are the most expensive key activities?
- What are the fixed and variable costs?
Managing your expenses and resources efficiently is a good practice to make operating costs lesser.
So, this is a simple roadmap to making an efficient business model using a business model canvas.
Over a period of time there will be a paradigm shift in the behaviour of the customer, so during those period the statistics change, so the business model must be changed to sustain in the market. Therefore a business model canvas will be helpful for a business to develop a sustainable business models.
You could use https://www.business-model-canvas.app to create a business model canvas.
