Have you ever thought, what is a business model? If your answer is no, it's probably because you haven't thought about creating one yet, or it could be that you have thought about it but didn't know it was called that. The business model is to know how you are going to generate money for your business, whether your business is selling tacos or a very sophisticated application is very important to take into account how much it is worth what we do in order to put a price for customers.
In their simplest forms, business models can be broken into three parts by (Parson, 2015) :
1. Everything it takes to make something: design, raw materials, manufacturing, labor, and so on.
2. Everything it takes to sell that thing: marketing, distribution, delivering a service, and processing the sale.
3. How and what the customer pays: pricing strategy, payment methods, payment timing, and so on.
In a few words, the business model is basically knowing how you are going to make money, because at the end of the day if you can't make your idea generate money, you will have to rethink it and decide whether to keep that idea or change it. In the business model it is important to know how much you spend on each aspect of your service and product, to know how much you can charge. That's why what we are looking for with the business model is that what we are paid is greater than what we spend to generate income.
That's why it's necessary to sit down and plan what we need to know about where we are, the budget, cash flow, or the elements that can make our company go bankrupt. Although it has been defined how we are going to get money, it is still important to know when you need the money and how the clients think about paying it.
Now, let's talk about a specific business model called "CANVAS" that was created to improve the business model that previously existed, allows us to discuss new business ideas and show the potential of them. Since it synthesizes the information in just one page it is very easy to understand, explaining the most relevant and leaving aside unnecessary information
Below is the canvas business model template with an example and we will explain each part of it:
The following canvas is based on this problem and solution:
As you can see the Canva template is divided into sections to make it easier to identify what we want to know:
First we define the problem, putting its main causes. In the same way we put the existing alternatives to know which is our competence, in solution we describe our idea in a specific way.
In key metrics we will put in what way we are going to measure the satisfaction or performance of our product.
Unique value preposition we will say what characteristics our product has and what it offers to the customer either in a quantitative or qualitative way.
High level concept is what internally our company knows it is doing, it can be seen as an internal slogan.
Channels in which way we can reach the customers, they bring us closer to our customer segment.
Unfair advantage is what we excel at and what no other company has.
Customer segments is to define for whom our solution is intended and early adopters is who can be those customers that can give us the money first and can prove it.
Cost structure The important expenses to be made in order to offer a quality product but which remains within the range of our profits.
Revenus stream So the client will have to pay and that is what he prefers to pay, payment method, this either by fees, licenses, etc. It must be related to our customer segment.
In conclusion, it is important to use some kind of business model, since it allows us to analyze where we are going to acquire the resources we need and the risks we must avoid in our business. So if you are ready to start, don't forget this good friend.
References
Das, S., 2020. Business Model Canvas Explained. [online] Feedough. Available at: <https://www.feedough.com/business-model-canvas-explained/> [Accessed 10 March 2020].
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