Your Business Model
To ensure the success of one’s startup, it is vital to understand how the business will operate and, ultimately, generate revenue. Otherwise, you are building a shiny object. The following are a list of key concepts an entrepreneur must consider in order to build their business model.
Value Proposition: Your value proposition is the product or service that you are trying to get your customer segments to purchase. While it is a significant portion of your business, it is only a component that must be considered along with the other pieces of your business model.
Customer Segments: Your customer segments are the people or groups that will be purchasing your product or service. You must do research into what demographic of people will most likely purchase your product or service and whether or not they can afford it. In a business, you may have multiple customer segments, some which may be more important than others.
Channels: Your channels are the ways your product or service get to your customer segments. Whether it’s through a brick or motor store, website or mail delivery, you must be mindful of the current channels in place and potential channels that could be utilized.
Customer Relationships: Your customer relationships are key to getting your product or service bought. As an entrepreneur, you need to consider what type of relationship needs to be maintained with each customer segment. For example, if your customers purchase your product through a website, you may not need to make personal calls to ensure customer service.
Revenue Streams: Your revenue streams are how you plan to make money by the creation of your product or service. Not only does your product or service have to be desirable enough so that your customer segments are willing to part with their hard earn cash, your revenue streams must outside outweigh your costs, too.
Key Activities: Your key activities are the activities you must do in order for your startup to work and start generating revenue. For a website company, a key activity may be to develop the alpha version of their site for testing.
Key Partners: Your key partners are people or groups who play a vital role in the success of your business. Whether they are distributors, government agencies or charity supporters, they are needed in order to make your startup function properly.
Key Resources: Key resources are resources needed in order to make your startup work. For example, a website startup would require servers in order to host the website.
Cost Structure: Your cost structure defines what expenses you are incurring by operating your business. While financial sheets and pro formas must be done to clearly understand that cost, an entrepreneur, when starting out, must brainstorm what potential costs will be.