The Business Model

Learning Objective: Develop a business model

What is business model?

A business model is a company’s core strategy for profitably operating in a specific marketplace. It encompasses several key elements:

1. Value Proposition: This describes the goods or services a company offers and explains why they are desirable to customers or clients. Ideally, it differentiates the product or service from its competitors.
2. Products or Services: A business model identifies the products or services the company plans to sell.
3. Target Market: It specifies the identified target market for the business.
4. Anticipated Expenses: The model outlines any expected costs associated with running the business.
5. Revenue Sources: Business models help companies understand how they will generate revenue. This can include direct sales, subscriptions, advertising, or other methods.
6. Pricing and Costs: The two levers of a business model are pricing (how much customers pay) and costs (how much it costs to produce or deliver the product or service).

Business models are crucial for both new and established businesses. They help attract investment, recruit talent, and motivate management and staff. Established businesses should regularly update their models to anticipate trends and challenges. Investors also evaluate companies based on their business models, while employees gain insights into a company’s future direction. 

How to create a business model?

1. Identify Your Audience: Start by defining your target audience. Understand who your potential customers are and what their needs are.
2. Define the Problem: Clearly articulate the problem you aim to solve. What pain points or challenges will your product or service address?
3. Understand Your Offerings: Describe the goods, services, or products your business plans to offer. What value will they provide to your customers?
4. Document Your Needs: Consider startup costs, financing sources, and operational requirements. Be thorough in assessing what resources you’ll need.
5. Find Key Partners: Identify potential collaborators, suppliers, or partners who can contribute to your business success. Partnerships can enhance your reach and capabilities.
6. Set Monetization Solutions: Determine how you’ll generate revenue. Explore pricing strategies, subscription models, or other income streams.
7. Test Your Model: Before fully launching, validate your business model. Conduct market research, pilot tests, and gather feedback to refine your approach.

Remember, a successful business model aligns your offerings with market needs, ensures sustainable costs, and positions you competitively. Regularly revisit and adapt your model to stay relevant in a dynamic business environment

Activity 1. My Business Model Canvas (30 points)

Instruction. Develop a Business Model Canvas for your start-up business. Use the template below:

Rubrics: