The Business Model
Business Tools to Assist You
Part 1 - Absorb
A business model is essentially the way in which a for-profit will deliver its value and make money. A mission model is the way a nonprofit delivers value.
The Business Model Canvas is a business tool that provides a way to think about all the important building blocks of an enterprise and how that enterprise delivers value. This was first introduced by Alexander Osterwalder in 2005 and has since influenced many other versions.
1. Look over the slides about business model canvas.
2. Watch these videos from Strategizer about the business model canvas, a tool to help you think about the business model (how you make $) and overall operation of a business.
the-business-model-canvas.pdfBusiness Model Canvas, a tool
This is the one created by Osterwalder, BUT this is not the one we will use for our project. Be sure to scroll down to get the modified one for our purposes.
Further Reading: Read What Is A Business Model by Andrea Ovans
What Is a Business Model By Andrea Ovans.pdfPart 2 - Absorb
The mission model canvas is for any entity that plans to operate to provide services or goods but not with the sole purpose of making profit. This kind of entity will still need to bring in money to cover the expenses of doing the operations to provide a service (or product) - usually donations. Often times, this kind of entity is a nonprofit organization.
The mission model canvas is very similar to the business model canvas, but some of the squares are different. It will be helpful to watch the videos on the business model canvas as well to fully understand the mission model canvas.
Customer Segments is changed to Beneficiaries
Cost Structure is changed to Mission Cost/Budget
Channel is changed to Deployment
Customer Relationships is changed to Buy-in/Support
This is the one created by Osterwalder, BUT this is not the one we will use for our project. Be sure to scroll down to get the modified one for our purposes.
There is a video which explains the concept for each box on this website page: Click HERE.
Part 3 - Absorb
Value Proposition
READ about value proportions by HubSpot
Essentially the value proposition is how you express what it is you are offering to the customer, why, and how it benefits them.
Think about the following:
What value does your business bring to customers?
This can also transform into a sales pitch!
You will craft a statement to help you not only identify your business's value, but it will eventually help you with marketing.
First, describe the problem or the need a customer experiences - explain simply
Second, describe your solution - explain simply
Third, what is the benefit to the customer?
Example: Quoted Her
Problem: the current greeting card market lacks a variety of inspirational messages from women in history, the arts, and culture; additionally, the market lacks a card that can also serve as a gift.
Solution: A 5 x 5 magnet with beautiful images and strong inspiration quotes from historical women
Benefit: quality greeting card with gift rolled into one, convenience
Value Proposition: When you need unique inspiration, we offer a women-focused magnet greeting card that doubles as a gift, offering convenience and surprise.
Tagline: Share her voice.
Example: Wing Cafe
Problem: people in Andover lack an option for a clean, hip, fast casual setting that offers breakfast, lunch and dinner with entertainment options
Solution: a Western-themed, fast casual food restaurant with occasional entertainment
Benefit: quick food option
Value Proposition: Andover residents need more fast-casual food options, we offer a fun environment with a unique Western-theme for quick and delicious food.
Tagline: Go get em' Food
More Examples:
21 Value Proposition Examples that Every Marketer Can Learn From in 2021, by Ramona Sukhraj,
Key Takeaway
- The value proposition is a statement that helps explain:
- The problem trying to solve or need trying to meet
- The solution
- The benefit to the customer
Part 4 - Do
Think about your venture using the canvas tool
The business and mission model canvas can be a way to think more strategically about your venture.
What are the resources you will need to make it all happen? What would you need to do to move forward on the idea?
Product
Service
Equipment to provide the product or service
Staff
Location - storefront, offices, service
Transportation
Marketing - brand, logo, marketing
Office Supplies
Data collection
Take a look at this SBA.gov tool to help you think about start-up expenses, are any resources you would need listed?
Make a list of the activities you'll need to do. Examples below, but not limited to:
Acquire the ingredients or materials to make the product, package to put it in
Search for a distributor for the product you will resell
Think of all the things that will be included in a service, make a list so the customer will know
Make the product / Acquire the product / Provide the service
If a food or cosmetics type business, make the label
Keep track of expenses and sales
Collect money, deposit money
Let customers know about your business, what marketing materials might you need? (Logo, Instagram, website)
Make a timeline for when you need to do these activities.
Think about the channel you will use to offer your product/service. Are you utilizing your network and the means of "whom you know" to do this business? How do you need to prepare for that?
Think about how you can use your value proposition to craft a sales pitch
Part 5 - Do
Think about your Target Market or Customer Segment
There are 3 main characteristics you can use to define your key customers, but only use what makes most sense to you and is specific to your business.
There are 3 main characteristics you can use to define your key customers, but only use what makes most sense to you and is specific to your business.
Demographic - measurable characteristics that matter to your specific business such as:
Age range
Ethnicity
Gender
Life stage: primary school / secondary / higher education / starting career / have young children / have teenagers / children out of the house / new career / retirement
Marital status: single / divorced / widowed / married / partnership / committed relationship
Income: Less than $35,000 | $35,001- $51,999 | $52,000-$73,999 | $74,000+
Education: GED / High School / Bachelors / Masters / Doctorate / Professional Certification
Home: rent / own
Geographic -
where they live or will purchase your product: country, cities, urban or rural
specific cities - for instance if you are a retail store in downtown Lowell, most likely most of your customers are from a 10 mile radius of Lowell - do you need to think about how long it takes them to get to you?
online vs. brick and mortar vs. wholesale
B2B - business to business
Psychographic –
things that define the psyche of your customer such occupation, consumer attitudes, value, interests, lifestyles, political affiliations, or specific occupations (for example if you sell uniforms, your customers might be nurses)
*this is really where so much of how you can describe your customer comes from
***You don't have to use all these characteristics! Only use the ones that make sense for your key customers and business. Ask yourself, are there specific qualities from above that are common in the groups of customers you serve?***
Key Takeaway
- Business Model is essentially how you offer value and make money
- Business Model Canvas is a tool to help you understand how and to who you deliver value
Part 6 - Do
Decide for yourself!
Are you a for-profit? Then use a Business Model Canvas
Are you a nonprofit? Then use a Mission Model Canvas
Are you a social enterprise and a mix of both? Then use a Business Model Canvas
Use This Canvas
Go here for a modified canvas model that will fit our purposes.
There are two sheets, one is the business model, one is the mission model.
Further Reading:
"If the Shoe Fits"
"If the Shoe Fits"
This reading will help you understand better if your solution should be a for-profit, social enterprise, or nonprofit venture.
*this is not required reading, but if you are interested in going a little deeper into the differences of the spectrum of entrepreneurial endeavors, this is a great read
If the Shoe Fits_ Nonprofit or For-Profit_ The Choice Matters.pdf