A business model is an overview of your business, on a single page. A business model is your game plan.
Much like you have seen in movies, where the coach has a blackboard and chalk, he explains to the team what the strategy is, who should do what, and what the end goal for the team to achieve is.
Starting with a business model
Before you get started with any type of business, create your business model first. Most people think to start a business you need a business plan…
Yes, a business plan is important, which is why designing a business model to start your business will be the fastest way to gain traction.
Once you have all the basics in place you know your numbers, and your business model shows you how you will make money, then you can start looking into creating a business plan, based on a working model.
Business models change often
The reason for changing often is due to competitors, as your competitors change, your business model should adapt and change as well, you might even design a model that makes your competitors follow you after some time. As your business will eventually end up being that good.
In business, your business model could change every 3 months during the starting stage. As time goes by and your business starts to establish itself, your model changes less.
The one thing to remember is that your business should always be improving your business model, even if it’s every 6 months, to a year. Businesses must improve their business models otherwise they are overtaken by their competitors and become extinct.
Business models & competitive advantage
The goal is to achieve a competitive advantage. Read the book of Michael Porter where he defined the two ways in which a company can achieve competitive advantage over its rivals and that is cost advantage and differentiation advantage.
The different business models
So, this blog will look at the different business models you should consider starting or growing your business.
You need to first ask yourself what stage your business is in, and what business model will work best for you.
Based on our experience we developed the following business models you can consider depending on the stage of your business:
- Bootstrap Model
- Startup Model
- Growth Model
Next, I will explain the business model in more detail.
Business model building blocks
Each business model consists of 9 building blocks, each of these blocks plays a major role in your business and has subdivisions under them. Below you will find each of the 9 building blocks of a business model, and why they exist:
1. Key partners
Key partners are the key partnerships that your business leverages, or relies upon, for success. This includes the resources or value your business gets from these partnerships.
3. Key resources
These are the key resources like people, systems, and money your business relies upon or uses, to operate and provide services.
4. Value proposition
The value proposition that sets your business apart from your competition. In other words, what are the unique selling points of your business that differentiate your business from the rest?
5. Customer relationships
The primary relationships you have with your customers, including how you interact with them, how these interactions differ among different types of customers, what different customers’ needs are, and the level of support the different customers receive.
6. Channels
How your customers are reached, how your services are provided, your different distribution channels and how your value proposition is delivered.
7. Customer segments
The ideal customer personas for your value proposition, the key differences between these segments, and potential steps in the customer journey.
8. Cost structure
The primary costs that are associated with starting, operating your business, and providing your services, as well as the relationship between these costs and other business functions.
9. Revenue streams
How your business generates revenue through the delivery of your value proposition.
It also includes various revenue streams, because you can’t rely upon only one value stream if you want to remain competitive.
Now that you have the basics of the 9 building blocks of the business model, let’s have a look at the first business model that is needed when starting your business. As well as how to use the 9 blocks.
RAS business model
When starting your business, the RAS Bootstrap Business Model is the first model you will be using.
The aim of using this business model is to structure and set up your business and work towards the goal of launching your business and entering the startup stage.
The bootstrap business model is designed to launch your business by using as little funding as possible, and the fundamental skills needed to get your business off the ground.
To build your model, use PowerPoint or a pen and paper with “sticky notes”.
The next page will share the bootstrap model you should consider.
RAS business model
1. Key partners
Your key partners are normally 3rd parties like external people and companies or systems that will help you run your business or provide you with the required services. You can also add more partners as your business progresses, as it’s normal to add more partners that can help your business as you progress.
Below is a list of your potential partners we suggest you consider at this stage:
- WordPress
- MailChimp
- Zoho
2. Key activities
As you are most likely to be the only member in your new business, you will find that you will be taking on most or all the activities in your business on your own in the beginning.
But as your business grows, the activities will start to be taken over by newly employed staff members, or even freelancers that you get in overtime to assist you.
The activities listed below, are the job roles that you will be using to deliver your customer’s services.
- Creative design
- Data analytics
- Content creators
3. Key resources
Every business makes use of resources, to deliver a product or service to its customers.
The resources will help you to create your customer’s ads and deliver outstanding service. Regardless of if you do it on your own, it is going to cost you something in time, because time is money from a business point of view.
Remember that resources can always be added, as your business grows, but each resource requires an activity, so be sure to always add an activity for each resource.
Below are the resources needed to set up your business:
- Unsplash
- Canva
- Possible funding
We will be expanding on how these resources are used in your business at a later stage.
4. Value proposition
Next, we will look at what you will be offering your customers, and what services they will be purchasing from you.
The reason why we recommend starting with only a small amount of services at the start is that you must focus on mastering the basics first, before combining different services that can make things a bit more challenging at the start.
You will also be surprised at how much revenue you could generate by just using Facebook at first.
Below we have listed the first couple of services you will be offering:
At the start of your business, in the setup stage, you will mostly be collaborating with customers who don’t always expect a real hands-on approach, as much as the corporate companies would, as they spend anything from $ 10,000 upwards on your business, for your services.
- Phone
- Online Meetings
6. Channels
Much like your customers, you will also use the same type of marketing channels to generate leads and grow your brand.
The only difference is, that where some of your customers might be delivering a product, and would need to ship the value proposition, you will deliver yours through an online process by using the following channels:
7. Customer segments
In the customer segment part of your business model, you will need to decide on who your market would be, and who could benefit from your business’s services.
As an example, we market to the real estate market and use them as our customer segments. You can add any market segment that you want for your business model.
Our segments would look like this:
- Developers
- Real estate agents
8. Customer relationships
The primary relationships you have with your customers, including how you interact with them, how these interactions differ among different types of customers, what different customers’ needs are, and the level of support the different customers receive.
9. Cost structure
Next, you will list all the costs that it will take for you to run your business and grow it.
You do not need to list every single little cost, just list the large fixed and variables for now, for example:
- Zoho
- MailChimp
- Marketing
- Salary
10. Revenue streams
The revenue stream is the only complicated process of the business model.
The more services you add to your business, the more revenue streams you will have, but you will also have more costs and activities that are needed to service the different streams.
Below we have listed all the services you will be offering and the possible revenue from them:
- Facebook Lead Generation at $210 /pm
- Facebook Conversions at $210/pm
- Facebook Page Likes at $210/pm
- Facebook Messenger at $210/pm
- Facebook Business Page at $150/pm
Now that you have listed all the services that you will be offering, you need to connect them to your customer segments.
The goal here is to decide what percentage of the market you could reach with your marketing budget, and based on that, how many of them could potentially become your customers.
By doing this you can forecast how successful your business could be.
Follow the fundamental guidelines above, and you will be able to create a simple profitable SME business model, that will explain your game plan and how you intend to make money business-wise.
So, give it a try and let us know how you are doing.
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Going forward
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