What is a business model?


A business model is simply the answer to four general questions about your business project:

  • What do we offer?
  • How do we make it?
  • How do we sell it?
  • How do we make money?
In other words it is about
  • Product
  • Sales
  • Organisation
  • Finance

Elements of a business model

Of course it is a bit more complicated than that, and each of the four main questions has a number of subquestions:

Product – What do we sell?

  • Customer value – Why do customers buy?
  • Positioning – How do we want our customers to percieve out offer compared to alternatives?
  • Price level – How should we price it compared to alternatives?
  • Experience Cycle – When in the purchasing and consumption process to we offer unique experiences?

Sales – How do we sell it?

Organisation – How do we make it?

  • Activities – What do we do in our business?
  • Resources – What to we have – or need to acquire – to do it?
  • Partnerships – How to we cooperate with partners?

Finance – How do we make money?

  • Revenue – How do we make money?
  • Price Model – How to we define the price of our products?
  • Costs – What are our costs?
Another common descriptions of a business model is made by Alexander Osterwalder whose Business Model Canvas has become a very popular model for brainstorming on your business model.
In the video below you can see a lecture by Alexander Osterwalder about the Business Model Canvas.


And you can download your own canvas as pdf below:

 

The business model canvas outlines nine building blocks of a business model:

  • Value proposition – what you offer.
  • Customers – who you make it for.
  • Channels – how you reach your customers.
  • Customer relation – how you relate to your customers.
  • Revenue – how you make money.
  • Key Activities – what you do.
  • Key Resources – what you have.
  • Key Partners – who helps you.
  • Cost Structure – what it costs to rund the business.

 

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