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Developing a Startup Business Model

July 10, 2017

In the process of creating and organizing a company, developing a business model is one of the most important steps you can take. In fact, by defining basic topics such as what is your product, who are your customers, what they are looking for in your product and what kind of resources you need to better sell your product, you create a clearer vision of what you want for you company in the future and of the best strategies you can make to achieve your goals.

 

When creating a business model, we consider nine major topics. Those are: Value Proposition, Customer Segments, Channels, Customer Relationships, Revenue Model, Key Resources, Key Partners, Key Activities, and Costs.   

 

 

Value Proposition

The first step when developing a business model is to define the Value Proposition, as it clarifies the problem that you are solving or the need that you are satisfying. From solving an accounting problem to making people have fun, or even connecting people on apps such as Facebook or Twitter, your value proposition can be anything if it has a clear goal defined.

Remember that the main goal of a company is to please their customers and satisfy their needs. It’s not about the technology that you have - clients don’t actually care about what you do in the backstage. What they really care is if, for example, their app is working as fast as it possibly can or if your supermarket has their favorite cereal.

 

Customer Segments

The first thing you need to learn is that your future customers don’t simply exist to buy your product, YOU exist to satisfy them. After knowing that, the next step is to learn who are your customers and why would they buy your product.

How old are they? Are they mostly males or females? What is their income? All that demographics is extremely important to know exactly the profile of your customers and what the best strategies are to sell your product.  

 

Channels

This topic of the business model is here to define how you are going to deliver your product to your customer. Nowadays, we have two ways of delivering a product: by physical channels or by virtual channels. Physical channels are basically the companies and virtual channels can be mobiles, the cloud or simply apps.

 

Customer Relationships

At this step, the major goal is to learn how your company can get customers to buy your product, how to keep them from buying it, and how to expand your product to more people. Developing a clear strategy for client growth and - more importantly - client retention, can help your company to grow faster and with a great reputation on the market.

 

Revenue Model

The Revenue Model is going to define how your company is going to make money. Spotify’s revenue model is based on charging people a monthly fee to listen to high quality music, Amazon sells a wide range of products, hotels charge for the number of days their customers use their rooms. These examples have different revenue models.

There are nine major categories of revenue models and those are:

  1. Commerce and Retail

  2. Subscriptions and usage fees

  3. Licensing

  4. Auctions and bids

  5. Advertising

  6. Data

  7. Transactions and Intermediation

  8. Freemium

  9. Revenue Model types in financial services industries

 

Key Resources

On Key Resources, you will define what are the most required assets to make the business model work. There are four major categories: Finance, Human, Intellectual, and Physical.

  1. Finance - Define, for example, how much you need to deliver the product to your customer.

  2. Intellectual - Define what knowledge you would have to have to deliver your product. If you develop apps, you will probably need some programs, platforms, and coders.

  3. Physical - Decide the necessary infrastructure to make your product. For example, if you build houses, you will need to have trucks, pavers, trailers, stone crushes, etc.  

  4. Human - Define what type of people you will need to have on your company. Scientists? Coders? Administrators?

 

Partners

What exactly are we acquiring from partners? At this step, you will clarify the profile of your partners and how they could contribute to make your product stronger and sell more.  

 

Key activities

The key activities are the most important tasks the company must do in order to achieve its business purpose. Typical Key Activities are:

  1. Research and Development

  2. Production

  3. Marketing

  4. Sales and Customer Services

 

Costs

The Costs will define all the costs and expenses your company will have while operating to deliver the product. Salaries, rents, utilities, variable costs, economies of scale, economies of scope. All are included in the costs of a company.

 

 

 

 

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