Close due to errors in the business model. But it is not only startups that ne to build a business model correctly. This tool helps all companies. Both new and already developing. We tell you how to build a business model. We share templates and examples.
What is a business model
A business model is a document that describes a plan for building a business. Let’s say you want to sell children’s toys on the embankment. You have an idea, but to launch a business and ensure its development, this is not enough. You ne to describe how you plan to implement this idea: from whom you will buy toys, who will buy them, will there be advertising and what kind, etc.
That is, a business model is a schematic description of business processes that helps to understand how the company will operate and whether it has a chance of becoming profitable.
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Why do you ne a business model?
There are 5 main reasons to build a business model.
- Strategy development. A business model is the foundation for creating a company strategy. It allows you to determine the main directions of development, goals and ways to achieve them. Without your own business model, you can make mistakes when entering the market .
- Evaluation of profitability. Thanks to the business model, an entrepreneur can evaluate the company’s efficiency. The business model will help you understand whether your project has a future.
The difference between a business model and a business plan
A business model is a tool that helps define the development strategy of a business or startup in general terms. Such a schematic description of business processes allows you to assess the strengths and weaknesses of the project, and understand how the business will earn money. A business model does not include detail calculations of revenue or expenses.
Types of Business Models: Top 7 Options
Let’s look at the popular types of business models that entrepreneurs most often choose.
1. Sales
This type of business model means that the company makes money by selling products or services. This is the most common type of business model.
2. Subscription
The company offers a product or service on a regular basis for a fix fee. This type of successful business model allows companies to generate consistent and prictable revenue.
Example: The team of the corporate messenger Compass offers 3 subscription options:
- Free plan with no feature limitations – for teams of up to 10 people.
- The Business tariff is a cloud-bas corporate messenger for teams of more than 10 people. The cost is 299 ₽ per employee per month.
- Tariff “On-premise” — corporate messenger on the company’s server. Cost — 399 ₽ per employee per month.
3. Franchising
The company allows other organizations to use its brand and business model in exchange for a fee. This type of model allows the business to expand without large investments.
Example. An entrepreneur can open and make a hairdressing salon on his own, then he will have to develop a business model from scratch. He can buy a franchise, for example, in the Chio Chio chain.
In this case he gets:
- a ready-made successful business model;
- calculation of the financial model and break-even point;
- assistance in selecting locations and professionals;
- access to the community of entrepreneurs.
4. Affiliate program
An affiliate program is an ideal business model that many companies use to increase sales and attract new customers. It is bas on cooperation between the company and the partner.
The principle of the affiliate program: the company that owns the program offers partners to participate in the promotion of its goods, products or services. Partners receive a reward for each successful transaction or client attract with their help.
Example. The developers of the Compass messenger have launch an affiliate program. Anyone can recommend the messenger and share contacts of friends who, in theory, will find the service useful.
The terms of the program are as follows:
- It is necessary to share contacts; company employees take on negotiations and transactions.
- Participants can control the process of working with potential clients in their personal account.
- Partners receive 10% or 20% of each subscription payment for two years. The percentage depends on the tariff.
If the attract person connects to the “Business” tariff, in addition to the percentage, the partner receives 200 ₽ for each connect team member.
5. Advertising model
Businesses make money by placing ads on their platforms: websites, apps, or social mia.
Example. The company launch a website where it broadcasts news from the world of fashion and show business. The content is free for users, but there is advertising. It is from this advertising that the project team earns money.
For example, the YouTube channel works on the same model. The blogger shoots videos, makes advertising integrations, and gets money for them.
6. Payment systems
Under this business model, the company provides payment services for a fee: payment processing, electronic money transfers and other financial services.
7. Freemium
The company offers the product for free, but additional features or services require additional payment.
Example: The developer of the Bitrix24 CRM system provides the product for free, but in this case its capabilities are limit:
- no assessment of employee KPIs;
- no automation;
- there is no possibility to work with documents;
- limit functions for tasks and projects;
- no integration with business processes;
- There is no possibility to issue invoices and generate commercial proposals.
To access these features, you ne to purchase one of the paid plans.
Osterwalder-Pignet Business Model Template
The Osterwalder and Pigneur Business Model is a framework special material that is the easiest way to create your own business description. This popular business model template consists of 9 blocks that briefly describe the key parameters of the business. This is what the structure of the Osterwalder-Pigneur business model looks like:
Consumer segments
Although this is not the first block of the template, it is convenient to start creating a business model with it. Here, segments of the target audience are describ. These are people who will definitely benefit from the product, product or service. In our example, there may be several of them:
- Young women 25-35 years old. Interest in fashion and art. Income – from 60,000 ₽ per month. Looking for elegant and comfortable casual clothes.
- Young mothers, 25-35 years old. Interest in healthy eating, sports, adherents of a healthy lifestyle. Income – from 40,000 ₽ per month. Looking for comfortable everyday clothes and stylish looks.
Key partners
Here you ne to describe who is ne to implement the business model. These could be suppliers, partners, investors.
Key Resources
This part of the business model describes everything that is necessary for the business to operate: premises, transport, brand, employees, money.
Value Proposition
In this block of the business model, you should describe what the value of goods or services is for consumers, what problems the business helps to solve. You ne to build a business model around creating a profitable offer for the target audience.
Customer Relations
Here they indicate how the entrepreneur plans to promote the ph numbers business, how he will attract clients, and how he will interact with them before, during and after the sale.
Cost structure
Here it is important to assess what expenses the business will have.
Income streams
This block contains all types of activities from which the business will receive income. This may be not only revenue from the sale of goods. But also franchising. An advertising model, etc.
