The development of a business model coherent and complete is a fundamental step for any entrepreneur who wants to transform his idea into a business. This step takes place after Validation idea and before preparation of business plan and, since it occurs early, it can lead the business on the path of success or failure. Therefore, it is recommended the greater dedication on the part of the entrepreneur in preparing this model taking as long as it takes.

There is no exact definition about Business model, since this concept is frequently used by individuals present in this area of ​​entrepreneurship and has undergone adaptations over the years and throughout the evolution felt in this area.

initially business model it just reflected the financial aspect, more specifically, how it would generate money. Over the years, this concept has expanded and started to include other aspects equally important to the success of a business, such as customers, objectives and strategy.

Currently, one Business model it is business planning where the resources, skills and partnerships to be used are identified in order to create and deliver something of value to customers and shareholders. In this phase, we seek answers to all questions about the relationships to be created with customers and partners, estimate the costs and sources of revenue and establish strategies to be followed to achieve the stipulated objectives.

In order to facilitate the preparation of this document, the Business model Canvas da The IT Factory.

Objective of the business model

Any business model must answer the following questions:

Seeing what?

Associated with the value creation aspect, this model you must indicate which market need your product or service responds to, as well as identify what differs from the competition.

Seeing who?

Customers are fundamental to the profitability and success of the business. In other words, it is necessary for the entrepreneur to understand who the target audience is, how the relationship between them and the consumers will be established and how the product or service will be presented to them.

Seeing how?

Here are defined the processes to be carried out in order to achieve the objectives, such as, which activities to develop, which partners are needed and which resources are needed.

Seeing how much?

The entrepreneur in this step must make the analysis as realistic as possible about the costs that his business will entail and how he will be able to make a profit. This is a very important point since a business that does not have the capacity to generate revenue and control costs will inevitably have more difficulties in achieving success or may even be driven into bankruptcy.

Generally, entrepreneurs at the beginning of their business feel a little lost as they do not have the full knowledge required in this area, which leads them to think that they are not able to develop a good Business model. However, the good news is that there are some models that have already been validated by other entrepreneurs, which can be used to carry out this step.

Note that it is not mandatory to follow one of these Models predefined business plans. The entrepreneur can structure his own model however you think is most appropriate for your business, however, by guiding yourself by one already recognized and tested in the market, it conveys security and facilitates that all relevant points are mentioned.

Business Model Canvas

The Business Model Canvas is one of Models which has been used intensively by the market. This was created by Alexander Osterwalder with the support of hundreds of professionals from different countries and is known for being an easy to use graphic tool, including the 9 most important elements of a business, in order to provide a good understanding for anyone.

The format of this model is shown in the figure below and through this, the entrepreneur will be able to transmit in a simple but detailed way the parts of the business charged with delivering value to customers and shareholders.

In order to allow the entrepreneur to know what to put in this model, below is an explanation of each existing block:

customer segments

It consists of identifying the market to be reached considering its size and composition. Thus, it can be useful to create fictional characters that represent the different segments of the desired market. For this, one must consider its main characteristics, needs, interests, consumption habits, among others. This will help to better understand the market and how the product solves its problems. In order to complete this block, the entrepreneur must answer the following questions:

“Who are we creating value for?”

“Who are our most important customers?”

Value offer

This block identifies the exchange of value between the company and its customers, that is, it describes the solutions that the entrepreneur will develop to respond to the needs of each market segment identified in the “Customer segments” block that is intended to be reached. The entrepreneur must answer the following questions:

"What value do we deliver to the customer?"

"Which of our customers' problems are we helping to solve?"

"What product or service packages do we offer to each customer segment?"

"What customer needs are we meeting?"

Channels

It consists of identifying how potential customers will be reached. Understanding how this process will be done is crucial for the business, so the best way to connect the involved parties to the final consumers must be studied. The choice of these channels will have a bearing on the costs that the business will have to incur and therefore, all associated logistics must be planned with the utmost detail and responsibility. The entrepreneur must answer the following questions:

"What channels do our customer segments want to reach?"

"How are we reaching them now?"

"How are our channels integrated?"

"Which ones work best?"

"Which are the most economically efficient?"

"How are we integrating them into customer routines?"

Relations with customers

It consists not only of how the company interacts with its customers, but also what it can do to make customers become loyal to the brand. That is, it is necessary to provide customers with a good experience, to provide quick and effective assistance to them when they encounter any problem. This block must be well structured taking into account strategies that can bring benefits to both the company and the consumer. The entrepreneur must answer the following questions:

“What kind of relationship does each customer segment expect us to establish and maintain with them?”

"Which ones do we establish?"

"How are they integrated with the rest of our business model?"

"How expensive are they?"

revenue streams

It consists of defining the method to be used in order to convert the value proposal into income. It is important to consider the sources of revenue and possible costs and this can be obtained from the sale of the product or service, licenses, advertising or sponsorships. It is up to the entrepreneur to choose which of these to choose and answer the following questions:

"How much are our customers really willing to pay?"

"How much do these currently pay?"

"How are they paying today?"

"How do they prefer to pay?"

"How much does each revenue stream contribute to overall revenue?"

Key activities

It consists of identifying all the activities necessary for the product to be successfully delivered to the customer. This step provides an insight into the complexity of the business and an optimization of this process. In the case of the product, the processes necessary for its development, production, packaging and distribution must be identified, while in the case of the service, the processes to develop, implement, sell and distribute it must be identified. To complete this block, the entrepreneur must answer the following questions:

“What are the key activities that our value propositions require?”

"What activities do our distribution channels need?"

"What about consumer relations?"

"What about revenue streams?"

Key features

It consists of the identification of the necessary resources so that the business is feasible in which these resources can be physical, intellectual, human and financial. In order to complete this block, the entrepreneur must answer the following questions:

“What are the key resources that our value propositions require?”

"What about our distribution channels?"

"What demands are there in relation to consumer relations?"

"How does the proposal reflect in the revenue streams?"

Key partnerships

It consists of identifying partners who can help develop key activities and add value to customers. Establishing partnerships is advantageous since it allows you to optimize processes, reduce the risk, uncertainty and costs associated with any business in the market (which is divided by both parties). To complete this block, the entrepreneur must answer the following questions:

“Who are our main partners?”

“Who are our main suppliers?”

“What are the key resources we are getting from our partners?”

"What are the key activities that partners carry out?"

Operating costs

To complete the Business model, it remains to identify all its costs, specifying the fixed and variable costs of all operations. Once all the blocks are interconnected, associating a cost to the key activities allows this step to be simple and quick. In order to complete this block, the entrepreneur must answer the following questions:

“What are the most important costs of our business model?”

"What about the most expensive key features?"

"What are the most expensive key activities?"

After completed all the blocks of this Business model, the necessary revisions must be made to confirm that no point has been overlooked.

In order to facilitate the preparation of this document, the Business model Canvas da The IT Factory.