What is a business model and why would anyone care? Especially why would you care when you are developing an online product (or any product for that matter)?
Why do I need a complex business model? Why can’t I use a simple one?
Models are descriptions of what is happening in the real world. Think of them as a map that explains where the subject is going and more importantly why. It allows you to predict what will happen to the subject under different conditions. And a business model is exactly the same.
Your business model says how you are going to run your business and what it is about.
In this article, I’m going to demonstrate the elements of a business model using a simple online product. The example I’ve chosen is selling online learning content to dog owners. More specifically the course is about separating fighting dogs safely.
There are nine parts to a business model:
1. The Customer. In this section, you need to identify what segments and customers you are expecting to deal with. In our example, your customers will be dog owners with multiple dogs or neighbors with dogs or dogs that they take for walks in the park. In any case, they have an aggressive dog that goes into fight mode when another dog appears.
2. The Value Proposition. In this section, you need to identify what you will provide to the customer and why your value is different and better than your competition. In our example, you are going to offer a video course on separating fighting dogs safely.
3. The Customer Relationship. A large element in your business model is how you relate to your customer and how they relate back to you. For our example, we’re going to use the trusted expert or authority relationship.
4. The Sales Channel. It’s nice to have a chosen relationship but you need to build that relationship and then you need to move your product to the client. This is what the sales channel is all about. In our simple business, we’re going to use the internet and its standard opt-in, sales page channels.
5. The Key Activities. This section defines your key business activities. These are the tasks and functions, you absolutely must do in order to succeed. In our example, creating learning content products and generating traffic are the key activities which must be done.
6. The Key Resources. No business can run on a real shoestring — except a shoelace manufacturer. Everyone needs certain resources — whether it’s people, knowledge or money. In this section, you need to list which resources are key to your business. For example, the key resource is dog behavior knowledge.
7. The Key Partners. It’s really hard to do it alone. In fact, most businesses can’t do it all alone. You need to forge partnerships. In our simple business, our major partners are going to be EzineArticles.com, our webhost, and Paypal on the sales side. On the development side, you are going to need to forge relationships with a vet and a good library.
8. Cost Sources. The first seven sections detail how your business will work. But it really doesn’t concern itself with the money side. In this section, you need to describe how your business spends money. As in all of the sections, only the key elements need be listed. In our example, the key sources of costs are articles for article marketing, the web hosting costs and the collection costs (i.e. PayPal).
9. Revenue Streams. The last section, describes how the company will make money. Marketers refer to this as monetization. In our example, the company will make money by selling home study courses.