How to Start a Startup With the Right Business Model


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Are you an aspiring entrepreneur looking to put your ideas down on canvas? Are you the established business owner who feels your enterprise has somehow lost its way? More importantly, are you looking for some guidance on how to better define your business model and refocus your efforts? If you’ve answered yes to any of these aforementioned questions, don’t despair! Regardless of whether you’re trying to get your new venture off the ground, or are merely trying to change directions towards a better future, there is a solution. This solution comes from renowned business model generator, Alexander Osterwalder. His approach is predicated on using nine steps to establishing or redefining your business concept. So what can be learned from Osterwalder’s strategy? More importantly, is there a way to simplify his concept even further, into something more condensed and far easier easier-to-use? Yes and to help you better navigate your venture’s future, here are nine simple blocks to generate your next business modeling canvas.

1. Stakeholders and partners: Who are the venture’s main stakeholders, and of those stakeholders, who are the most valued partners? When looking to define your venture’s stakeholders, look to isolate those strategic partnerships so vital to your venture’s success and ones that are essential in mitigating risk. Focus on key investors, suppliers and creditors. Next, define their relationship to your enterprise and their appropriate roles and responsibilities.

2. Essential activities: What activities or operations are essential to growing your business? When answering this question, think of those business activities that your enterprise must excel at in order to meet its value proposition. Think of the importance of a well-defined supply chain, one where vendors are properly aligned and can immediately turn around raw materials and parts. Think of the importance of having solid partnerships with creditors and investors.

3. Essential resources: What resources must your company acquire or secure in order to attain its value proposition? Your venture’s resources can be its business knowledge, its core competencies, its management, its employees, or even its physical assets, such as equipment and machinery. This section is more about resource utilization than it is resource allocation. What resources does your venture require in order to achieve your value proposition? For instance, do you need to sell through distributors, VARS (value-added resellers), integrators, sales agents or can you go direct to the end-user?

4. Value proposition: What is your company’s value proposition? More importantly, how will you deliver that value to your customer base? Focus on strategies that distinguish your product offering in your market. What do your customers want most and how best can your business deliver that to them?

5. Supplier to customer partnerships: What do your customers expect from you in terms of servicing and maintaining their business? Can your enterprise bundle special services with your product offering that might help to set it apart from its competition? Move away from seeing sales as a series of singular transactions where you try and maximize gross profit on each additional sale. Instead, see your customers as potential partners and define what it takes to retain their business for the long-term.

6. Segmented customer base: Segmenting your customer base is an essential part of identifying your venture’s critical sales channels. In this section, focus on key demographics, age groups, ethnicities and genders in order to segregate your customer base. From this exercise you should be able to distinguish between those customers that your enterprise deems to be the most important and essential to growing your market.

7. Channels to service: Once you’ve segmented your customer base, you’ll now have to decide upon those aforementioned channels to market. This may ultimately force you to use multiple channels. For instance, you may opt to sell direct to end-users for some product lines, while using sales agents and distributors for others.

8. Company cost structure: In this eighth step you’ll define your company’s cost structure relative to your value proposition. What costs are essential to manage in order to deliver your venture’s value proposition? How best can you manage these costs in order to derive the greatest return? Focus on segregating those resources and activities where you’ll need to have strong cost controls. Lower costs means these activities will bear fruit earlier in the process.

9. Revenue channels: The final step is to define your company’s revenue channels. Will you only derive revenue on sales of a given product line, or will you charge for essential services such as delivery and special packaging? Approach this last step with the mindset of your customer segments. What are your customers willing to spend in order to benefit from your enterprise’s value proposition?

Considered by many to be the preeminent business model generator, Mr. Osterwalder takes a simplified approach to defining business models by incorporating these nine aforementioned blocks on the "business model canvas". The approach is straightforward and focuses not only on defining a venture’s key partners, activities and resources, but also its value proposition and what it must do to segment its customer base. Next, the focus shifts to establishing how best to reach customers, defining the venture’s overall cost structure and finally the revenue streams that are so vital to increasing the company’s market share.

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