Listen & Download
Welcome to the recording of my first livestream! There were a few hiccups in the beginning but we got through it!
In this livestream/episode I continue the discussion from the last episode (audio only sorry) of Up and to the Right when we talked about the definition of a business model. This time I talk about how to get practical value out of a business model in the context of small business. Can small businesses get value out of business modeling? Using a specific example from one of my own businesses I go through how I modeled the business and how we can get value out of the exercise.
While there is no real 'right' or 'wrong' way to develop a business model that works for you I'll outline below how I went about it for my own business.
Step 1. Key Considerations
What are some of the key considerations that affect your business?
For the example business I used here are a few...
- Narrow market niche
- Diverse customer base spread across regions, disciplines, markets, applications and organization type
- Privately held
- Limited capital
- Domestic (US) and International sales
Step 2. What do we do?
What processes and/or actions do we use to create value?
- Product design
- Sales & Marketing
- Legal & Accounting
- HR & Payroll
- Application support
- Repair and service
Some of these activities are performed in partnership with other vendors. Manufacturing, Sales, Legal, Accounting, HR and Payroll are all partially or fully outsourced.
Product design, customer service and marketing are the three areas where my team and I have the best capability and opportunity to create value for our customers. During the livestream I touched only on the product design and customer service components but after considering it (while post-processing the episode) I realized that marketing falls into this category as well.
We use the "what we do" question to help articulate the next part of the business planning process.
Here are my notes from the first two steps:
Step 3. The Obligatory Flowchart
Using the information from Step 2 I created the flow chart in the picture below. This helps me by providing a visual description of the process and shows the basic relationships between the elements.
Step 4. SWOT
Once you have a basic business model in place you can use any number of analysis tools to review your model. In my case I chose to use the common SWOT (strengths, weaknesses, opportunities, threats).
Believe it or not there are tools other than Moleskines that you can use to model your business! One that I like is called the "Business Model Canvas" developed by Alexander Osterwalder. Yes, I did my plan on a notebook and you can too but one of the advantages of using a framework like the Business Model Canvas is that it provides some structure to help you work through the process.
Here's a sample that I adapted from my notes:
Actions to Take
- Model your business - if you're not familiar with business model examples you can find plenty with an internet search. If that's the case though, I'd just stick to an established framework like the Business Model Canvas which will help you develop your business model without trying to 'fit' your business into some existing model like "cost plus".
- Analyze the model - the value of modeling your business is only partly in documenting it. To really get value from the process you'll need to analyze your model for things that work well and aspects that might be improved. Use whatever tool or process works for you.
- Get feedback - review your business model with a trusted colleague. The important point here is that you find someone with enough courage to tell you what they really think... and this second part is crucial... that is qualified to provide helpful feedback. While this can be a friend if you have one that fits the bill you might also look for professional help in the form of coaches and/or business consultants who can offer both qualified and objective feedback.
Click the link above or use your favorite pod catcher to listen to the full episode.
In the interests of actually producing the podcast and getting it out regularly I've dumped the intro videos. Is that a mistake? Let me know at email@example.com!
Thanks for watching or listening!
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References & Resources
Canvanizer - Business Model Canvas Tool
Strategyzer - Business Model Canvas Tool
BMI Business Model Canvas Download Link (this is the one I used as an example of the Business Model Canvas)