how do you set it up?

The business model, or economic model in French, should not be confused with the business plan. It is a tool that describes the company’s process of creating value for itself and for its customers..

The main purpose of a business model is to present the economic viability of an entrepreneurial project in a clear and fast manner.

To build it, you must first listen to your customers’ needs and thus avoid the number one cause of failure for entrepreneurs: a product or service that does not meet customer expectations.

For an existing company, changing the business model sometimes means anticipating changes in the environment. Companies therefore need to be more reactive to better adapt to variations in activity and to increasingly rapid and sometimes uncertain developments.

How do you set up an effective business model?

Choosing a business model requires reflection and diagnosis. To successfully complete this step and prepare your project while defining business strategy, it’s important to answer the following few questions about your business model:

• what is the goal? Who is the product intended for? Who are the potential customers? ;
• what is the offer? (the products, services to be sold);
• what is the value proposition of the project? (to differentiate from competitors and gain a competitive advantage);
• what will be the positioning of the company in its market? ;
• how to reach, acquire and retain the customer? ;
• how to generate income? ;
• which pricing strategy? Will the activity be profitable? What will the profit margin be? What will the cost structure be? ;
• how to reach, acquire and retain the customer?

To answer these questions it will sometimes be necessary to conduct market research.

In any case, a business model can always (and should even) be refined over time (testing what works and what doesn’t). The ideal is to arrive at a business model that offers a sufficient and, above all, interesting income level.

For inspiration, there are several examples of business models available for the company, we quote the most famous of them:

• freemium : the company offers a free limited service and additional paid services (premium);
• subscription : the company offers its services in exchange for a periodic subscription;
• Pear to Pear : the company receives brokerage commissions between customer and supplier;
• the auction : the product is sold at the auction to the person who offers the best buy offer;
• membership : in view of its reputation, the company offers another company to sell its products or services through its website, in exchange for a commission on the turnover achieved;
• the printer model: : This business model consists of selling a product at a loss or at a very low margin, and then offering accessories at a higher price;
• house sale : one of the forms of direct selling is that a company sells its product after a direct demonstration (at home) to one or more potential buyers;
• the low cost : It involves offering products or services at very attractive prices to attract more customers. Products and services sold on the basis of this model are simpler and focus on the essentials (few accessories, few options). The customer who wants to enjoy an extra service or option has to pay more to obtain it.

Presentation of the business model canvas

The business model canvas, invented and modeled by the Swiss Alexander Osterwalder, is a tool that allows to present and formalize the business model of the company in a very simple way.. It is perfectly suited for the start-up phase of a company or the launch of a new product or service. This graphical tool divides the company’s business model into 9 sections:

• the value proposition : in which the company has to present the added value of its products or services, especially what they can offer the customer (for example: speed of delivery, selling price, quality of service, customer experience and its satisfaction, etc.) and how it differs from the competition;
• customer segmentation : this includes explaining the customer segments targeted by a product or service (for example: the budgets of young executives between the ages of 22 and 30 who are located in a geographical area, etc.);
• distribution channels : this explains how the product or service is sold and through which distribution channel (directly: for example on the internet or in a physical store, or indirectly via resellers, etc.);
• the customer relationship : it is about proposing the means of communication that the company will use to reach its potential customers or to keep its current customers (advertising, blog, telephone solicitation, after-sales service, possible returns, etc.);
• sources of income : the essential element of the business model is to show how the company intends to make money and what its pricing policy will be (subscription, direct sales, package, rental, affiliation, etc.), how many customers the company will have before a positive yielded results, etc.? ;
• essential resources : these are the necessary resources that a company must implement to launch and succeed its project, they can be classified as human resources including personnel and the management team, intellectual resources such as knowledge, brands and patents, financial resources such as cash contributions, material resources such as equipment, etc. ;
• essential partners : it is about listing the various partners of the company who will help it to promote its products or services or complement its offers (prescribers, commercial partners, suppliers, subcontractors, sponsors, financial partners, etc.), as well as their costs ;
• main activities : these are the activities required within the company to make the company’s business model work, e.g. IT development and marketing development, after-sales service, the supply chain, etc. ;
• cost structure : this involves proposing the various costs that the enterprise bears (fixed and variable costs, direct costs, indirect costs) for its proper functioning.