UNDERSTANDING YOUR BUSINESS MODEL
If there’s an overused term in business management, it’s probably ‘business model’.
It’s a term that gets thrown around a lot and used in many different contexts. So much so that if I hear someone talking about business models, I might ask them to explain exactly what they’re talking about.
For me, it means the fundamental building blocks of a business: how it makes money. And there aren’t that many variations on a theme. Most business models aren’t new or innovative, although their application might be.
Take everyone’s example du jour, Uber. It’s disrupting the taxi market by providing a ride sharing service. And it’s being driven (no pun intended) by mobile technology and growing online communities. But the basic business model – provide a service or someone for a fee – hasn’t changed. Old business model, but improving on an existing product.
Understanding your business model is crucial, because it’s the basis of how a business generates profit. Once you know it, you can start to make changes to the business model to make it more profitable. Or you can throw it out and adopt a new business model.
The problem then becomes, how can I examine and understand my business model? And how can I do it without boring myself to death?
For me, a key tool is the Business Model Canvas. Created by Alexander Osterwalder and Yves Pigneur of Strategyzer, it’s a practical, design-led approach to mapping out a business model. It breaks down a business model into 9 critical elements and can be undertaken individually or as a focal point for a team discussion.
I’ve been using it since 2011 to sketch out business models for clients in collaborative workshops. This results in a series of insights into the business model which the owners can use to start improving their business performance.
It’s useful in two specific instances:
- Examining an existing business and taking a fresh look at its core elements. Stepping away from the business and seeing it sketched out on one large canvas can help pinpoint the strengths and weaknesses in its operations.
- Testing an idea for a new business venture, and thinking about the various elements needed for its success. This is crucial activity for any would be entrepreneur, and the Business Model Canvas helps make it easy.
To see it in action, have a look at this video here.
If you’ve got issues in your business you don’t seem to be able to get on top of, why not get in touch? Not only do we provide a full suite of bookkeeping and tax services here at Generate, but we’re also able to help with business coaching, strategy workshops, business plans and much more. You name the problem and I’m sure we can help.