The components of a business model

By Samantha Garner | December 18, 2017

As we discussed in our last post, a business model is a blueprint for the business, outlining how you’re going to run your business, and how you’re going to make money. It’s made up of five elements:

  • Business concept
  • Value chain position
  • Calculating customer value
  • Revenue sources and cost drivers
  • Competitive advantage

Let’s take a closer look at each one.

Business concept

A business concept is essentially a clear description of your business. It’s made up of:

Value chain position

Understanding the value chain, or more specifically, your business’ position in the value chain, is critical to further understanding your business on a larger scale.

A value chain is the series of activities that make products and services get from you to the end user. As products and services pass through the value chain, they gain value. For example, a leather bag involves researching the best design; designing the bag; sourcing leather; creating a prototype; tweaking the design; creating the final version of the bag; adding details such as pockets, straps or hardware; and packaging the bag for sale. All of these steps add value to the finished product.

In a value chain, there are two flows of activities: i) Upstream activities, involving the production or manufacturing of a product or service; and ii) Downstream activities which are associated with selling or marketing of the product or service, distribution of the product or service to the end user, product warranty and customer service.

If you’re going to operate a service business, your value chain is shorter because there is no manufacturing process. Most services are delivered directly to the customer only through downstream value chain activities like marketing, sales and distribution.

Where will your business sit in the value chain? Where can you add value for your customer along the way?

Calculating customer value

Are you 100% positive of the value you can bring your customers? Or are you only about 70% positive? It’s important to estimate the value of the tangible benefits your customers will receive through the purchase of your product or service.

After all, customers today are presented with a bewildering range of value and choice of products and services. They can shop for benefits and can buy from virtually any company worldwide. Figure out how exactly they will benefit from choosing you.

What does your customer value? What actual benefits will they get from doing business with you instead of your competitors? Once you understand customer value, you can better estimate what people will pay for your product or service.

Revenue sources and cost drivers

Next, it’s time to identify revenue sources and cost drivers (any activity that causes a cost to be incurred). A very healthy business model always has several sources of revenue from many different types of customers and multiple products and services. Diversification is good!

With multiple revenue streams, you not only reduce risk, but you also create several sources of income. If one revenue source isn’t doing so well, you have other sources to keep you going. Offering multiple products to multiple types of people also means you spread out your risks and minimize the costs of marketing and acquiring new customers.

Now – cost drivers. The most common ones are volume and time. The cost of an activity increases as more units are produced and the longer it takes to complete. For example, increased sales may also mean you have to hire a new employee – increasing your HR costs.

What are your cost drivers? How they can be improved and made more efficient?

Competitive advantage

Your business has a competitive advantage when customers believe you offer clearly superior products and service from your competitors. Craft a competitive strategy, which considers how your business will compete against others — either by being different, or by serving a niche market where there are no other competitors.

Why not just copy what others are doing? It seems like a good idea, but it can also get you into trouble. Why would customers buy from you if you’re the same as your competitor — one your customers already have history with?

Crafting a competitive advantage and clearly communicating your advantage to the customer will lower their risk and make them at least think about buying from you instead.

Small businesses can serve niche markets, or smaller markets with unsatisfied needs. For example, maybe your market research suggested that there were plenty of wedding cake bakeries in your area, but customers were complaining about not being able to find vegan or gluten-free wedding cakes. Sense a competitive advantage there?

Small businesses can change quickly; they can respond to changing market conditions faster than larger businesses, making them better able to satisfy customers. Understanding how your business will compete against the competition will help you stand out.

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The difference between a business model and a business plan

By Samantha Garner | December 9, 2017

When you’re getting ready to start your small business, you want to create as solid a foundation as you can – and that involves education and planning. You might have heard that you should start with a business plan, or a business model. That’s great! But what are they, exactly, and how are they different from one another?

Business model

The business model is a blueprint for the business, outlining how you’re going to run your business, and how you’re going to make money.

There are five elements of a business model:

  • Business concept: A short description of an opportunity, including a description of your average customer; the benefit of your product or service to the customer; the product or service; and the way you’re going to get your product or service to the customer.
  • Value chain position: Your business’ position on the chain of activities through which products and services pass to get from you all the way to the end user.
  • Calculating customer value: An estimate of the value of the tangible benefits your customers will receive by purchasing your product or service.
  • Revenue sources and cost drivers: Identifying your sources of revenue, and activities that come at a cost.
  • Competitive advantage: The state when customers perceive your products or services to be superior to your competition.

Business plan

Where a business model is a blueprint, a business plan is a roadmap. A business plan is a formal written document that includes a description of the business you want to run, your business goals, and the plan for reaching those goals.

A business plan is a detailed document that contains sections such as: Marketing Plan, Startup Expenses and Capitalization, Management and Organization, Products and Services, and Operational Plan.

A business plan is usually developed around the answers to three common questions:

  • Where are we now?
  • Where do we want to be?
  • How are we going to get there?

And is usually written for one or more of these five reasons:

  • To test the feasibility of your business idea and work out any bugs on paper first.
  • To develop strategies ahead of time for marketing, finance, operation and human resources, instead of when you’re in the fast-paced start-up stage.
  • To get funding, such as a bank loan.
  • To attract investors.
  • To have a roadmap to follow for at least the first year in business.

Why does your small business need both a business model and a business plan?

It’s easy to come up with business ideas, but just because you build a company, that doesn’t mean customers will come. A great deal of time and effort should be spent planning before your new company’s products and services ever reach the market. You need a good foundation and planning before you invest all your time and money.

To get started, check out our free One-Page Business Plan – happy planning!

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How to diversify your rural business – and why you should

By Samantha Garner | December 2, 2017

Note: This article was originally posted in February 2014. This updated article contains refreshed links and up-to-date information.


diversify-rural-businessAccording to Statistics Canada, 28% of Canada’s small and medium-sized enterprises (SMEs) are rural-based. Running a small business can be challenging at the best of times, but rural entrepreneurs face additional hurdles: Industry changes, technology replacing human labour, and a steady trend of youth migrating away. Rural-based entrepreneurs, especially those in remote areas, can be challenged even more by lack of access to training (ahem – this is why we put our small business program 100% online!), and a greater distance from markets and business services. Compared to your urban counterparts, you may also be be affected more by the level of taxation, insurance rates, low profitability and government regulations.

Reducing your business’ dependence on one industry or income stream can help you mitigate these risks. Here are six ways to help you diversify your rural business.

  1. Engage existing customers. Know what they are buying from you and what they’re not.  Keep track of the products and services you sell every day. Find out what customers love about your products and services, and what they wished you would offer. According to MIT professor Eric Von Hippel, 70% of new product ideas come from customers.  If you don’t ask, how will you know what your customers want?
  2. Engage new customers. Take a close look at your product or service offerings. Are there customer segments who are not currently buying your products? Could you tempt them over to you with a little product tweaking? Oil Can Charlie’s is a North Battleford SK oil change shop, but owner Jay Bottomley also opened Betty Bubbles next door – a car and RV wash.
  3. Take stock of your company’s strengths. Can those strengths be turned into a new product and new market combination? Caterpillar leveraged their popularity in the heavy equipment industry with the launch of Caterpillar Apparel.
  4. Challenge your competitors. Scope out your competition. Visit them if you can – become a customer. This works best for retail businesses but your goal is to find out what they are offering, how and how well. Can you do better?
  5. Think ahead. Where is your market going? What are they doing? What are their likes and dislikes? Do an environmental analysis of trends that may impact you, your business or your customers in the future – and position your business accordingly. Look for emerging trends in society, technology, the economy, and politics.
  6. Investigate partnerships. Is there a business in your area that isn’t direct competition and could work well with your business? For example, a flower farming business could partner with a local country market to teach a flower arranging workshop, or rent out an unused building as a wedding venue (with the appeal of local flowers!).

Local economic development groups in your area, such as Community Futures, are great for suggesting diversification strategies that suit your business and local market.

Diversification can reduce your business risk and maximize your opportunities to grow business operations while leveraging your company’s resources, materials, talent and success so far. You’ve heard the expression, “Don’t put all your eggs in one basket!” That’s the best reason of all to pursue a diversified strategy.

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How to get your small business ready for year-end

By Samantha Garner | November 25, 2017

Note: The last version of this article was posted on December 2016. This updated article contains refreshed links and up-to-date information.


business-plan

Winter can be a slow time for many businesses, especially at the end of the year. Nobody wants to be caught unprepared in the new year. But, by taking this downtime to prepare your business for what lies ahead, you’ll start the new year refreshed, prepared and ready for anything. Here are some simple things you can do to get everything in order for year-end.

  1. Organize your accounting files, records and receipts to get ready for income tax season. This includes completing inventory records and putting expense receipts into month-based categories.
  2. Update your payroll records, report all current-year paycheques on T4 slips, and make sure all your other deductions are in order – when you see your accountant or bookkeeper in the new year, it’ll run smoother for everyone.
  3. Create a to-do list for the first week of January and make appointments now with key advisors, especially your bookkeeper and accountant – before they get booked up.
  4. Streamline your contacts list – remove old contacts and duplicate records, and update current contacts in your professional networks.
  5. Update your personal productivity and technology tools – download updates and templates and make sure your current apps are still working for you.
  6. Review your business goals. What went well? What lessons did you learn? What did your competition do? (Check out our competitive matrix to see how you measured up to your competition.) This way, you can do more of what worked and less of what didn’t work.
  7. Develop a strategic plan to get you to your goals. If you don’t have one, check out our free one-page business plan template to get you on the right track.
  8. Analyze your marketing, HR, financing and operations. There’s always room for improvement, so brainstorm some ideas to become more effective.
  9. See how social media can help promote your business in the new year. Read some business blogs (like this one) or follow some business experts on Twitter, Facebook, LinkedIn, or Instagram. Learn from the pros as well as from the social media gaffes.
  10. Delete old or duplicate files, get rid of email spam, back up your business records onto a memory stick or in the cloud. You can also hire a company to do this for you on a regular basis.

There you have it – 10 ways to prepare for your small business’ year-end that can easily fit in around your holiday activities. Have fun with it, and pat yourself on the back for your year in entrepreneurship!

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Useful Tricks That Will Help to Create Facebook Ads That Stand Out

By GoForth Guest Blogger | November 18, 2017

Keeping in mind that Facebook has over two billion active users every single month, it is no wonder it became the place to be if you want to promote your company or business. As a matter of fact, there are sixty-five million companies who are currently advertising on Facebook, and you should definitely be one of them. So what made Facebook a popular place for marketing?

Firstly, Facebook Ads are not super expensive and you will be able to create a buzz without investing a lot of money. Secondly, the process of creating and putting together your ad is very straightforward and you can do it quickly. Thirdly, your ad will appear to your target audience which will eventually lead to more interest in your brand or business.

But there is a downside to the fact that Facebook Ads are in demand right– the struggle to stand out from the crowd. Users do see many ads during the time they spend on Facebook, but are they going to click on every single one of them? The answer is no. So what you need to do is to create a unique advertising campaign that will stop a user while they scroll through their feed, and make them see what your product is all about.

Invest a lot of time in the visual side of your advertisement. This means choosing the right image that will spark an interest from a user. But don’t forget to add meaningful content as well. An interesting Facebook ad should be a combination of various factors that will attract your audience, and intrigue them. It might sound difficult if you have never advertised your business on Facebook before, but it really isn’t.

Once you cover the basics that explain how Facebook Ads work, it is time to move on to some useful tricks from the experts. The infographic made by Assignmenthelper shows all the different layers of research and preparation you need to complete if you want to make an outstanding Facebook ad that will beat the competition. You will notice that there is some psychology in it as well!

There is no reason why you shouldn’t try Facebook Ads to make your business more successful. After all, companies of all sizes advertise their products on this social media site, and that is for a reason. Start by going through the infographic and reading each point carefully – you will create an amazing Facebook ad in no time!

11 Tricks to Create Great Facebook AD Designs


Lucy Benton is a marketing specialist, business consultant and helps people to turn their dreams into profitable business. Now she is writing for marketing and business resources. Also Lucy has her own blog ProWriting where you can check her last publications.

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