The business model in practice

The business model is the first step to formalize, structure, model, and bring your project to life. Working on a business model is an essential step. It is a clear, synthetic document that covers all the themes of your company without technical details. It is also a communication tool for your project and serves as a basis for working on a business plan (a detailed version of your business model) if necessary.

To define a business model, you can use the Business Model Canvas (BMC), a table that evolves based on your research and exchanges. It is a theoretical tool that needs to be complemented by market research and exchanges with your future clients.

The BMC consists of 9 blocks that encompass the four essential dimensions of your business project: "who" (your clients), "what" (what you sell), "how" (means of selling), and finally, "how much" (your price, costs/revenues).

These blocks correspond to a dimension and allow you to verify three main points: the desirability of your offer to your clients (pink boxes on the table), the economic viability of your project (blue boxes), and finally, the feasibility of your project (green boxes). We recommend completing the order of the boxes according to the model below. Don't worry; we will detail them together!

1. Customer Segments

Segmenting involves dividing your market into groups of potential clients, or "segments," sorted according to various criteria:

Demographic criteria: age, gender, education level, profession, family status, nationality, etc.
Behavioral criteria: buying frequency, consumption habits, usage level, etc.
Psychographic criteria: lifestyle, personality, values, convictions, interests, etc.
Geographic criteria: needs, preferences based on geographical area.

Once this segmentation is done, you enter what is called targeting. For each segment, you will deduce personas that you want to address. Generally, it is not recommended to address more than 5 personas (you cannot target everyone!).

Each segment will have its issues. A business does not have the same needs as an individual, meaning that your messages, strategy, etc., will not be the same. That's why you should always segment and then define personas.

Example: I am a career coach, and I assist individuals with topics related to their professional careers. I can target individuals, men and women, seeking a new career/reconversion/career management/taking on new roles (Segment 1), and HR professionals in SMEs in the financial sector (Segment 2).

2. Value Proposition

A value proposition is the answer to the question, "Why choose you over someone else?" What will your offer bring that is different? Here are the steps to build a relevant value proposition:

Clearly define your personas (previous step).
Identify the problem you will address.
Determine the advantages of your offer compared to the competition.
Draft a unique and clear value proposition.
Express your value proposition in writing, for each customer segment if it makes sense to differentiate them.
Validate the value proposition and its assumptions (market research step).

The value proposition is composed of three elements: the problem you address, the solution you propose, and the real and concrete benefits for your client.

Example: If I am a career coach, I can use the "Why, How, What" technique (there are others) :

Why: My passion is to guide individuals and organizations toward a fulfilling professional future so that everyone feels in their place.
How: By combining various coaching methodologies and my 10 years of experience in human resources, I have developed customizable individual and group coaching sessions.
What: I offer tailored coaching to men and women seeking meaning to help them achieve their professional goals, as well as customized corporate training programs to improve performance, employee retention, and corporate culture. Through this approach, I help individuals give meaning to their careers and help companies maximize their human capital.

3. Channels (Sales, Distribution)

Channels include all the means you will use to communicate with your clients and deliver your value proposition. They can vary widely depending on the nature of your project. Here are some questions to find your channels:

Through which channels can your clients find information about your activity?
Through which channels can your clients make purchases?
What are your customer acquisition channels?
Do you have distribution channels?
How do competitors operate?

Each choice you make for your project must be coherent. You should never approximate; you must justify each choice. Consult with your competitors, conduct research, and engage with your clients. Fieldwork is the only way to confirm the viability, feasibility, and desirability of your project.

Example: Channels for a career coach may include:

A website
A LinkedIn page
Etc.

4. Customer Relationship

It is essential to determine the nature of the relationship you intend to establish with your future clients before they embark on a purchase process. We strongly recommend engaging with your prospects before deciding on customer relationship management. Contact them, gather their opinions, and note their preferences. Ensure that their expectations and needs are at the center of all your decisions.

You need to build a vision of your customer journey (before, during and after the sale). Here are some questions to ask:

What type of relationship (personal, automated, co-built) does your clientele expect even before buying your product/service?
During the purchase, what is your clientele sensitive to? How can you facilitate the purchase?
What channels/tools are in place after the sale?
How can you ensure to meet or exceed their expectations?

Example: Channels for a career coach may include:

Email exchanges to respond to information/claims requests
Automated emails sent at different periods to follow up/foster loyalty/inform about new workshops
Emails/workshops to "co-build" a new offer with the help of your clients
Free workshops to position yourself as an expert and gain sympathy from your target audience

5. Revenues

Revenue streams encompass the various sources of income that an organization generates by selling goods, providing services, or a combination of both. Revenue streams can vary in nature, such as recurring revenues, transaction-based revenues, project-related revenues, or a combination of different types, depending on the specific nature of the organization's activities.

Here are some questions to describe your revenues:

For which value propositions are clients willing to pay?
How much are clients willing to pay for what you offer?
What payment methods are available (subscriptions, packages, one-time payments, wire transfers, cash, credit cards, etc.)? What is the revenue share generated by each of your activities?

Example: Possible revenues for a career coach:

Payment in 3 installments for individual coaching (20% of total revenue) at a price of 130 euros per session or a package of 5 sessions for 550€
Payment in one lump sum after the service for a seminar for a company (50% of total revenue) at 1500€ per day
Online payment to access online training modules (30% of total revenue) at 50€ per module

For each of your services, think about the billing method, price, and overall percentage it could represent of your total revenues. These are estimates to go further and develop them into financial forecasts. Consider studying the competition for inspiration and finding ways to stand out!

6. Key Activities

To deliver your value proposition, what activities/processes do you need? List all the elements allowing you to materialize your offer. Key activities encompass manufacturing, production, logistics, accounting, procurement, sales, information research, information analysis, website management, point-of-sale management, events, etc.

Example: Possible key activities for a career coach:

Organizing seminars
Prospecting
Creating and updating coaching programs
Creating and updating online training programs

7. Key Resources

These are all the tangible (manufacturing facilities, furniture, vehicles, premises, etc.), intangible (patents, copyrights, skills, expertise, databases, etc.), human, and financial means that you need to gather to deliver your value proposition through your offer. Key resources can be owned by the company, rented, or obtained from key partners.

Resources enable the execution of key activities and the delivery of the value proposition (each axis being interconnected).

Example: Possible key resources for a career coach:

A website – to be created and updated (Channels)
An online training platform – to be created and updated
Tools for event management: Weezevent, Calendly, etc.
A contact management and customer tracking tool

8. Costs

A business project incurs costs typically classified into two main categories: "fixed costs," which remain constant regardless of the level of activity, and "variable costs," which increase with the volume of activity. To ensure the profitability of the activity, revenues must exceed costs. The projected revenue must exceed expenses, taking into account their fixed or variable nature.

When a company surpasses its breakeven point, it achieves profits. If it precisely reaches this point (which is relatively rare), the result is zero (=0). Finally, if it fails to reach this point, the company records losses. In this case, it is necessary to consider actions to make the project profitable, a topic covered later.

At the business model stage, it is essential to identify at least the major expense areas allowing you to sustain your activity, even if you don't have precise figures yet.

Example: Possible costs for a career coach:

Creating and maintaining a website
Purchasing training courses to stay up-to-date
Creating and maintaining an online training platform
Specific subscription costs (examples: LinkedIn Business, Paperjam Club, etc.)
Communication expenses (business cards, etc.)
Etc.

9. Partners

Nowadays, collaboration and networking are increasingly essential. You must build a network of relevant partners for your activity. Consider all the entities capable of bringing value to you (and vice versa) and essential for delivering your offer. This could include suppliers, subcontractors, experts, influencers, ambassadors (such as former clients), and other businesses with which you might benefit from forming partnerships for complementarity, among others.

Example: Possible partners for a career coach:

Coaches/professionals from other complementary specialties
ADEM (National Employment Agency in Luxembourg)
Organizations related to career orientation/reorientation
Associations that assist individuals suffering from burnout
An agency to create your website
Etc.

Working on a business model is a complex but necessary exercise. You can refine and transform it based on the evolution of your project. If you want to give more meaning to your project, we recommend considering incorporating impact; detailed discussions on this are covered in the social business model canvas. Of course, you must quickly confront all your ideas with reality. A business model on its own remains highly theoretical and does not validate your project. Move swiftly to your market study! Only the confrontation with your market and clients allows you to assess the risks, feasibility, desirability among your personas, and finally, the viability of your entrepreneurial project!