No matter the type of business operation you own (startup or established), it’s important that you can explain your business model to anyone that will a vested interest in your company. Your business model should identify the resources required to successfully implement your business processes and generate revenue. People who have a vested interest in your company will want to know this information. This includes your potential business partners, banks and investors.
If you ever have to pitch your business to a potential partner or investor, you can use the business model canvas to do so. Create an outline of your business model now so you’ll have it ready for important meetings with potential partners or investors. You will also be able to use the business model canvas to explain your company business model to contractors or employees during your new hire training process. In this blog I show you how to outline your business model using the business model canvas created by Strategyzer, a leader in business model innovation.
This is What You Would Pitch to Potential Partners, Banks and Investors
There are nine key components of the business model canvas by Strategyzer. Below I explain what they are and how to outline your business model using each component. When pitching your business to a potential partner, bank or investor, covering each component should help them easily under how your business operates and generates revenue.
Components of a Business Model
Key Partners – Under this component you would identify the relationships you have with partners and suppliers. Partners and suppliers should be identified if the company relies on them to successfully provide its products or services to its customer segment.
Key Activities – This component should describe the key activities that must be done to provide value to your customer segments. In a nutshell, it should explain what’s done to provide your products or services to your customer segment in a satisfactory manner.
Key Resources – This component should describe the company’s key assets. Key assets can include people (e.g. the company management team) and things like heavy machinery and equipment.
Value Propositions – The value proposition component should describe the competitive advantage the business has over its competitors. You should outline what makes your company different and sets it apart from the competition. (And describe how it benefits your customer segment).
Customer Relationships – This component describe the types of relationships you will develop with each customer segment that the company is targeting. It explains how you are going to maintain your relationship with your customer segments over time (to continue generating revenue for the company).
Channels – Under this component you would identify the channels you use to reach and communicate with your customer segments. An example of this would be the marketing and advertising techniques used to get exposure and generate leads for the business—leads that turn into sales. (Sales equal revenue and this is something potential partners, banks, and investors will want to know).
Customer Segments – Here you would identify your target market. Provide details such as their location, income, age and sex. You would describe industry types and industry revenue (if your business is B2B). Potential partner, banks, and investors will need to understand who is buying your products or services.
Cost Structure – Under the cost structure component you would identify the costs the company incurs to successfully operate the business. Examples, include rent, marketing and advertising fees, staff salaries, etc.
Revenue Stream – The revenue stream component identifies your product or service offering. Simply put, it describes exactly what you sell to your target customer to generate revenue.
The Business Model Canvas Helps You Keep Your Pitch Short & Sweet
Banks and investors are very busy people. Hundreds of business owners present their businesses to them every month. They feel like they heard it all and seen it all. That’s why you need to keep your pitch to them short and concise. If you build your pitch using the business model canvas you will cover all of the “sweet spots” that banks and lenders look for in a pitch. They want you to explain what you’re doing, how’re you’re doing it, and how it makes money. A good pitch should tell them what they need to know in under 3 minutes.
The Business Model Canvas Isn’t a Substitute for a Business Plan
Although the business model canvas does a good job of explaining how a business operates and generates revenue, it isn’t a substitute for a business plan. Whether your business is a startup or established company, a business plan should be written. A business plan is sometimes required when you apply for business financing. Having one on hand to provide to a lender or investor when they ask will make you look well-prepared. It’s also good to have a business plan to guide your management team and staff on operating the business, reaching company milestones, and generating revenue (amongst other things). A business plan is a living document that changes and grows as your business changes and grows. It will help you keep track of your business growth.
LenCred Can Help You Get Capital for Your Business without Either
While I always recommend that startup and established business owners have an up-to-date business plan ready and available for banks and lenders who might request it, it’s not always required to get financing. In fact, LenCred has helped thousands of business owners raise millions of dollars in funding without need to provide a business plan to a lender. The LenCred team specializes in help entrepreneurs and small business obtain unsecured business lines of credit.
To qualify for an unsecured business line of credit you need to have an excellent personal credit history. Your business can be a brand new startup with no revenue or an established business with $500,000 in revenue. It doesn’t matter! If you’re interested in learning more about how you may be able to get financing for your business without a business plan (and without pitching your business model), contact the LenCred team today for more information.