MODULE 3
LEARNING OBJECTIVES:
1. Learn how to evaluate and act on business opportunities through
crafting business models
2. Identify strategies for managing in the creation and implementation of
innovative ideas; and
3. Develop business pitching skills.
Building Business Model, Planning for
Entrepreneur and Creating Revenue
Models
“You don’t build a
business, you build
people, then people
build the business”
Zig Ziglar
A business model is a high-level plan for profitably
operating a business in a specific marketplace. A
primary component of the business model is the
value proposition. This is a description of the goods
or services that a company offers and why they are
desirable to customers or clients, ideally stated in a
way that differentiates the product or service from its
competitors.
Building Business Model
Types of Business
Models
A retailer is the last link in the supply chain. These
businesses purchase goods from manufacturers or
distributors and then sell them to customers for a
price that will both cover expenses and turn a profit.
Retailers may specialize in a particular niche or
carry a range of products.
A manufacturer converts raw materials into
products. Then, they sell those products to
distributors, retailers or directly to consumers.
Types of Business
Models
A fee-for-service is just what it sounds like: A
business charges a set fee for a specific service. A
business set up on this model can increase its
earnings by doing work for additional clients or by
raising its rates.
Depending on what type of work the business does,
it might charge an hourly rate, monthly retainer or
commission. It may also create a fee schedule with
a set rate for different types of services.
Subscription-based business models strive to
attract clients in the hopes of luring them into
long-time, loyal patrons. This is done by offering a
product that requires ongoing payment, usually in
return for a fixed duration of benefit. Though
largely offered by digital companies for access to
software, subscription business models are also
popular for physical goods such as monthly
reoccurring agriculture/produce subscription box
Types of Business
Models
The bundling business model involves companies selling
two or more products together as a single unit, often for a
lower price than they would charge selling the products
separately.
This type of business model allows companies to generate
a greater volume of sales and perhaps market products or
services that are more difficult to sell. However, profit
margins often shrink since businesses sell the products for
less.
A franchise is an established business blueprint that a
franchisee purchases and reproduces. The franchiser, or
original owner, works with the franchisee to help them
with financing, marketing and other business operations
to ensure the business functions as it should. In return,
the franchisee pays the franchiser a percentage of the
profits.
Types of Business
Models
In a freemium model, customers can use parts of a product
or service for free but must pay for access to more
advanced features. This model is common in the software-
as-a-service space — Spotify, for instance, has a free ad-
supported tier, but subscribers get to listen ad-free.
Affiliate marketing business models leverage a
business’s audience as an asset. With affiliate marketing,
a business earns a commission when a member of its
audience buys a product or service it recommends. If
you’ve ever heard a podcaster encourage you to use a
specific offer code when you buy a product they’re
promoting, affiliate marketing is probably part of the
podcaster's business model.
Types of Business
Models
To understand the razor blades model, you can
simply look to your local drugstore. You’ll notice
that replacement razor blades may cost more
than razors themselves.
Companies offer a cheaper razor with the
understanding that you’ll continue to purchase
more expensive accessories — in this case,
razor blades — in the future.
Example: Printer and you continue to purchase
ink
How to Create a Business Model
Identify your audience
Define the problem
Understand your offerings
Document your needs
Find key partners
Set monetization solutions
Test your model
The business planning process in entrepreneurship
helps an entrepreneur identify exactly what needs to
be accomplished to build the venture, and what
human and financial resources are required to
implement the plan. It is a planning tool that helps
entrepreneur startups get where they are going. The
forecast profit and loss statement provides a means
to compare actual results to what had been forecast,
and make corrections to business strategy if
shortfalls in revenue occur.
Planning for Entrepreneur
Business
Plan
Business planning for a start-up venture or an established company does not
have to be complicated. You start by describing your products and services in
relationship to those of competitors. You describe what you will be doing that
is superior to what customers have seen from these other companies. This
answers the critical question of why your products solve a significant, current
customer need. You then devise strategies for introducing your products and
services to the market. You determine the costs of producing the products or
delivering the services and the marketing costs required to attract
customers. You also plan the managerial and staff resources required to
accomplish all of these tasks, when they will be hired, and what their
compensation will be.
Know the customer
Skills for success
Planning vs writing
Common financial miscalculations
