Hello, everyone. This is Alejandro Cremades, and today we’re going to be talking about
what is a business model? Essentially, a business model is the way in
which your business is generating income. You’re essentially realizing or creating
value, and you’re extracting or taking away with you the compensation that you’re receiving
from your customers in exchange for whatever you’re putting out in the market.
It is very important to separate the business model from the business strategy. The business
model is all about how you are creating value and getting compensated for it. The business
strategy is all about how you’re planning on bringing your business to the market and
how you’re executing on it. So, with that being said, let’s get into it.
The first part of the business model is the product. Essentially, you’ve seen a problem
in the market. You’ve been able to come up with a solution, and that solution that
you’re bringing to market, whether it’s in the form of a service or if it’s in the
form of a product, that’s essentially what the product is all about and, obviously, that
product is going to have a price. You need to price it right. You’re going to have
to do some price testing, some elasticity on the pricing. Whatever it needs so that
you’re getting the amount of money that people are going to be paying for it right.
The next part of the business model is the market. You need to understand who you’re
targeting. What’s the geographic location? Who are the people that you’re going to
be going after, and essentially, this is a critical component of the business model because
ultimately, your market and understanding who you’re going after is going to help
you in extracting that value as soon as possible and having a business model that is repeatable
and scalable, which is, at the end of the day, what investors, especially, you want
investors for your business, are really wanting to go and look after. If they’re able to
pull, let’s say, one dollar in, how many dollars can they take out, and you are only
able to do that if you really understand very well the product that you’re bringing to
market, who you’re servicing it to, and then how you’re getting out there and getting
in front of your right customers. The next part of the business model is the
delivery. Essentially, the delivery is how are you planning on bringing that product
to market? How are you going to do that? Is it going to be via organic distribution channels,
via partnerships that you’re creating? Is it going to be via Facebook ads, Google Ads,
LinkedIn ads? You really need to understand how you’re going to be delivering your business
and put it in front of the right people. For this, first, you need to understand, as we
were saying before, who is your market? Then understand where that market is so that you
can get the right people in front of whatever you’re trying to bring to market.
The next part of the business model is the expense. What is the cost of this business
model? What is the cost of that product or of that service? The cost that it’s taking
in order to put it in front of the right people because, at the end of the day, what you don’t
want to happen is that it’s costing you more than what people are willing to pay for
it. You really need to make sure that you get your cost, very tightened up so that you
understand how much money at the end of the day is going to be your take-home.
A few examples in terms of business models: you have, for example, the membership model.
A membership model is where you’re putting out some knowledge that you may have, and
you are making people pay for that coaching or for that service on a monthly basis a certain
fee, and that could be on a recurring basis. Another example could be a premium-to-premium.
You’ve seen this on platforms like LinkedIn or platforms like that where you really get
the idea of what the service is, you get to play with it for free, and then essentially
if you want to do additional stuff with it, you need to pay a fee. That’s another way
in terms of a business model. Another way could be the franchise. You develop,
let’s say, a restaurant. You maybe develop the food, and then you are giving that structure,
those logistics to someone else who wants to replicate it, but not run with the burden
of the logistics and coordinating everything. A good example of this could be McDonald’s,
Burger King, you name it. Then, lastly, you have the typical examples
like retail. You have e-commerce platforms where you just go in, and these people are
buying a certain amount at large scale. Then they sell it individually, and they make from
the margins from those sales that they’re actually making.
Essentially, that’s what a business model is all about. If you like this video, make
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thank you so much for watching.