How to Do a Business Model – Part 1

July 10, 2010 at 8:41 am 4 comments

Today we tackle  a business concept not covered in the EITC free Entrepreneur in the Classroom curriculum: BUSINESS MODELS.  Use this exercise as a one-off to help students or entrepreneurs to develop a business idea they’ve got. If you’re an entrepreneur, this may be news for you as most people out there tend to confuse “business plan” with “business model.”

Let’s first start with what I teach my students about business models. One of the best business model tools out there is a 6 part process constructed by a team led by Michael Morris.

The six parts of the business model – in layperson’s terms – according to the Michael Morris paper are:

1. How we create value – what you do/make and put out there in society
2. For whom – target customer population
3. Internal competitive advantage – operational efficiencies or processes that make you better
4. External competitive advantage – how consumers/stakeholders outside the company know you’re better
5. Economics – how you make money
6. Exit strategy – what is your exit from this business, is there one?

This is an incredibly back-of-the envelope description of the paper by Mike Morris and his team, but, you get the general idea.

Suggested exercises:

1. Using an example many students can understand, explain the concept of the business model. (For example, in my class I have used the movie Lord of the Rings, how it was filmed and directed, and applied it to the six-part business model template – see next post for detail on this exercise).

2. Advanced: With a business idea (or existing business) in mind, fill out a grid with the six components above. Take note of the most difficult parts to complete, why?

More information

The NFIB Young Entrepreneur Foundation is a 501(c)(3) organization promoting the importance of small business and free enterprise to the nation’s youth. More information is available at www.NFIB.com/YEF.  The Foundation is associated with the National Federation of Independent Business; NFIB is the nation’s leading small business association, with offices in Washington, D.C. and all 50 state capitals.

Entrepreneur In The Classroom. The NFIB Young Entrepreneur Foundation Entrepreneur-in-the-Classroom (EITC) supplemental curriculum exposes students to entrepreneurship and the necessary steps to take an idea and turn it into a business. The free curriculum can be integrated into classes teaching a variety of subjects including music, art, fashion, business and many more. You must be registered to view the full Entrepreneur-in-the-Classroom curriculum.

Related links:

Follow NFIB Young Entrepreneur Foundation on Twitter

Follow NFIB on Twitter

Follow blog author Kathy Korman Frey on Twitter

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Entry filed under: Business exercises, Business Planning, Entrepreneur, Teaching tools. Tags: .

NFIB and Visa Inc. Announce 2010 “Young Entrepreneur of the Year” Winner How To Do A Business Model – Part 2 – Lord of the Rings Meets Business Analysis

4 Comments Add your own

  • 1. Natalie  |  July 22, 2010 at 6:09 am

    Great simple breakdown of what’s really important in a business plan. The number of people who get caught up stalling actually working on their business because they’re creating an overly complicated business plan amazes me.

    At the end of the day they’re a moving, active document that you refer to keep you on track and succeeding.

    Reply
    • 2. kathykormanfrey  |  July 22, 2010 at 4:46 pm

      Agreed Natalie. A business model is the underpinning of a business plan, and we need to think of the simple ‘why” versus overcomplicating and stalling. As a frequent speaker in my class, Wendee Kanarek, said “Investors are people too.” Appeal to everyone’s common sense and humanity, and the numbers will come.

      Reply
  • […] 22, 2010 In the last post,  we took a look at an important business concept that is a mystery to entrepreneurs and business […]

    Reply
  • 4. seo plan  |  August 20, 2013 at 3:26 pm

    I doubt I could keep up with maintaining a place like it!

    Wonderful work and I really would love to see you keep up the pace for a good
    long time.

    Reply

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