1. Crafting Your
Business Model
Marty Kaszubowski
Executive Director
Old Dominion University
Center for Enterprise Innovation

2. A Startup Is a Temporary Organization
Designed to Search for a Repeatable
and Scalable Business Model
• Failure is an Integral Part of the
Search for the Business Model
• No Business Plan Survives First
Contact with Customers
• Preserve Cash While Searching for
a Repeatable Business Model. After
It’s Found, Spend
• Communicate and Share Learning
• Startups Demand Comfort with
Chaos and Uncertainty
Per Steve Blank, et al

3. But not all startups are the same!
There are six distinct organizational paths for
entrepreneurs:
1. Lifestyle business
2. Small business
3. Scalable startup
4. Buyable startup
5. Large company
6. Social entrepreneur
Per Steve Blank, et al

4. Types of startup ventures
1. Lifestyle Startups: Work to Live their Passion.
Examples: Professional Photographers, Healthclubs,
Surf Shops, Ski Instructors, Golf Pros
2. Small Business Startups: Work to Feed the
Family.
Examples: Restaurants, Clothing stores, coffee shops,
Cleaning Services, Contractors, Taxi Cabs, Consultants
3. Scalable Startups: Born to Be Big:
Examples: Google, Facebook, Skype, Apple, Ford,
Boeing, Мобильные Телесистемы, SoftServe, etc.

5. Types of startup ventures
4. Buyable Startups: Born to Flip:
Examples: Tumblr (acquired by Yahoo), Instagram
(acquired by Facebook), Groupon (should have taken the
offer from Google!)
5. Large Company Startups: Innovate or
Evaporate:
Examples: Boeing (satelites, rockets), Ford Motor
Company (Ford credit), Apple Computer (iPod, iPhone,
iPad), Hewlett Packard (printers), Research In Motion (?)
6. Social Startups: Driven to Make a Difference:
Examples: Tom’s (shoes), Ethos (water), Husk Power
Systems (electricity generation)

6. Which type are you planning
to build?
1. Lifestyle business
2. Small business
3. Scalable startup
4. Buyable startup
5. Large company
6. Social entrepreneur

7. The best technology doesn’t always win …
Being first doesn’t always help …

8. A well-known brand is no guarantee …
Being well-funded won’t solve every problem …

9. All of the pieces have to fit
Value Proposition(s)
Key Partners
Key Resources Channels
Cost Structures
Key Activities
Customer Relationships
Revenue Streams
Customer Segments

10. What is a Business Model?
A Business Model
describes how a
business expects to
generate revenue and
profits.
Your Business Model
details your long-term
strategy and day-to-day
operations.

11. What is a Business Model?
A Business Model is an opportunity to
innovate just as you do in your products.
A Business Model will evolve as you gain
experience and as your market changes.
Like your products, it will probably take
several versions to get your business
model right.
You get better with practice.

12. Why do you need a Business Model?
 You can’t succeed in business
without one …
 Deliver value to customers at a
reasonable price
Maintain costs low enough to
make a profit.
 It’s not enough to have the “coolest” product
 It’s not enough to be “a solution looking for a
problem”
Every investor will expect you to be able to describe
how you plan to make a profit!

13. A Business Model
describes the rationale
of how an organization
creates, delivers, and
captures value

14. Without a viable
business model, your
startup is just a dream.

15. You will see many descriptions of
Business Models

16. You will see many descriptions of
Business Models

17. You will see many descriptions of
Business Models …

18. A Taxonomy of Business Models
 Transplanted Real-World
Business Models
 The mail-order model
 The advertising based
 The subscription model
 The free trial model
 The direct marketing
model
 The real estate model
 Incentive scheme
 Business to Business
 Combinations of the
above models
 Native Internet Business
Models
 The library model
 The freeware
 The information barter
 Digital products and the
digital delivery model
 The access provision
 Web site hosting and
other Internet services
A Taxonomy of Internet Commerce, Paul Bambury, 2006

19. The Business Model Canvas
Business Model Generation, Osterwalder, Alexander & Yves Pigneur, Wiley, 2010

20. 9 Elements of a Business Model
1. Customer Segments are the specific types of
customer your product or service helps to solve a
problem
2. Value Proposition is a description of the problem
you solve, why your solution is unique and why a
certain customer segment will care.
3. Channels are the way your product or service is
delivered to the customer

21. 9 Elements of a Business Model
4. Customer Relationships describe the specific
“feelings” your product or service creates for your
customers.
5. Cost Structure describes all the costs incurred to
operate the business.
6. Key Resources are the assets (inputs) you need to
create and deliver value to your customers.

22. 9 Elements of a Business Model
7. Key Activities are the things you and your team
must accomplish to create the value you hope to
create.
8. Key Partnerships describe the external
organizations you need to align with to help your
goals.
9. Revenue Streams are the (many?) ways customers
pay for the value your product or service creates.

23. Focus – The Revenue Model
There are a (seemingly) infinite number of ways a company
can make money, but they really all fit into eight categories:
1. Unit sales: Sell a product or service to customers.
2. Advertising fees: Sell others the opportunities to distribute
their message on your space.
3. Franchise fees: Sell the right for someone else to operate a
version of your business.
4. Utility fees: Sell goods and services on a per-use or as-consumed
basis.

24. Focus – The Revenue Model
5. Subscription fees: Charge a fixed price for access to services
for a set period of time.
6. Transaction fees: Charge a fee for referring, enabling, or
executing a transaction between parties.
7. Professional fees: Provide professional services on a time-and-
materials contract.
8. License fees: Sell the rights to use intellectual property.

25. Some Business Model Examples
Product or Service
The Long Tail
Multi-Sided Platforms
“Freemium”
“Bait & Hook”
Open Source

26. You will see many descriptions of
Business Models

28. Some things to consider
How well does your Value Proposition
achieve the result your customer
seeks?
How many people or companies are
there with a similar need?
How much importance does the
customer place on the need and does
she have a budget to spend on it?

29. Some Questions to Ask Yourself
 How much do switching costs prevent your customers
from leaving?
 How scalable is your business model?
 Does your business model produce recurring revenues?
 Do you earn before you spend?
 How much do you get others to do the work?
 Does your business model provide built-in protection
from competition?
 Is your business model based on a game changing cost
structure?

30. A Final Consideration … Simplicity Rules!
 The winning model almost always emphasizes simplicity over
complexity:
 How can you take steps out a process?
 How can you save your customer from having to learn or remember
something?
 How can you keep your product focused on doing a single thing very, very
well?
1. Go end-to-end. Consider the entire customer experience, from first
contact to final support.
2. Cut it. Eliminate features and services that don’t get used.
3. Specialize. Focus on what you know, and outsource the rest.
4. Don’t get distracted. It’s too easy to compromise; always reduce
clicks, messages, prompts, and alerts.
5. Measure and Fix it. Constantly ask yourself, can this be done any
simpler?

31. Questions?
Marty Kaszubowski
MJKaszub@ODU.edu
757.376.7828