Business models 101

Your business model is your business’s value delivery vehicle. This is how you fulfill your ICPs’ dream outcomes and deliver value in exchange for money.

Perfect Business & Business Model.

We’ve seen them already, the 4 criteria that allow us to create the perfect business.

On this page, we’ll see in detail how to create the ideal conditions to perfect your business. For this, we’ll need to list the tools we have at our disposal to move the needle on each of the 4 levers:

1. Lever 1 — Expensive:
   • Brand Image
   • Brand Experience
   • Perceived Value
   • Delivered Value
   • Business Models
2. Lever 2 — Low cost:
   • Business Models
   • Product costs
   • Acquisition costs
3. Lever 3 — Recurring:
   • Business Models
4. Lever 4 — Unique:
   • Brand Image
   • Brand Experience
   • Business Models

With this little breakdown, moving stuff around to optimize your business becomes easier.

1. Branding to make the business unique and justify high prices.
2. Marketing and Sales to :
   • optimize acquisition costs
   • raise awareness of the brand and the value it brings to the market
   • make prospects perceive the actual value of your products and services.
3. Business modeling to :
   • increase purchase recurrence
   • optimize the price/production cost ratio
   • increase customer lifetime value (LTV)
4. The Product, to :
   • optimize production costs
   • deliver far more value to the customer than they perceived when they were only a lead
   • build customer loyalty to ensure we never lose a single customer, thereby increasing LTV

Also, your business model is part of each of the 4 criteria for the perfect business.

What do we need to do?

We need to improve your business model and pricing system to create a context favorable to maximizing our 4 conditions.

The part about your pricing system will come in a following chapter.

In this chapter, we’ll focus on business modeling only precisely because it impacts all four levers simultaneously.

The aim is to create the perfect distribution vehicle for your business. Your business model is the blueprint for this vehicle.

We seek to optimize your business’s constraints so that they serve both your “ultimate avatar” (ICPs + personae) and your brand’s survival objectives in its infinite game.

The difference between Business Model and Pricing System.

The terms “business model” and “pricing system” are often confused.

A business model is the complete modeling of the system for delivering value to a company’s customers.

It precisely describes how a company decides to earn money in exchange for delivering value.

For example, if I say:

To make money, we’re hoping people will approach us and take turns saying, “You’ve got a good face, you know. Here, I’ll give you some money.”

I’ve just described a business model based on sheer hope and luck.

However, we’ve never talked about pricing.

The critical thing to remember is that a pricing system is simply the definition of the prices to be attributed to our offers. That’s all there is to it.

On the other hand, a business model structures our business so that it earns money in a specific way in exchange for delivering a certain amount of value to our customers.

Many companies change their prices every four mornings without ever explaining why.

This is often because they’re fumbling for the “perfect pricing,” thinking it’s the right way to find their business model.

Spoiler, it works 1 time out of 100,000, and that’s just dumb luck.

We’re not going to do that. First, we want to define a sensible business model and then a pricing system that matches it.

This method’s advantage is that what is defined can be more easily measured, tested, and modified by iteration.

This way, nothing is left to chance. We’re going to knock it out of the park with method.

Our philosophy:
If a plan requires luck to work, it’s a bad plan.

Business Model Canvases.

At this stage, the classic move is to look up the Business Model Canvas or Lean Canvas on Google Images and try to fill in all the boxes.

And that’s when people start fighting:

• “I prefer the Lean Canvas!”
• “Nah, I prefer the Business Model Canvas!”
• “Nah, I prefer blah blah blah ...”

The truth is, we don’t give a shit!

Cool, there are many pretty boxes, and they are super synthetic.

The problem is that once filled, the canvas is understandable to the canvas creators but unreadable for 99% of the people on this planet.

Even if you’ve managed to read this thing at some point in your life, 3 months later, you can’t understand it anymore because it’s such a mess.

The real problem with these tools is that they’re often misunderstood and misused. They’re great for dissecting other people’s models but not for creating our own.

These models lack depth and connection.

Notes on the above canvases:
Diagrams and other synthesis elements, such as the canvases above, merely describe the results of one or more specific observations.

This means that the quality of a “good” summary depends first and foremost on its intended audience.

Suppose the synthesis element is too generic and synthetic. In that case, it becomes more difficult to understand the nuances and links between all the elements observed.

If it’s too specific, the paths of thought become more challenging to follow and put into perspective.

Therefore, the degree of specification of a synthesis element must be adapted to our different needs. Whatever our use cases, a synthesis element must :

• Generalize complex concepts without distorting their meaning (zoom out).
• Enable us to draw relevant conclusions about links between particular elements (zoom in).
• Put observations into perspective by linking them together in different ways.

The Business Model Canvas and the Lean Canvas are 20 years old. It’s high time we find a way to get things done without setting our neurons on fire, melting our brains, and crying blood out through our ears.

Don’t worry. We won’t throw everything in the garbage can. We’ll pick out the elements that interest us.

Remember, in an infinite game... there are no rules.

Also, no one said combining the two methods is forbidden, yet everyone opposes them.

Once again, there are no rules.

Tearing down the canvases and exposing their pitfalls.

First, it’s worth noting that each canvas box can and must be tackled from different angles.

This is where the Business Model Canvas and the Lean Canvas fall short. They don’t allow for attacking subjects from different angles, which can bring nuance. These angles are just as relevant and complementary as the boxes themselves.

So, here’s the complete explanation for why Post-it-sized boxes don’t allow us to do quality work.

It’s essential to break this down to understand why we need to go deeper than just using the canvases as they are.

The “Customer Segments” Box.

Before diving into customer segments, you must challenge the market and niche you’re operating in.

Only then can you approach your target audiences with accuracy and relevance.

Traditional canvases skip this critical step, and that’s why we built it into the foundational pages of this guide.

The “Customer Relationships” Box.

Customer relationships are built across multiple layers and formats:

• Branding
• Marketing
• Sales
• Product
• Customer Success

Reducing this step to a single box without connecting and clarifying these key areas leads to frequent oversights and mistakes.

The “Problem” Box.

The lean canvas asks you to list your customers’ top 3 problems.

But here’s the truth: your customers never have just 3 problems.

No one looks at 3 random pieces of a giant puzzle and says, “Oh, amazing, I can totally see the full picture here.”

Solving only 3 of their problems is often the main reason they don’t buy from you.

The only way to truly stand out is to help your customers overcome every obstacle standing between them and their dream outcome.

The “Solution” Box.

Like the Problem box, the Solution box asks you to list only 3 “features.”

Problem 1:
You don’t always need to add a “feature” to solve a problem.

Problem 2:
Only 3 solutions? Really?

Teaching someone how to do perfect push-ups, squats, and rowing won’t help them achieve their dream of losing 15kg.

Your customers won’t reach their dream outcome with just 3 ideas, some hope, and a sprinkle of stardust.

The “Unique Value Proposition” Box.

A “Unique Value Proposition” isn’t just a nice-sounding sentence pulled from a template you found online.

Your UVP results from delivering relevant solutions to a clearly defined audience while ensuring the experience is honest, functional, and genuinely unique.

You need to work through every chapter of this guide to get there, not just scratch the surface.

The “Unfair Advantage” Box.

Your business’s unfair advantage isn’t a specific feature or a flashy innovation.

Your true unfair advantage is the combined result of all the steps you took to remove your business’s constraints. That’s what keeps your business thriving for decades.

Your business is only as strong as its weakest link.

Your “Unfair Advantage” is the overall resilience of the chain that holds your business together.

The “Key Activities” Box.

You need to complete the other boxes properly to list all the activities related to Channels, Customer Relationships, Unique Value Propositions, and Revenue Streams.

To know “what you’re doing”, you’ll need to know: • What problems you’re solving. • What solutions you’re delivering. • How it all comes together.

In other words, by working on the other boxes and defining your business model, you’ll discover what your business needs to do. That’s your “key activities” right there.

The “Key Metrics” Box.

Key Metrics are the same for every business; the ones that allow you to measure your ability to survive in the infinite game.

You don’t need to invent them. What’s missing in this box isn’t “ideas”; it’s a “method.”

The “Key Resources” Box.

Key Resources depend on your business’s maturity, identified constraints, and Key Activities.

In other words, you can put just about anything into this box by obsessing over competitors or lacking perspective.

It becomes easy to comfort yourself by listing everything that feels important, but that won’t help you run your business better.

The “Key Partners” Box.

Listing the partners you need becomes straightforward if all the other boxes are filled out correctly.

The real challenge? Finding the right partners. And for that, there’s no framework (yet 😏).

It comes down to knowing trustworthy people committed to helping you achieve your goals by doing your job flawlessly.

The “Channels” Box.

This box is a mess.

It’s like mixing how you deliver solutions to your customers with marketing channels… and sales… and support… and wanting it all tied up in a perfect bow. You get the idea.

A better approach is to break these elements down, examine them in-depth, and analyze them from different angles without inaccurately scrambling them together.

The “Cost Structure” Box.

This box (like the next one) depends on all the others.

If the work is solid and you’re tracking the right KPIs, calculating your business’s costs becomes almost effortless.

The “Revenue Streams” Box.

This box (like the previous one) depends on all the others.

If the work is solid and you’re tracking the right KPIs, calculating your business’s revenue becomes almost effortless.

Conclusion on the canvases pitfalls.

The canvases aren’t all bad. They’re not precise enough and don’t help us work methodically and pragmatically.

To avoid these pitfalls:

• We’ve compiled a list of the most common business models below.
• We’ve also explained how each business model works, giving it a description and a visual representation.

This list will enable us to consider the model (or models) that best match your ideal targets and the value you have to offer them.

Once we’ve gone through all these models, we can assemble our own by choosing a simple or hybrid model.

But first, let’s get the basics right. We’ll make it as simple as possible to describe what a business model is.

Business Modeling 101.

In business model, there is “model”.

And model means... we have to do some modeling.

Modeling:
To conceive, to elaborate a model allowing understanding, acting, and reaching a goal.

So, to make things easier, we made a series of sketches.

The aim of these is to model your business concept to better understand it, act on it, and achieve our goal of creating the perfect business.

The 5 core functions of any business.

To run smoothly, every business needs to know how to:

• Generate leads
• Nurture leads
• Sell/convert.
• Fulfill.
• Resell + retain.

The aim of modeling a business is not to define its lead generation or lead nurturing strategy in depth, nor is it to define its resell strategy.

Our objective is to model how we bring value to our customers.

In other words ...

Our goal is to make it easy to understand how we:

• sell to our customers
• satisfy them
• and build loyalty

Each of these three points raises its own issues:

• What do we sell in general?
• How do we satisfy our customers’ desires?
• Why should our customers stay customers?

The Value Delivery Cycle.

Why? How? What?

We see something emerging here, don’t we?

A hint ⇒ Simon Sinek

To efficiently communicate the value of your business to your customers:

• tell them why they should come in the first place.
• tell them how you solve all their problems.
• tell them what solutions you sell to help them.
• and tell them why they should come back for more.

To model our business, we must sketch precisely how we do it.

To rock the game, we need to make it real and :

• give them good reasons to come
• and help them solve all their problems
• through the solutions we sell them
• and give them good reasons to stay.

We’re still at the modeling stage, and the best way to learn how to model is to see examples.

So, in the chapter, we’ve listed over 40 standard business models that can be found everywhere.

In other words, you’ll find over 40 blueprints for value distribution systems.