BMC: Part Two- The Operation

Hafa Adai and welcome to the second post in our BMC series.

Last time we went into detail about what the BMC is, as well as the first three components that I identify when beginning a new BMC. They are the value proposition, the customer segments, and the customer relationship. If you missed my last post and want to read it first, click here.  I  also wrote a gearing up post here about the value proposition, if you are interested.

Today we are going into our next three components in the BMC: the channels, revenue streams, and key activities. I consider this part of the BMC to be the operation segment of a business because it deals with how you make your money and what you have to do to operate on a daily basis, excluding expenses (we’ll get to those in the next post).

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Click here to download the-business-model-canvas

Revenue Streams

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We are going to start with revenue streams because it is easier to identify the channels that you need to distribute through and your advertising method when you are able to see the products and services you’re offering.

Revenue streams are the products and services you are offering to your customers aka how you make you money. You have to sell something for it to be a business, right?

So, are you selling handmade products? Manufactured products that you have designed? Are you a distributor? Or are you selling you’re expertise?

This is also where you decide the pricing structure for your products and services. Are you going to have a tiered system for service? Do you offer different packages? Are your products geared toward a specific customer segment? If so, does the pricing match?

Once you have identified your revenue streams, you can move on to channels.

Channels

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Channels means two things on the BMC; advertising channels AND distribution channels.

Advertising Channels

Advertising channels are how you plan to get your customers attention and convince them to buy your product or service. Are you going to be on Facebook? Instagram? YouTube? Twitter? Snapchat? Radio? Newspaper? Pop-up ads? Electric signs? Magazines? Blogger sites? Your own website?

The possibilities run on and on. It is important to remember that you need to keep your customers and your product/service in mind. You have to choose advertising channels that are going to get your product in front of the people you want to sell to. Otherwise it is like shouting at people walking down the street in New York City. You may get a couple of people to listen but that doesn’t mean its your customer. If they aren’t your customer, you aren’t making money.

Identifying your advertising channels is like the foundation to the marketing plan. You can take this and expand it to make your marketing plan and calendar.

Distribution Channels

Distribution channels are how your customer receives the product or service and you are paid. Traditionally there are three methods of distribution: business to business, business to business to customer, and business to customer. In modern times, however, we also must include customer to customer.  Examples of this last distribution channel are Uber, Lyft, or if you live on Guam, Stroll, as well as other businesses that capitalize on the sharing economy.

The questions you need to ask yourself are how is the product or service getting to your customer? Do they come to you? Do you go to them?

How are you getting paid for your work? Is it via a cash register? A smartphone adapter swipe reader? A PayPal account?

These are all important aspects of the model that will influence your cost both to you and your customer. Weigh the pros and cons of each option and choose the one that is best for your business and convenient for your customers.

Key Activities

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The final piece of the BMC puzzle that we are solving today is the key activities for your business. These are the things that you have to do everyday to keep your business open and attractive to customers.

Things like clean the floors, wipe down tables, and sterilize equipment would be imperative to a restaurant or eatery.

If you have an online store, maintaining inventory and keeping accurate counts for you customers may be the most important.

Checking email and responding to customer queries would be important for all businesses, but especially a consulting firm.

Identify the most important things, the activities that would shut you down if they were not done everyday. That’s where your focus needs to be in this section.

Two times a wrap…

We’ve covered two-thirds of the canvas now and you should be seeing your business coming into focus. Next week we will be discussing the final three components of the BMC: key resources, cost structure, and key partners. Following that we will have a case study using the BMC so you can see it in action.

Have a great week and remember…

Go forth and shine.

E.B.