The Business Model Canvas for freelancers and the self-employed
The very concept of a business model is not a novelty, it has existed since the 1960s. Despite this, many people find it difficult to separate this concept from other closely related expressions such as business strategy, business plan and business concept. A business model describes how your work creates different types of value. It explains in a theoretical and clear way what is important for the business to generate income. So, how does this help freelancers and the self-employed?
A business model consists of several parts.
- A revenue model, which shows how revenue comes into the company.
- A production model, which describes how goods and/ or services are produced.
- A delivery model, which describes how the goods or services will benefit the customer.
Business models are often used to describe and classify companies. Another common area of use is when managers investigate opportunities for future development within a company. It is not uncommon for a company's business model to serve as inspiration for other companies.
At the same time, it is important to remember that your company's business model is unique. For example, you could be your own company - and most likely are - and maybe started one even during the pandemic!. Each company bases its operations on its own unique resources. These resources must always be coordinated in a way that suits the current business. It is not usually recommended to copy someone else's business model straight off.
The Business Model Canvas is a form of visualization of your business idea and the most important business processes, which essentially consists of nine elements and covers everything there is to know about the functionality and cost structure of your business. You can use a business model canvas in addition to the business plan to show in concrete terms how your business should work.
For this purpose, the Business Model Canvas is printed out at least as large as a poster. You can also find out more about this with a manual (“Business Model Generation”: Alexander Osterwalder, Yves Pigneur, et al .; first published in 2010). Osterwalder developed the Business Model Canvas in 2004.
In any case, the analog representation is preferable to the digital one. A poster format also has the advantage that other aspects can be introduced using post-its and the like and a quick overview of all nine areas is guaranteed.
These nine areas can basically be arranged as desired. Different templates, which you can find online for printing under the keyword "Business Model Canvas Template", also have different arrangements. Let us take a look at all nine points.
1. Value Proposition
The value proposition is what actually makes your business worthwhile. Because if there wasn't something that your business could offer your customers in terms of added value, it would simply be lost in the competition. Or it would not even be accepted. The value proposition can take many forms. Questions that you can ask yourself and answer here include the following:
- What does the company do better than others?
- Why is the service or the product unique?
- What distinguishes the product?
- Why should customers buy from the company?
In the classic way, however, this question is in the foreground:
Which customer problem do we solve?
The last question is the most important because it answers the purpose of your company. If you don't solve a problem (although a problem can also be an unmet and perhaps even unknown need), you are not offering anything that someone should spend money on.
The other questions specify the qualities of your business model. Your company's value proposition represents what you want customers to think about the quality of your products or services.
2. Key Activities
Key activities are all those actions that ensure that business is running at all. A lot belongs here. For example, if you produce products, you will need to:
- ensure processing
- Acquire and maintain machines and the like
- Have premises available
- Maintain sales channels
Everything that is necessary to bring customers and the product together and to manufacture the product belongs here.
3. Key Resources
The key resources are the stuff dreams are made of. At least that's true if your business has always been your dream and hopefully still is. The key resources in the Business Model Canvas are the seeds, the fruits of which are happy customers, success and income.
At the forefront of course are human resources. As a one-man freelancer, this is most likely you. Your most important qualities for the business are your knowledge and the quality of your work. There are also financial resources because sometimes nothing works without money - and of course material resources: work rooms, machines, computers and the like.
4. Key partners
Key partners are all of these without whom your company could not operate. For example, if you only source certain material from one company, that is a key partner. And sales partners can also be key partners.
5. Customer Relationships
How do you win customers, how do you communicate with them and how do you keep them with you? Maintaining and improving customer relationships is difficult depending on the industry. Project-oriented and long-term cooperation requires completely different communication than, for example, running a business with a lot of walk-in customers.
Sure: Here too, many customers want to experience communication, expect friendliness and maybe information material and the like. But personal communication is seen less here than, for example, with the illustrator, who has been working for the same regular customers for years. Here is written down what you do to bind your customers to you and what impressions they should take away. The staff and corporate branding play a role accordingly.
Which channels do you have to sell your product and how can customers contact or visit you? What do you do in the area of social media and which sales platforms do you use? What about newsletters? What is your website doing and is there a physical store?
7. Customer Segments
Who buys from you anyway - and why? Who are your customers, where are they from and what do they need? Are there different customer groups?
Example: A small spice shop has roughly three different customer groups:
- Hobby cooks who value a large selection of spices and who specifically visit a specialist shop
- Interested customers who might just want to discover something new and occasionally spend a little more money on spices, oils and the like
- Walk-in customers who happen to pass by your shop and then perhaps spontaneously make a purchase
Professional cooks are excluded here because they probably buy from wholesalers or are not even responsible for purchases themselves. Children are probably not part of the target group here either, as are people with very simple eating habits that do not have any variety or only consist of ready-made meals.
Your customer group is likely to be nutritionally conscious and value “good ingredients”. Marketing that indicates the regions of origin and traditional production is therefore a sure-fire success. You sometimes only find out who your customers are after a while in business. It is definitely worthwhile to note how old these are on average, where they might come from, which gender is most frequently represented and so on. Marketing and customer communication can be designed accordingly.
8. Cost structure
Everything that generates costs belongs here. So these are material, space, employee, mobility and many, many other items. The cost structure of mostly digital freelancers such as copywriters, illustrators and social media consultants is of course very different from that of a small business or company producing goods. However, the overview is important: It is also noticeable where too many costs are being produced or where there is simply poor management.
9. Revenue Streams (sources of income)
Your sources of income are just that: your sources of income. For freelancers, this is usually the invoices paid. Depending on what your business model is, there are also several sources of income.
Especially in the area of online marketing and complete solutions for customers (e.g. text, illustration and social media content for advertising campaigns), the income streams can also be differentiated according to sources.
Important: Only sources of income that are directly related to the business in the Business Model Canvas belong here.
What the Business Model Canvas brings you
Visualization is an underestimated means of understanding processes. This can be done digitally, but then it must be ensured that everyone involved understands how they, in turn, can "operate" the digital visualization - for example, a schematic representation of the company structure. A sufficiently large poster with a few defined areas has the advantage that everyone will understand. It can also be easily supplemented with sticky notes.
If you are forced to reduce your business idea to these nine key points and to define them, gaps will also be noticed. Maybe you haven't given any thought to customer relationships or key partners. What is it like, for example, when you can no longer get a certain material from a dealer? Is there a plan B? And is a fixed location included in the plan, or will your business stay digital?
The Business Model Canvas basically shows you at a glance whether everything has been thought through. The simplified representation thus supplements the business plan, which is also important - but mainly consists of paper and theory.
You can use a Business Model Canvas at the beginning of your self-employment or even before that in order to build up an all-round successful company from the start (https://kontist.com/posts/sustainability-for-freelancers-and-self-employed). Or do you find out about it right now and just want to try it out? It is possible in a few hours and with a little brainpower. This form of presentation is also ideally suited to clearly show your business to new employees, business partners or investors.
There is an answer to all important questions - especially to the questions “Where does the income come from?” And “Why is your product better than others?”. Thanks to the analog representation as a poster, you can always have it in view as a simple guide. Hang it at your home office, in the office or wherever your business is at home. The Business Model Canvas is an asset in any case.