Business Model Primer
Kim Alter
Virtue Ventures LLC
Social Impact, October 2007
What is a business model?
A conceptual tool that describes the value
an organization/enterprise offers to its
customers/clients and that expresses the
architecture of the firm/organization and
logic for creating, marketing, and delivering
this value and relationship to capital, and
how together to generate sustainable
revenue streams.
Social Impact
October 2007
Planning Process
Strategic
Goals
Strategic
Objectives
Business
Model
Social Impact
October 2007
Business
Plan
Business Model Building Blocks
Product
Value Proposition
What value do the products create for the customer/client?
Client
Customer
Interface
Target Market
Distribution
Channels
Relationship
Dynamics
Who is customer / client? How can they be divided?
How can we deliver value at appropriate cost?
Special needs or considerations to deliver products and
services client/customer segments?
Infrastructure
Management
Value Configuration How is value delivered? What is the structure of the value
chain?
Capacity
What are the organization strongest capabilities and
strategic assets?
Partnerships
Who are the partners/alliances? How are these
relationships structured?
Financial and
Impact
Aspects
Cost structure
How much will it cost? How will costs be broken down?
Returns
Benefits/returns to stakeholders? How quantified?
How do we cover our costs/meet financial objectives to do
this business?
Social Impact
Revenue Model
October 2007
Model Building Blocks Informs:
Value proposition
Product and services features/design
Target customer
Market opportunity
Distribution channel
Marketing/outreach and sales model
Customer Relationships
Brand and Reputation
Value configuration
Operating model
Core competencies and capabilities
Organizational culture & management model
Partnership
Partners and partnership model
Revenue model
Financial sources and flows
Returns
Social impact model and metrics
Cost structure
Capital requirements and uses
Social Impact
October 2007
Target Market: Refugees

Demographics



Economically active
Weak social ties
Vulnerable



Psychographics




Few assets
Inability to repay
Transient
Risk adverse
Extra burdens
Geographic


Refugee camps
Poor or degraded market
& infrastructure
Social Impact
October 2007
Product
Value Proposition
Value Proposition
Enable economic
security and create
a sense of
community, trust,
and physical and
emotional safety
throughout transition
Financial Services
Features








Social Impact
October 2007
Grants and training before
loans
Monitoring
Mentoring
Certificates – credit rating
Support to start up microbusinesses
Transparent processes
Continue service
Branding
Customer/Client Interface
Client
Consumer
Client
Producer
Client
Worker
Social
Enterprise
Market
Client
Beneficiary
Client
Community
Environment
Public
Social Impact
October 2007
Client/Customer Interface:
Relationship Dynamics
Business Venture Idea Evaluation Form
Venture Idea
(Rate according to ability to fulfill criteria)
-1
0
+1
-2
(Definitely will not meet criteria)
+2
(Definitely will meet criteria)
Janitorial
Services
Assembly
Business
Laundry
Services
Restaurant
Range of skill requirements –
mostly low skill jobs
+2
+1
+2
+1
+2
0
Range of full time and part
time jobs – mostly part time
+2
+2
+2
+2
+2
0
Variety of tasks
+2
0
+1
+2
+1
+2
High proportion of repetitive,
predictable tasks
+2
+2
+2
-1
+2
+1
Environment that management
can control
+2
+2
+2
-1
+2
+1
Daylight-hours jobs
+1
+2
+2
0
+1
0
Monday through Saturday
+1
+2
+1
0
+1
+1
Organized as supervised
team/crew work
+2
+2
+2
0
+2
0
Room for quality checks and
controls – time to correct for
mistakes
+2
+1
+1
-2
+1
0
Minimal deadline stress
+2
0
+1
-2
0
0
Minimal seasonal layoffs
+2
0
+1
0
+1
-1
Leads to living wage work
+2
0
+1
0
+1
+2
+18
-1
+16
+6
Criteria
Total Score:
+22
+14 Impact
Social
October 2007
Commercial Commercial
Copy
Bakery
Management Infrastructure
Value chain structure and Opportunity
Procuring
Supplies
Fair Trade
Employing
Workers
Designing
Product or
Service
Producing
Product or
Service
Marketing
to Target
Disenfranchised
Groups
Delivering
Education
Green
Techniques
Microfinance
Adapted from Dees (2002)
Social Impact
October 2007
Management Infrastructure
Value Configuration
Target Population
Customer * Social Impact
• 20 Clinic Members
• Established 25 Years Ago
(Non–Profit)
CCC
CCHN
Quality
Management
Practice
Management
Financial
Viability
Council
Connections
• 420 Clinic
Members
• Established 18
Years Ago
(For–Profit)
Service Lines
Pharmacy
Lab
Services
Med/Surg
Supplies
Office
Supplies
Social Impact
October 2007
• 13 Clinic Members
• Established 5 Years Ago
(Non–Profit)
Managed Care
Contracting
Technical Services
Organization
Financial Aspects
Profit
For biz &
program
investment
Social Costs
Business Expenses
Enterprise Revenue
Breakeven Before
Social Costs
Social Expense
Social Impact
October 2007
Breakeven
AFTER
Social Costs
Business Expense
Enterprise
Revenue
Subsidizes
Social costs
Years
Financial Aspects
Cost Structure:subsidies







Volunteer time/expertise
Infrastructure
Overhead and back office
Professional fees
Staff time spent on enterprise and allocated to
other budgets
Grants that cover social service costs or
subsidize service prices
R&D
Social Impact
October 2007
Employment Model
Organization
Clients
Market
Product
Social Impact
Financial Sustainability
Social Impact
October 2007
Entrepreneur Model
Organization
Client
Market
Loans
Financial
Sustainability
Product
Social Impact
Social Impact
October 2007
Fee-For-Service Model
Services
Clients
Organization
Social Impact
Sustainability
Social Impact
October 2007
Market Intermediary Model
Clients
Social Impact
Organization
Financial
Sustainability
Social Impact
October 2007
Market
Service Subsidization Model
Organization
Clients
Services
Market
Social Impact
Financial Sustainability
Social Impact
Clients
Social Impact
October 2007
Organizational Support Model
Subsidiary
Organization
Foundation
Clients
Financial
Sustainability
Social Impact
Financial
Sustainability
Social Impact
October 2007
Cooperative
Organization
Internal
Market
Clients
Social Impact
Sustainability
External
Market
Social Impact
October 2007
Social Value Added
In the business model
Social Impact, October 2007
Somers, Shaping the Balanced Scorecard for use in UK Social Enterprises, “Social Enterprise Journal”
Social Impact
October 2007
Somers, Shaping the Balanced Scorecard for use in UK Social Enterprises, “Social Enterprise Journal”
Social Impact
October 2007
Business Model FRAMEWORK
Product
Value Proposition
What value do the products create for the customer/client?
Client
Customer
Interface
Target Market
Distribution
Channels
Relationship
Dynamics
Who is customer / client? How can they be divided?
How can we deliver value at appropriate cost?
Special needs or considerations to deliver products and
services client/customer segments?
Infrastructure
Management
Value Configuration How is value delivered? What is the structure of the value
chain?
Capacity
What are the organization strongest capabilities and
strategic assets?
Partnerships
Who are the partners/alliances? How are these
relationships structured?
Financial and
Impact
Aspects
Cost structure
How much will it cost? How will costs be broken down?
Returns
Benefits/returns to stakeholders? How quantified?
How do we cover our costs/meet financial objectives to do
this business?
Social Impact
Revenue Model
October 2007