Understand how businesses work

While every business is different, they all follow standard patterns. Having a clear picture or mental model of how all businesses work is a powerful tool for you as you plan your own business. We’ll be referring back to these core ideas throughout your Action Plan, so let's take a moment to explore them more fully.

The Business Model Canvas

We’re fortunate that we don’t have to create this mental model from scratch: it’s already been done for us. It’s called the Business Model Canvas and it was set out by Alex Osterwalder and Yves Pigneur in their 2008 book, Business Model Generation. We’re going to give you an overview here but if you want to dig deeper, this is one book that we recommend everyone checks out.

At the most basic level, the canvas has four sections: team, offering, customers and money. You’ll notice that these color-coded categories are the same ones that we use throughout indie.biz to organize marketplace items, guides and actions.

Each of these categories is made up of more detailed components. Taken together these nine components represent everything that any business does. That’s a pretty amazing little tool. Let’s take a closer look.

Your team is made of the people you rely on. Depending on your business, these could be business partners, employees, mentors or suppliers.

Your team has access to assets, which can include tangible things like machinery or intangibles like skills. And you have certain actions that you take to keep your business running and your customers satisfied.

Your offering is the thing that customers pay you to provide. We’ll sometimes refer to it as the value you create for your customers. It's the foundation on which your relationship with them is built. In your case it is the products and services you provide.

Your customers are the people who buy things from you. Many businesses will have several different types of customers. In your case it’s the small businesses you serve. Businesses reach their customers through a channel, either selling direct, over the internet or through a store. Over time you will build relationships, and if you get things right the people buying your products will become loyal, repeat customers.

Your profit is the difference between what your customers pay you—your revenue—and the cost to make and deliver your products and services. In practice, of course, things can get a bit more complicated; we'll talk more about the ways in which profit is measured as we move through the Action Plan.

That’s the quick summary. If you want to go a little deeper, check out our Business Model Basics guide for a more comprehensive look.

Give it a try for yourself

If you don't have experience working with business models, we recommend spending some time practicing with the canvas by mapping out businesses. These could be ideas you have or businesses that already exist. They can in Marketing Consulting Services or other businesses such as the ones your frequent on your street or in your community.

We created this worksheet but once you've the hang of it, a blank page will work just as well.

As you practice, you'll start to see that all the businesses you come across work in ways that can be mapped out. What assets does your local corner store have? And what relationships does your favorite e-commerce website rely upon? You can even try it with institutions like schools, hospitals, government agencies and non-profits.

The power of mental models like the Business Model Canvas is their ability to change your way of seeing and thinking about the world and opportunities around you.

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