VisuALS’ Business Model

Russell McGuire
ClearPurpose
Published in
5 min readMay 1, 2020

Yesterday, we saw how the VisuALS team defined their business strategy. On Tuesday, we saw VisuALS’ value proposition. Today, we will see how they filled out the rest of their business model.

As I’ve previously shared, Alexander Osterwalder defines a business model as, “a representation of how an organization makes (or intends to make) money.” Making money involves bringing in more money than you’re spending, so it’s helpful to think of a business model as addressing these two factors:

  • What causes money to flow into the business? This is closely tied to the value proposition.
  • How do we spend money in delivering the value proposition? Are we spending any money not related to the value proposition?

My favorite tool for representing a business model is Osterwalder’s Business Model Canvas, first introduced in his book Business Model Generation¹.

The Business Model Canvas

The Business Model Canvas simplifies everything about a business down to nine components on a single sheet of paper. In typical Lean fashion, the contents of those nine boxes start as hypotheses that you iteratively test and refine.

When you look at the canvas (below), there’s an obvious break between the top section (business decisions) and the bottom section (the financial impact). Less obviously, the canvas can be broken in half left and right. At the center is the “Value Proposition” and this truly is the core of the business model. I like to call the right half, the “Front End” of the business model, and it represents the decisions made in order to bring that value proposition to market. The left half, or the “Back End” of the business model, represents all the decisions that enable the business to successfully deliver that value proposition to the target customers. Successful execution of the Front End results in the Revenue Streams. Successful execution of the Back End requires investment represented here by the Cost Structure.

Looking more closely at the Front End we see two elements that we should already know much about if we’ve used the value proposition canvas — the Value Proposition and the Customer Segments. The format here is different and so the presentation of the information also needs to adapt. The Value Proposition box should contain a relatively brief summary of how your business creates value for the target customers. If possible, this box can also contain initial hypotheses around different offers and pricing approaches to reflect that value. Similarly, the Customer Segments box contains a relatively brief summary of the target customers and optimally would include market sizing information.

The remaining two boxes in the top portion of the Front End explain the mechanics and relationships involved in growing revenue by delivering the Value Proposition to the Customer Segments. The Channels box represents customer acquisition — what will be your primary marketing and sales channels to bring in new customers? The Customer Relationships box represents customer retention — what will you do to maintain a relationship with the customer to bring in future revenue from each customer?

The Revenue Streams box captures the net result of the four Front End boxes. The success of the Channels will determine how quickly sales grow while successful management of Customer Relationships will result in ongoing recurring revenues and/or follow-on sales.

The heart of the Back End are the Key Activities and Key Resources required to deliver the Value Proposition to the Customer Segments. In other words, what do you need to do (activities) and what do you need to have (resources) in order to operate the business. It’s unlikely that a new venture will have all the resources and capabilities required, so the Key Partners box identifies key vendors and alliance partners who will help fill in the gaps. It can be helpful to organize these partners into categories aligned with the Key Activities, perhaps sales, marketing, product development, manufacturing, operations, and distribution.

The Cost Structure box reflects the expenses represented by the Back End boxes. Although typically qualitative and not quantitative, optimally this is reflected in terms that will translate well to a financial model — cost of goods, fixed costs, and variable costs.

VisuALS’ Business Model Canvas

In developing their business model, the VisuALS team started from the value proposition they had previously developed, the lessons they’d learned through their MVP, and the broader vision they’d developed as part of their business strategy.

VisuALS’ initial business model (numbers are merely illustrative)

Let me point out a few structural notes about how the team adapted the canvas to their needs. Most obviously, there appear to be more than 9 boxes in this canvas. For starters, they decided to include a description of their initial product in the value proposition slot.

They also broke several of the other boxes into multiple components. On the far left, they broke the key partners into those on the “front end” involved in acquiring and maintaining customer relationships, and those on the “back end” involved in developing, building, and delivering the value proposition to customer. On the far right, they wanted to think about target customers in three buckets: the initial target market, future target markets, and those influencing the decision process.

They also handled the financial boxes with more granularity than the standard canvas requires. They looked at three categories of expenses: fixed, cost of goods per unit sold, and other variable costs per unit sold. On the revenue side, they called out the price and volume leading to total revenues. Finally, they added an additional box at the bottom to reflect long term margins.

Within the remaining boxes we see reflected some of the decisions that went into their business strategy. Because of the focus on affordability, all sales would be online and customer support would be over the phone and online. That meant that, unlike competitors, they wouldn’t need a distributed workforce providing in-person sales and support. Given their focus on “loving their neighbors” they would need to make sure that the virtual support personnel were carefully selected and trained. Their partnership with Oklahoma Christian University would also play a key role in maintaining affordability.

The level of detail that went into the business model set the stage for the team to develop their full business plan, which we will talk about next. Stay tuned!

Sources:

¹Osterwalder, A., & Pigneur, Y. (2013). Business Model Generation: A handbook for visionaries, game changers, and challengers. New York: Wiley & Sons.

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Published in ClearPurpose

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Written by Russell McGuire

Strategist, Entrepreneur, Executive, Advisor, Mentor, Inventor, Innovator, Visionary, Author, Writer, Blogger, Husband, Father, Brother, Son, Christian

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