I’ve been reading some fascinating stuff about putting together business models for a new venture I’m working on. Through doing the research, I’ve realised that formulating a business model that applies to freelance creative professionals is just as important as a model for any other minor and major business organisation.
What is a business model, and why do freelancers and self employed people need one?
A business model describes the reasoning behind how an organization or individual creates, delivers and captures value. Essentially, it is the framework through which an organisation makes money.
If you don’t have one in place, your money-making strategy is likely to be cloudy, less efficient, and confusing for you.
As a freelancer, you are in the business of creating and capturing value in this way, so it is crucial that you have a model in place when you set out to do business.
Here are 9 key elements of business models for creatives that you would benefit from knowing.
1. Customer Segments
This defines the different groups of people your creative work is aimed at. Make sure you know specifically who you are working and marketing for.
2. Value Proposition
This describes the value you are delivering to your customers. This is the response to the question: ‘What problems of our customers are we helping to solve?’
The value proposition of a graphic user interface designer, might be to improve the user experience of people using a site that would be of interest to site owners, for example.
Your business channels cover the methods you use in showing and delivering your potential customers the value in your product or service.
This could include the website you use in selling your products and the social networking sites you use in sharing information about your business.
4. Customer Relationship/s
You should be thinking about how to engage with your customers, and how to carry out a long term relationship with them. If you are dealing with more than one customer segment, you might find a very different type of relationship style is required.
For example, it might be crucial to dedicate considerable time in dealing with some clients face to face or on the phone.
With a different area of business, such as in selling merchandise, for example, it might be sufficient to make the process more automated and less personal, but it all depends on the nature of the market segment you are dealing with.
5. Revenue Streams
This represents the money you generate from one or more market segments.
You need to be crystal clear on exactly how you intend to create revenue from your business. For most creative freelancers, it would be a case of agreeing to carry out a service of some kind, and being paid on a ‘per job’ basis.
As another example, an alternative revenue stream could be subscription payments brought in from the customers of a printed magazine.
6. Key Resources
This describes the most important assets required to make a business model work and is key in the functioning of all other aspects of the model.
Such resources are all the elements required to contribute to your Value Proposition (2.), including your own personal skill, but also physical assets like software, hardware, printers, canvases, cameras and scanners.
7. Key Activities
These are activities that are crucial in making the business work. Like key resources, such activity is required to create and offer a strong Value Proposition, reach markets, maintain existing customer relationships, and earn revenue.
A key activity for a web designer might be in solving problems of web user experience and require face to face meetings with clients, whereas for a sports photographer, this would be in preparing for and documenting sports events, as well as delivering photographs electronically to customers.
8. Key Partnerships
These describe one’s network of suppliers and partners that exist to allow a business to function properly.
In some cases, partnership for freelancing or other creatives are not a part of their business model, but others, such as in the case of a collaborative group of illustrators working together or in marketing the work of a combined illustration collective, can act as a powerful element of an effectively functioning business.
9. Cost Structure
This defines how you go about paying for the things you use within your business. Being clear on your cost structure is an important element of your business model because it will define where and when you add or subtract costs.
You might create luxury furniture requiring high value materials. In which case, your business would be more value-driven, and depend on more expensive items.
On the other hand, you might provide a cheap and basic web design service that markets itself based on keeping costs low, with high output. In which case, you would strive to reducing costs wherever possible in your business.
These 9 elements all come together in creating a sound business model structure if used properly and appropriately.
It is definitely worth thinking about how each of these elements applies to your business and where certain areas might need tweaking in order to maximise value for the services you offer and therefore allow you to earn more of the green stuff.
Do what most freelance creatives don’t do, put together a business model that defines how you create value, and push ahead!
*Credit must be given to several sources of business model advice, including Alexander Osterwalder’s book: Business Model Generation, which I thoroughly recommend.
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