September 2015

News From The Louisville SBDC
An Alternative to the Business Plan

Entrepreneurs have been using business plans to plan, outline and communicate a business project and its implementation since the first decades of the 20th century.

By the mid 1990's, a new school of thought was developing around the idea of the importance of developing a business model as a way of describing how a company creates, delivers and captures value. The very word, model, begs us to think in a more visual way and to try to chart a business's value proposition, infrastructure, customers and finances.

The Business Model Canvas (BMC) was initially proposed in 2008 by Alexander Osterwalder, a Swiss business theorist, author and consultant. He was the first to establish a standard framework and vernacular for entrepreneurs to use when mapping out their scalability. Here's a diagram of what that business model canvas might look like:

Let's look at a few applications for this useful tool within your start-up or existing business.

(1) Strategizing - One of the primary ways businesses choose to use the BMC is in their regular strategic planning and development cycles. Quite simply, it can be used to create a blueprint of the company's strategy. When used as a strategic plan, users apply the BMC to describe what they've done the past year and what they intend to do in the year ahead.

(2) Understanding Competition - Another interesting way to use the BMC is to understand the competition. By sketching out the business model of each one of your competitors you gain a better understanding of their strengths, limits, constraints, and what they can or can't do. This increased understanding of your competitive landscape will allow you to act accordingly and design a better business model.

(3) Dashboard -We've seen a couple of teams and companies start using the BMC as a dashboard to monitor their growth. They define a set of indicators for each building block of their Business Model Canvas that they want to follow. Then they define a performance threshold for each indicator. It's on green if they are happy with the performance per indicator, turns orange if there is something to look at, and turns red if there's a problem.

(4) Investing -Some businesses are using the BMC to make better investment decisions.Once you've sketched out a business model(s) and you understand the underlying business opportunity, you have a better understanding of where you should allocate resources.This is true both for improving existing business models to inventing entirely new business models. The Canvas makes business opportunities explicit and can serve as a guide to how these resources get allocated.

(5) Understanding Customers -An incredibly interesting and innovative use of the BMC happens when companies use it to sketch out the business model of their customers.

By better understanding their customer's business model they can develop better value propositions and/or better explain their solutions in the context of their customer's business.

As a management consultant with the KSBDC, I am often tasked with exploring the close relationship between business model and business plan. The job at hand is then to determine which my client is most in need of. One leads to the other, so often times it is both. So which comes first?

The motivation for the business plan may be to “sell” a project to potential investors or internally to top management. Clients need a complete business plan to map out their business ideas.  In fact, when you have designed and thought through your business model, you have the perfect basis for writing a good business plan.I'm a visual person myself so I truly appreciate the opportunity to use the BMC to work with my clients to sketch out their business models.

My colleague, Toni Sears, and I will lead a workshop on developing a Business Model Canvas for your business idea on September 28th at the Synergy-Center. More details are available here:  Business Plan vs Business Model Canvas

I hope you'll join us!
Vallorie Henderson, SBDC Consultant

Recent News and Events
The Louisville SBDC celebrated last week at the 2015 Inc.Credible Awards, presented by Greater Louisville Inc. The annual event recognizes Louisville's small businesses in various areas including: greening/sustainability, health & wellness, innovation/technology utilization, and small business of the year.

The highlight for us was seeing so many of our current and former clients (some nominated) and being able to catch up with them.

See More

Louisville SBDC Staff
#shades #peaceout
Vallorie Henderson
Management Consultant, Louisville SBDC
Email Vallorie
Vallorie Henderson has worked with the KSBDC since 2011. Prior to joining the team in Louisville, she served as the business development director for the Kentucky Arts Council in Frankfort for over 10 years. She holds a B.A. from Berea College in Berea, Kentucky and a M.F.A. from Miami University in Oxford, Ohio. Vallorie has over 25 years of experience in marketing and promotion with such regional organizations as the Speed Art Museum and the Indianapolis Children’s Museum. She has worked closely with fair trade organizations around the globe to assist artisan entrepreneurs in growing their businesses and to assure they are paid a living wage. Vallorie has her Export and Trade Counseling Certification from the U.S. Small Business Administration and is also a member of the KSBDC’s Million Dollar Loan Club. She has her Export and Trade Counseling Certification from the U.S. Small Business Administration.
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