The. Business. Model.

Hi friends.

Now that you’ve had a chance to take a look at Strategyzer’s Value Proposition Canvas, it’s time to dive into the main meal: The. Business. Model.

Here’s the Business Model Canvas. You’ll notice that all that work you did on the Value Proposition Canvas can plug into the “value proposition” section of the business model.

Here’s an overview of how to use this handy tool:

“Okay, this is great,” you may be thinking, “but how does a social enterprise’s business model differ from that of a non-mission based business?”

Strategyzer created the the Mission Model Canvas for that. Unfortunately, the Mission Model Canvas makes it look like you can just replace the “revenue streams” section with the “mission achievement” section. A social enterprise – and nowadays even non-profits – really shouldn’t do that. You need to come up with a way to both accomplish your mission and earn revenue streams, because the likelihood of your organization surviving on mission alone is kind of slim.

So here’s my recommendation: if you have a social enterprise, use the normal business model, but add social and environmental costs to the “costs” section and add social and environmental benefits to the “revenue” section. By doing this, you’ll start to account for the true costs and benefits of what you create.

What if you have a non-profit, you ask? Do you need a business model?

This is an interesting question. Historically, non-profits were given a Logic Model, and then patted on the head and told to go write some grant requests. Logic Models are great for drawing out your assumptions about how inputs and activities will lead to outputs and outcomes to accomplish your goals.

Here’s a nice-looking version of a Logic Model from the Innovation Network:

logic-model-evaluation-plan-templates-1-638

The issue with the Logic Model is that it doesn’t give non-profits the space to plan out revenue streams, which they frequently need in order to scale solutions to the size of the challenges they’re facing.

Here’s an important legal caveat for non-profits planning revenue streams: non-profits can only earn tax-exempt income from activities that are directly related to their mission. If you’re curious about earned income for non-profits and the IRS’ laws around unrelated business income, you should read The Society for Nonprofit Organizations’ Fundraising Guide to Earned Income.

Overall, I suggest that all organizations should:

  1. Develop a solid business model. Need help doing this? Strategyzer has a bunch of tools to help you with the Business Model Canvas if you log into their site.
  2. Account for true costs and benefits (not just the financial ones) of your organization’s activities. You can learn more about true cost accounting here.
  3. Fill out the Logic Model. Make sure you know what direction you’re heading in.

There you have it! Bet you didn’t think you’d get all this when you clicked on the Business Model post!

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