Find Out What Kind of Partners a Business Should Have
The final grouping of factors to look at (externally facing ones) are the ones that indicate what partners you need to be the most efficient and, importantly, how to make money!
We’ll start with key partners, the people, and organizations that take some of the responsibility off your shoulders.
They might supply raw materials or finished goods, send customers your way, or act as a sponsor/enabler.
You want to know which external supporters are essential to the model. For example, who could make life difficult if they were to leave?
There’s some flexibility here. It’s worth thinking about how you could outsource the tasks that aren’t your core skills to a partner or take things in-house to save money or improve quality. This block might have a strong relationship with the Key Resources and Key Activities blocks - as you can see, they are grouped on the top left of the canvas.
Let’s look at the types of partnerships a business can have:
Strategic Alliances
They occur between businesses that are not rivals in an advantageous deal for both parties. An example might be a computer hardware company agreeing to include Microsoft Office on its machines.
Co-opetition
This partnership happens between competing companies. It has certain benefits, such as helping to divide the risk by trying to do something new in the market and generating audience growth that both may take advantage of, to name a few. For example, you could describe Amazon Marketplace this way. Amazon enables other retailers to reach Amazon’s Marketplace (which creates competition for their own products and opens up a huge market to those retailers). In return, they learn about what sells and what doesn’t.
Joint Ventures
They involve two companies developing a new business together to attack a new market or access a new geographical region.
Buyer-Supplier Relationship
This is the most prevalent sort of collaboration. The buyer-supplier relationship attempts to ensure reliable supplies. As a result, both parties benefit from a reliable provider and a dependable and frequent customer. Classic examples might include a relationship between a supermarket retail chain and a consumer packaged goods company.
The Key Partners block refers to the network of suppliers and partners that make your business model efficient and viable. There are several factors to consider when selecting a partner, some of which are crucial to your company’s success or failure.
What partners does our book subscription business require? Let’s look at some of our other blocks and see what we have in those. That might help determine if we need partners. We’ve only selected a few of the blocks.
Key Activities:
Could we use a partner to help us with customer acquisition?
Could we save money/infrastructure costs by having a delivery partner?
Key Resources and Cost Structures:
Are there any partners that could create and manage our web assets?
Could we find a partner to provide and/or store our materials?
Are there any partners who could provide services that mean we don’t have to fill certain roles?
(all of the above could reduce our costs)
Channels and Customer Relationships:
Are there any partners who could manage/promote/run events for us?
What partners might have a direct relationship with our perfect customer segments?
Your Turn! Find Partnerships for Our Book Subscription Business
Answer the questions above for The Founders Reading Guild.
Ready? You should have enough input now to complete the Key Partners block of the BMC for The Founders Reading Guild. So try it now, and you’ll get a chance to see what we have added later.
✅ Take a look at how I’ve answered the partner questions and see how they helped guide our answers.
What partnerships you need may also change over time, so it’s critical to revisit your needs, and whether partners can be beneficial at different stages.
✅ Let’s now look at the key partners I identified for The Founders Reading Guild. How does it compare to the ones you’ve identified? Did I miss any interesting partnerships? 😉
As you might have observed, the Key Partners block has a relationship with many of the other blocks.
The partners we choose can help:
Save money.
Improve the performance of certain channels.
Reach more of our customers.
Scale fast etc.
Discover Ways for a Business to Make Money
The final block, a fairly important one, focuses on how to make money - Revenue Streams.
While these boxes aren’t a replacement for a proper financial model, they at least give you the ability to make basic forecasts. It also gives you a chance to think about your pricing strategy – clever pricing can massively increase the profitability of your new business.
Let’s consider some revenue generation types for our business model:
Asset Sale
This sale involves transferring the ownership rights of a tangible good from the seller to the buyer. For example, Amazon will sell you a book. You pay them money; you get to keep the book.
Usage Fee
Service providers usually charge this kind of fee to customers for the use of the service. An example might be something like an internet service provider, like Amazon Web Services, which supplies cloud services for businesses. They charge based on cloud usage (the amount of storage they utilize).
Subscription Fees
Users who require long-term or continuous access to a company’s products pay a subscription fee. Typical examples include Netflix and Spotify.
Lending/Renting/Leasing
Some businesses grant their clients temporary exclusivity over their products for a predetermined fee. After this time frame, the company reclaims possession of the item. This type of revenue model offers a lot of benefits to the client and the business. The customer provides recurring revenue for the stated period. On the other hand, the consumer doesn’t have to make a sizable investment and has exclusive access to the product when needed. Car leasing would be a perfect example of this revenue generation model.
Licensing
Companies with rights to products, services, or ideas can offer licensing agreements to unlock revenue streams. Customers pay a license fee for access. For example, technology companies where customers buy several software licenses for their staff use this revenue stream.
Brokerage Fee
When a company acts as an intermediary to ease the communication and transaction between two or more parties, they charge a brokerage fee. A typical example of this exists in the insurance industry. Specialist brokers will research and select the best insurance for their customers from an available range and take a commission or payment for their expertise and selection.
Advertising
Advertising has become a common revenue stream for internet companies. They make content freely available to their audience, then sell advertising space to companies to reach that audience. Advertising is the predominant model of web portals like Yahoo!.
As mentioned earlier, the pricing strategy can make a huge difference to the success of your business. It’s an often diminished aspect of revenue generation, as subtle pricing differences can impact a solution’s perception and desirability. A few years ago, a famous beer company played on this with their advertising tagline, “Reassuring expensive.”
So what does a good pricing strategy look like?
It portrays value. Cheap can signify two different things. It might imply a lesser cost, but it might also indicate a cheaper product. There’s a reason why consumers connect inexpensive goods with subpar construction. A higher price on a product can imply a higher quality or value.
It convinces customers to buy. A high price may convey value, but if it is higher than the potential customer is prepared to pay, it won’t matter. A low price might seem cheap and reduce purchase intent. The ideal price convinces people to purchase your offering over the similar products that your competitors offer.
It gives your customers confidence in your product. If higher-priced products portray value and exclusivity, the opposite follows. Prices that are too low will make it seem as though your product isn’t well made.
Your Turn! Think of how The Founders Reading Guild Can Make Money
So, we want the perfect revenue-generating model for our business and get the pricing strategy spot on.
From the beginning we have indicated that this is a subscription service. Maybe that’s the right plan, or perhaps it’s not. We can use this block to challenge our assumptions and identify how to develop or improve on them. Following are some key questions that can help us fill out the Revenue Stream block more effectively:
What is the value to customers of the insight they will gather? The time they will save?
What benefits will encourage customers to pay more?
What mode of payment would they prefer?
What factors will influence our pricing strategy?
We can also look at our Value Propositions block to see how we create value. Again, this can help identify appropriate pricing. Another block immediately springs to mind - Cost Structure.
Fill In the Revenue Streams Block
So, do you feel you have enough information to complete the final block of the BMC? First, try it and then look at our approach.
✅ Here’s how we did it to complete the full BMC.
Let’s Recap!
Key partnerships are the suppliers and partners that make the business model work. Companies forge partnerships to optimize their business models, reduce cost/investment, and access resources.
Revenue streams are the sources from which a business earns money from selling products or services. The nature of the business defines the types of revenue.
Pricing strategy is a powerful lever a business can use to grow revenue and affect customer perceptions.
Wow! We now have a completed BMC. Picture the business founders stepping back from their own BMC on the wall to review how they collectively put together this beneficial document. Now, the founders can see the critical elements that make up the business model and flesh out the value proposition on one page. They can see the delicate interplay between each of the elements. This is a moment to reflect and remember the value of the BMC. This shared vision of the business is a fabulous springboard for the team to get going! On that note, what happens now? First, take the quiz, then join me for the fourth and final part to find out!
