What is a Business Model ?

By Eckhard Ortwein | Business Model

Sep 16
What is a business model

What is a Business Model and what turns a Business Model into a Business Case?

A great business model describes your business logic and supports it with meaningful numbers and metrics. However, most business model approaches are very thin (not even lean) when it comes to numbers and metrics. They don't lay out activities to quantify assumptions or even suggest meaningful benchmarks. So, what is a business model? This post proposes a business model framework taking the best elements of a few approaches and allowing you to capture your assumptions in a structured manner. We describe what turns a Business Model into a Business Case and how you can easily quantify your assumptions. Discover a completely new way of how to create a business case.

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To get started, we are looking first at three proven business modelling approaches

  • Alex Osterwalder's Business Model Canvas,
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    Key Elements of  Business Models proposed by the Lean Analytics Approach and
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    Customer Lifecycle Metrics introduced by Steve Blank's Lean Launchpad

This blog post supports the first chapter our free ecourse Learn how to build a professional Business Case in 20 min 

By combining the best elements of these approaches, we come up with a Business Model Framework which makes it easy to document assumptions. Using this framework, we can hence show to turn a Business model into a Business Case and how to turn your Business Case into numbers

Business Model Canvas

You have probably seen – and most likely used  –  a Business Model Canvas like the one shown below. A Business Model Canvas can show your business model on one page and has become a global standard used by millions of people in companies of all sizes. This is why you can use the canvas to describe, design, challenge, and pivot your business model.  The Business Model Canvas helps to structure discussions. It is fast,  great for developing a portfolio of ideas, intuitively makes sense and puts the value proposition at the core.  However, it does not give equal weight to all elements. When it comes to revenues, cost and  metrics it is relatively high level and doesn't clearly lay out activities to quantify assumptions and translate them into numbers. 

Lean Case Business Model Canvas

Lean Analytics Approach

The "numbers gap" of the Business Model Canvas is closed by the book Lean Analytics - Use Data to Build a Better Startup Faster by Alistair Croll and Benjamin Yoskovitz. It introduces the Business Model Flipbook and describes a Business Model as a Mix of Things:

  • what you sell
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    how you deliver it
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    how you acquire customers, and
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    how you make money from them
Lean Analytics Business Model Flipbook

Lean Analytics introduces five key elements as the Flipbook Business Model Concept:  

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    Acquisition Channel answers how the visitor, customer or user finds out about the business.
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    Selling Tactic defines your go-to-market model what the business does to convince the visitor or user to become a paying customer
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    Revenue Model describes how the business extracts money from its visitors, users, or customers?
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    Product Model is focused on the each product unit the business sells to a customer
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    Delivery Model describes how the product gets to the customer

Lean Analytics also puts a lot of emphasis on the company lifecycle stages. In much detail, it provides a framework to identify the right metric for your respective business model and your company stage. 

Customer Lifecycle: Get-Keep-Grow

On a more abstract level than Lean Analytics, Steve Blank – The Lean Launchpad introduces the Customer Lifecycle with its key metrics

  • Get Customers: The Get Customer Phase engages users and lets them do something you have planned for them to do. The key metric describing the Get Customer Phase is the Cost of Customer Acquisition (CAC)
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    Keep Customers: Most startups forget that it is much more expensive to get than to keep a customer. Retaining a customer or ensuring that a customer doesn't churn is therefore the major business objective to keep customers. The Key Metric of the Keep Customer Phase is Churn
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    Grow Customers: Growing the customer finally maximises the Gross Profit return over the entire future relationship with a customer (the customer lifetime). The key metric is the Customer Lifetime Value (CLV or often CLTV).
Grow a Customer

The Customer Lifecycle Model is relevant to answer the key question for every business:


Is the Customer Lifetime Value significantly higher than the cost to acquire a customer?

Turning a Business Model into a Business Case 

All three approaches are extremely valuable in answering of what is business model. To combine the best of them, we have mapped the structure of the Business Model Canvas, the key elements of the Lean Analytics Approach and the three phases of the Customer Lifecycle into one framework. This allows us to pragmatically capture the assumptions of a Business Model. Our business model framework maps out 

  • how to get customers with a Lead Generation and Sales Strategy
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    how to keep and grow customers with a Re​​​​venue Model and Product Model and
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    how to manage and run a business?
Business Model Elements

This is a nice structure to document any business model assumptions, but still doesn't help much in quantifying them. By linking the key metrics of the Customer Lifecycle to this model (see figure below), we can overcome this issue and truly turn a business model into business case: 

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    Cost of Customer Acquisition is the Key Metric of the Get Customer Phase and captures all direct cost which are related to the acquisition of a customer. This cost can be broken down into Cost-of-Marketing driving Lead Generation and Cost-of-Selling driving Sales Strategy.
  • Customer Lifetime Value is the Key Metric of the Keep-and-Grow Customer Phase. It can be calculated from Gross Profit (=Revenues - Cost of Goods Sold  (all cost directly related to revenues)) and Churn. Revenues and Churn drive the Revenue Model, whereas Cost-of-Goods-Sold drive the Product Model.
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    The Manage-and-Run Model captures mainly all other indirect cost which are mostly related to the overheads required to run a  business,
Business Case Metrics

This framework is the basis to answer if the Customer Lifetime Value is significantly higher than the cost to acquire a customer.  An answer to this questions rarely makes it into any Excel Model submitted to Investors.


Lean-Case logo
How to use the framework to document assumptions

Let's illustrate the suitability of this framework with a case study. This is about a SaaS company in the Software Enterprise space which we call SecurUs. This case study is the basis for our free eCourse. In this course, we describe all assumptions in much detail. 

Case Stuy Template

Implementing a Business Case in Lean-Case

After putting numbers behind the assumptions, we can now start to figure out if they make economic sense. How do you do that? You have a the choice. You can start building another Excel model greenfield or you can keep reading and learn how to use Lean-Case. Instead of worrying about formulas, lookups or charts, you can immediately focus on answering the relevant business questions: 

  • How can you forecast your potential revenues?
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    Is your business viable at the core ? and Do your assumptions make sense?
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    When does your business become profitable and how much investment does that require
LeanCase UI

In Lean-Case, you can easily map the assumptions for the each of the element of the business model.


Lean-Case logo
How to map your assumptions into Lean-Case 

In Lean-Case, you can easily map your assumptions to each element of the business model.

Let’s have a quick  look at Lean-Case that you get a basic understanding. You find 3 menus revenues, headcount and expenses which we will use in this tutorial. All of them are very similar with 3 submenusel.

- In the Revenue Menu you capture revenue assumptions and all the assumptions regarding revenue related cost.

- In the Headcount Menu you capture salary relevant assumptions  for jobs, teams and roles.

- In the Expense Menu you capture relevant expenses for non-direct cost to manage and run the business.

Each of the menus has 3 submenus:

In the Plan Menu you can capture your assumptions and look at high level results, you can browse through the data, and look at it by month quarter and year. In the Check Menu you look at the data of your assumptions in detail,  filter is by different revenue streams and metrics and  export it. In the Track Menu you will be able to keep Lean-Case working for you and compare your actuals against your plan. In the Dashboard, you find all the results for revenues, headcount, expenses and - of course - the combined results for profitability, cash-flow and unit metrics as well as the Profit & Loss report which actually is a simulation board at the same time. You can filter which revenue streams, teams or expense groups you want to include in your report allowing you to analyse different scenarios.



Our blog post series will cover each of the critical business questions in more depth. For now, we would like to invite you to subscribe to our free eCourse. 



"Learn how to build a professional Business Case in 20 min"


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About the Author

CEO and Founder Lean-Case - Eckhard is a Serial Entrepreneur co-founding cyber-security startup accells acquired by Ping Identity and m-payment startup paybox acquired by Sybase/SAP. As a Business Angel, VC Partner and Investment Advisor, he has realized that turning business models into numbers is a major challenge and must professionalize.

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