The document outlines the 10 basic elements of a strong business model: 1) value proposition, 2) target market, 3) sales/marketing, 4) production, 5) distribution, 6) revenue model, 7) cost structure, 8) competition, 9) unique selling proposition, and 10) market size, growth, and share. It describes what should be considered for each element, such as defining the customer's problem for the value proposition or estimating costs for the cost structure. The goal is to explain to investors how the business will cover costs and make a return in a growing market segment.

1. The ten basic elements of a
strong business model

2. 1. Value proposition. What is the need you fill
or problem you solve? The value proposition
must clearly define the target customer, the
customer’s problem and pain, your unique
solution, and the net benefit of this solution
from the customer’s perspective.

3. 2. Target market. Who are you selling to? A
target market is the group of customers that the
startup plans to attract through marketing and
sales their product or service. This segment
should have specific demographics, and the
means to buy your product.

4. 3. Sales/Marketing. How will you reach your
customers? Word-of-mouth and viral marketing
are popular terms these days, but are rarely
adequate to initiate a new business. Be specific
on sales channels and marketing initiatives.

5. 4. Production. How do you produce your
product or service? Common choices include
manufacturing in-house, outsourcing, off-the-
shelf parts. The key issues here are time to
market and cost.

6. 5. Distribution. How do you distribute your
product or service? Some products and services
can be sold and distributed online, others
require multi-level distributors, partners, or
value-added resellers. Decide whether the
product is local or international.

7. 6. Revenue model. How do you make your
money? The goal here is to explain to yourself
and to investors how your pricing and revenue
stream will cover all costs and still leave a good
return.

8. 7. Cost structure. What are your costs? New
entrepreneurs tend to focus only on product
direct costs, and underestimate marketing and
sales costs, overhead costs, and support costs.
Test your projections against actual published
reports from similar companies.

9. 8. Competition. How many competitors do you
have? No competitors probably either means
there is no market or you have not done enough
research. More than ten competitors indicates a
saturated market. Think broadly here, like
planes versus trains. Customers always have
alternatives.

10. 9. Unique selling proposition. How will you
differentiate your product or service? Investors
look for a sustainable competitive advantage.
What is protecting you from copycats? Do you
have a patented technology?

11. 10. Market size, growth, and share. How big is
your market in dollars, is it growing or shrinking,
and what percent can you capture? Venture
capitalists look for a market with double-digit
growth, greater than a billion dollars, and a
double-digit penetration plan.