Building your business model

What it is, and what it is not

A first clarification, and it changes everything: a business model is not a business plan. A business plan is the document you write to convince someone else: a funder, a bank, a selection panel. A business model fits into a few sentences and is first and foremost there to convince you. What you produce, for whom, what that person agrees to pay for, and what it costs you to produce it.

You can have a crystal-clear business model without ever having written a line of a business plan. You can also draft twenty beautifully presented pages without checking that a single customer is willing to pay. Guess which of the two sinks the project.

In the CCIs, this confusion is costly, and you are not the only one to fall into it. Most project leads know exactly what they want to create. Far fewer know who is going to pay for it. That is exactly where we start today.

The four questions to ask, in order

Take them one by one, in order, and answer out loud before writing anything down.

• Who pays? Not always the same person who benefits from the project, and that is the first trap to spot. A festival that is free for the public is paid for by local authorities, sponsors, ancillary ticket sales. An app that is free for the user is paid for by advertisers or by a small share of users who upgrade to the paid version. Keep the beneficiary and the payer clearly apart, otherwise you build a model around the wrong person.
• In exchange for what? An object, a service, access, a right of use, an experience, an association with your image. This detail changes the whole pricing mechanism: selling an object and granting broadcasting rights are not negotiated in the same way or at the same pace.
• How much? Price is not simply your costs plus a margin. It also depends on what the market is willing to pay for this kind of good or service. A creator who only looks at their own costs nearly always ends up undercharging, because they forget to include their own time.
• How often? A one-off sale, a recurring subscription, a commission per transaction, an annual fee. The rhythm makes all the difference to your cash flow. A model that brings in a large sum once a year means you need a reserve to get through the following eleven months.

Possible revenue streams for a CCI project

None of these streams belongs to a single type of organisation. A non-profit can sell services, a company can receive grants. What matters is knowing which one really carries your project.

• Direct salesAn object, an artwork, a print, merchandise. Easy to understand, but it requires a volume or a unit price high enough to cover creative time, often the heaviest and least visible cost in the budget.
• ServicesDesigning, producing, facilitating or training for an identified client. The most widespread model among CCI freelancers, it needs neither stock nor a large cash advance. Its limit: income stops the moment you stop working, it does not build up capital.
• Public or private commissionsA local authority, a company or an institution pays for a project defined in advance. Income is more predictable, but keep a close eye on how dependent you are on a small number of commissioners.
• Copyright, licensing, assignment of rightsA creation keeps earning long after it was made: an image reused under licence, content distributed across several media. This builds up over time and is rarely enough on its own at the start.
• Subscription or membershipA recurring payment in exchange for ongoing access or a service. Once the subscriber base is in place, it stabilises cash flow. Until then, allow for time and patience.
• CrowdfundingPerfect for launching a specific project and gauging public interest beforehand, less suited as recurring income. A successful campaign is also a full-scale test: the audience exists, you have just proved it.
• Grants and sponsorshipSupport with no direct commercial return, essential for many cultural projects.
• The mixed market and non-market modelBy far the most common case in the CCIs. A share of commercial income, a share of grants or sponsorship, sometimes a share of volunteer time valued in the accounts. This is not a compromise to apologise for, it is the economic reality of most cultural organisations.

A mix rather than a single model

Few CCI projects live off a single revenue stream, and that is perfectly fine. A board game designer can sell directly at fairs, license rights to a publisher, and run workshops in libraries. A performing arts company can combine ticket sales, paid residencies, an operating grant and cultural outreach activities invoiced to schools.

The point is not to stack up lines so the spreadsheet looks good. It is to know which one carries the project and which ones complement it. If three streams each bring in 20% of the budget and none exceeds that threshold, the model is fragile: losing a single line will not sink the project, but it forces you to reorganise constantly. A sturdier model generally has one dominant line, around 50 to 60% of the budget, and one or two supporting lines.

The pitfalls that come up most often

• Not paying yourselfA budget that does not count your time as a cost gives you a cardboard profitability. The day you need to hire someone to do that work, the model collapses: it never really existed.
• Confusing turnover with marginSelling a lot means nothing if each sale costs almost as much as it brings in. Check this first if you produce objects or events, as variable costs rise quickly in those cases.
• Depending on a single client or funderA commission that accounts for 70% of the annual budget is not a business model, it is a bet on that commission being renewed. What happens the year it is not?
• Forgetting about cash flow delaysA grant approved in June may be paid in December. A service invoiced in January may be paid in April. The model can be right on paper and the bank account empty at the worst possible moment.
• Setting a price out of awkwardness rather than calculationMany creators undercharge at the start for fear of losing the client. A price that starts too low is very hard to raise, as clients quickly get used to the entry rate.

Test before you commit

A business model is not decided alone behind a screen. It is checked in the real world, in contact with real people, and that is the most important habit in this whole guide.

Talk to five or ten potential customers before setting a price. Offer a scaled-down version of the service, or a pre-order, before producing in volume. Look at what comparable organisations charge, in the region or elsewhere, for a similar service. These checks take a few weeks, and they save you months of adjustment once the project is up and running.

The model that comes out of this work does not need to be perfect. It needs to fit into two sentences, the ones you would say to someone hearing about the project for the first time. And it must stand up to one simple question: if your first customer disappears tomorrow, what do you do?

What comes next

Two steps follow naturally; you choose which one to start with.

Set it out visually

The Business Model Canvas provides a nine-block framework that forces you not to forget anything, in particular the resources and partners you will need to last over time.

Put figures on it

A model that is sound in principle then translates into a financial forecast, over one to three years, to check that it holds up over time and not just on paper.

An initial conversation with accro lets you go over this work with an outside perspective, on your real project rather than a textbook case.