6 Mechanics to look for in a winning business model

Figuring out if your business model is really working can feel tricky. But looking at it through a few simple lenses can make it much clearer. These seven mechanics will help you spot what’s working, where things might need tweaking, and how to uncover new opportunities. They’re directly tied to the blocks of the Business Model Canvas, making them easy to map and act on. Let’s take a closer look and see how your business stacks up.

Do You Earn Before You Spend?

This is both a working capital and a validation strength. If you are able to make money before you spend to create and deliver your value proposition, you are both validating that there is a market for your product and also you have cash in hand to run you business. Models like subscriptions, crowdfunding, pre-orders or waiting lists are great examples. Think about Netflix charging monthly fees upfront or Kickstarter campaigns collecting funds before production even starts. However if you can’t deliver what you promised, customers will lose trust fast. It’s hard to recover from that and could make it tough to get future buyers on board.

Just look at the timing in your revenue stream and cost structure ie map them on a journey, or process if you will. See what comes first.

Does Your Business Model Produce Recurring Revenues?

Having recurring revenues means you don’t have to start from zero every month. It’s the difference between selling one-off products and building a steady stream of income. Spotify’s monthly subscriptions or Amazon Prime’s yearly memberships are perfect examples. However this is also an overused mechanic, customers are getting tired of too many subscriptions. If they don’t feel like they’re getting value, they’ll cancel, and high churn can wreck the predictability you were counting on. For example box subscriptions come and go, not many stick. Make sure (validate) your value proposition and customer segment pair (problem solution fit) strongly calls for a subscription model.

Is Your Business Model Based on a Game-Changing Cost Structure?

We looked at an edge in revenue streams, now let's look exclusively in the cost structure. Cutting costs in a smart way can give you a major edge. Companies like Uber and Airbnb flipped the script by not owning cars or properties. Automating processes or outsourcing can also make a big difference. In other words optimize you activities and resources, most likely with key partners. But if you lean too much on outsourcing or shared resources, you might run into quality issues or supply chain headaches. It’s a risk to keep an eye on. The rule of thumb is you should own your core value proposition and outsource other stuff. For both Uber and Airbnb, the core value proposition is not the assets but the usage experience. Both companies own diligent quality and service UI and systems.

How Much Do Switching Costs Prevent Your Customers from Churning?

If you are acing customer relationships, then customers stay. But can you do more? When it’s hard or annoying for customers to switch to a competitor, you’ve got a built-in safety net. Apple’s ecosystem is a classic case: once you’re locked into iCloud, iMessage, and the App Store, moving to another brand feels like too much hassle. The downside is that the customers might feel trapped and grow resentful. If a competitor offers something irresistible, they might jump ship anyway, even if it’s a hassle. Actually this is typically how startups win over incumbents. They shatter the switching costs.

How Much Do You Get Others to Do the Work?

This is Web2.0 in business model terms. Do you create the value exclusively or are your your customers and users creating value within the base. Getting others to contribute can supercharge your business. eBay relies on users to create listings, and TikTok thrives on content from its creators. Actually platforms like TikTok, Youtube and Meta spend millions on creators. It’s a win-win when done right. Just look out for quality. Imagine you are a museum curator. You are not responsible for creating the art, but you are responsible for the quality.

Does Your Business Model Provide Built-in Protection from Competition?

If your business has something unique or hard to copy, you’re in a good spot. Tesla’s battery tech or Google’s search algorithms make it tough for others to compete. When looking at your business model, remove everything that is the same for every other player in your industry. What's left? Is it enough to be truly competitive. But be careful, over-relying on one competitive edge is risky. This will be the first place your competition will attempt to out-perform you.

How does your business compare? If any of these mechanics feel like a weak spot, it might be time to revisit those blocks and experiment with some changes.