Developing Your Business Model Strategy

While credit unions are often referred to as non-profits, they operate as not-for-profit cooperatives. This distinction is crucial because, like any business, credit unions need to generate profits to build capital and ensure long-term sustainability. A well-defined business model clarifies how your credit union will achieve this.

Furthermore, a clear business model mitigates the risk of failure. The decline in the total number of credit unions underscores the importance of a strong business model. Many credit unions that have failed had poorly structured business models that created risk and ultimately eliminated profitability.

Understanding Business Model Structure

A business model is essentially a roadmap for how your credit union creates and delivers value to its members while generating revenue. The Business Model Canvas, a popular framework, provides a structured approach to mapping out your business model. It consists of nine interconnected building blocks:

1. Customer Segments: Define the specific groups of members your credit union serves.

2. Value Proposition: Articulate the unique benefits your credit union offers to each member segment.

3. Channels: Determine how you will deliver your value proposition to your members.

4. Customer Relationships: Establish the types of relationships you will build with your members.

5. Revenue Streams: Identify the sources of income for your credit union.

6. Key Resources: Outline the essential assets required to operate your business model.

7. Key Activities: Define the core activities necessary to execute your business model.

8. Key Partners: Identify external partners that contribute to your business model.

9. Cost Structure: Understand the costs associated with running your credit union.

Building Your Model

Credit unions are complex organizations serving diverse member segments with evolving needs. To build a successful business model, ask yourself:

1. Who are we serving? Clearly define your target member segments.

2. What value do we offer? Articulate the unique benefits your credit union provides to each segment.

By thoughtfully addressing these questions and leveraging the Business Model Canvas framework, you can create a clear and effective business model that will drive your credit union's success. Remember, a well-defined business model is not static; it should be regularly reviewed and adapted to the changing needs of your members and the competitive landscape.