9. Cost Structure

This defines the cost of running a business according to a particular model. Businesses can either be cost driven i.e. focused on minimizing investment into the business or value driven i.e. focused on providing maximum value to the customer.

Following are some traits of common cost structures:

1. Fixed Costs: costs that remain the same over a period of time
2. Variable Costs: as the name suggests, these costs vary according to a variance in production
3. Economies of Scale: costs decrease as production increases
4. Economies of Scope: costs are decreased by investing in businesses related to the core product.

The first step for an entrepreneur is to obviously identify all costs associated with the business. A realistic understanding of the costs of the business is one of the hallmarks of a good business model. After identification, it is important to list all the costs on the canvas, so they are visually present and then create plans for each cost. Some costs may be decreased through certain measures while others may go up if you decide that an investment in a particular section will result in future gains.

The basic questions you must answer in this category are:

What are the most important costs in your work? Which key resources/ activities are the most expensive? What will it cost?