A business model is a blueprint that defines your company’s mission, goals, operations, and structure and is essential to successfully growing a new business. Business models should not be confused with business plans, which are more elaborate documents that detail projected finances. Instead, business models are concise explanations on how you intend to deliver your products and services and retain customers.
Here are some tips to help you develop a business model for success.
Keep It Simple
Believe it or not, the best business models are the ones that are concise, easy to follow, and only take up one sheet of paper — unlike business plans, which may be up to 100 pages. It is often best to illustrate your model using a diagram that makes it easy for partners and staff to refer to and understand. Think of the business model as a single concept, and let that guide you through the development phase.
How will your company operate? What departments are involved in producing your products or delivering your services? How will the different departments and divisions within your company be managed? Your business model should outline the operational flow of your company – from manufacturing to marketing. It should also name each department and define the positions and job responsibilities within each department.
Use your operational model to help you determine manufacturing costs and define ways to achieve higher margins. To help you achieve higher margins, devise a business model that includes the following:
- An efficient distribution channel
- Less sales support and sales effort
- Lean manufacturing process
- Other opportunities for revenue that do not increase your costs
Operations, sales and marketing, labor costs, and organizational structure are essential components to a successful business model. It is also crucial to revisit your company’s organizational and logistical structure to keep your business practices current and efficient to meet consumer demands.
To supercede your competitors, you need to find the best ways to meet your customers’ wants and needs. Include a customer profile in your business model to help you stay focused on developing products and services specifically with your customers in your mind. Ask the following questions to develop a customer profile: What are your customers’ needs? What motivates your customers to make purchases? What are common characteristics of your customers? How can you provide value to your customers? How can we improve to attract and retain a larger target?
Customers are not always the end users of a company’s products or services. Customers can also be retailers, distributors, catalogs or anyone that you sell your product or service to. In some cases, companies have partnerships or alliances with other companies, in which case, the company would still need to take into consideration the needs of whomever is relying on the products or services.
Include a statement of your company’s purpose in your business model. This mission statement helps everyone involved in the company clearly see the customers’ needs and how the company intends on serving those needs. A clear statement will serve to guide future decision-making, set the tone for your company’s culture, and lay the foundation for day-to-day operations. To help you write your company’s mission statement, ask the following questions: What is my business? What do I want to accomplish for my customers? Why should we exist?
Probably the single most important feature of your business model is its elasticity. In other words, your model should – and will need to – change several times throughout the years to accommodate changes in the marketplace, technological advances, etc. As the world changes, so too should your business model. Your business model should not be strongest at the moment of its inception; make accommodations to adjust your model as needed to keep it from eroding.
Think of your business model as your roadmap to success. Have a clear set of directions on hand, but know that you may need to accommodate for detours or the discovery of better routes.