Business experts view the development of a strong business model as an essential component of business planning and I would agree. The business model ranks near the top of the list of business planning responsibilities. I teach business plan writing for an SBA affiliated organization and I’ll place the business model fourth in line, after one gauges demand for the product/service, defines the primary customer and evaluates the competitive landscape.
The business model is the roadmap within the roadmap that is your business plan. It is the blueprint for the process by which a company will make and sustain a profit. It is therefore necessary to do thorough market research and put the pieces together carefully. If you expect to make any real money, you had better get your business model right. Unfortunately, too many aspiring entrepreneurs do not roll up their sleeves and hash out the gory details that are the building blocks of a viable business model.
The business model shows you how to make your business work efficiently. The first big question the business model asks you to examine is, how will you and the clients connect? Will they find you via your website? If so, how will they know that your website exists? What should you do to drive them to your site and what do you want them to find and do when they get there? The type of website that you design and your call to action are business model issues.
Or maybe you will connect with clients and prospects via referral. Who, then, will refer to you and what will motivate that behavior? Do you have, or can you create, referral relationships that will feed you a steady supply of prospective clients?
For example, if you are a florist, do you have relationships with wedding and other event planners? Perhaps you worked in a busy floral shop and know a few people who will send brides and others to you. Or do you think you can depend on networking to connect you with enough prospects to get the ball rolling on sales? Who knows, maybe you are that lucky.
Where business will actually be conducted is another business model issue. Will customers visit you at your floral shop, or will you operate as a Freelancer and go to them, toting a binder or iPad that shows examples of arrangements you can create?
For those who sell other types of products, will you sell from a physical location, will you place items into the stores of others on consignment, or will all be sold via your website?
Providers of intangible services must first know how clients expect to engage in the type of transaction offered and whether you should open an office (accounting or law), or go to the client’s location (PR services or business consulting). Your business model will explain it all and tell the reader (and you) why it makes good business sense to sell in the way you’ve chosen. As your business grows, the business model will change accordingly, to accomodate increased demands on resources and client expectations.
Remember also to address customer service issues, like your return/replacement policy, in the event that a few customers are not satisfied with a product, or if something breaks while being shipped. If you will sell from your website, the shipping process will be addressed in your business model.
So the business model impacts many facets of your business plan and its fine points deserve careful consideration before you take the plunge and start spending time and money on a concept that you cannot make work. Next week, we’ll take a look at questions to ask yourself and some guideposts to assist you as you develop a business model for a new enterprise, or revamp the one you’re in now.
Thanks for reading,