If you're thinking of starting your own business then you MUST know what your Business Model is.
Even if you have already started your own business, it's not too late to determine which Business Model you have adopted.
Unfortunately, most entrepreneurs neglect this vital step when launching a new business.
So what is a BUSINESS MODEL?
A company's Business Model is the co-ordination of all of the elements that will go into that business, to yield a profit. The Business Model will identify the products (or services) to be sold; how they will be obtained (manufactured / out-sourced / purchased in-house / etc.) the ideal customers (who is going to buy the product or service) and the anticipated, related expenses.
A Business Model is NOT a Business Plan.
The Business Plan sets out, in detail, all of the elements of the Business Plan and explores how each element will integrate into the business. That is, the Business Model is a pre-cursor to the Business Plan. Without a Business Model, you can not prepare a proper Business Plan.
So, for example, if you were going to start a business selling handbags; then the Business Model would set out the following:
1. What handbags specifically are you going to sell? (fabric, leather, both?)
2. Where will you source the product from (import, manufacture yourself, outsource the manufacturing?)
3. Who are your customers? What does your Ideal Customer look like? (Customer Avatar)
4. How will you sell the handbags? (Online store / informal trading / via retailers?). WHat about deliveries and returns?
5. What will it cost to get the product to the market?
6. How will you fund the development?
7. What is your Break Even volume?
and so on....
When you sit down and work through all of the variables and elements that have to go into the new business, you will start developing the Business Model.
The Business Plan
Once your Business Model has been built (it will probably never be completed as you could add to it continuously as you come up with new ideas; or as circumstances change) then you need to take EACH ELEMENT of the Business Model and list (in as much detail as possible) everything that you can think of that needs to happen for that element to work completely and as efficiently as possible.
For example: (taking the handbag business as an example) - If you were to import your handbags for resale, then exactly what is required to import the bags (what Customs Regulations have to be complied with, what are the Import Duties on handbags, what will it cost to import and have cleared and delivered to you? How long will it take from date of order to date of receipt? Do you need Foreign Exchange cover? DO you need to insure your shipment? And so on.....
For more on Business Models (and starting a new business), check out our FREE Online Course: WHAT BUSINESS IS RIGHT FOR ME?