When done right, a business model lays a foundation for building something meaningful. It distills the potential for a business down to its essence.
Your business model will help answer the most important questions about your business:
What problem are you going to solve?
Who are you trying to solve it for?
How will you solve it?
How will customers pay for the solution?
How profitable will it be?
Your business model is then your foundation for your strategy, setting your direction for success. Whether you are just starting a business or you are moving into a new market with an existing offering, you need a plan to guide you — a model for your emerging business or product.
There are a number of approaches you can take to build your model, but here is the approach we use with our business and our clients business which is what we believe to be the 10 key elements of a business model:
High-level vision: A basic description of your business model, just two or three sentences that show what you’re about.
Key objectives: Your top goals and how you plan to measure them.
Customer targets and challenges: The types of customers who will purchase your solution, along with their exact pain points you’re going to help with.
Solution: The primary way that you solve your customer’s problems.
Value: The core elements of your solution that make it unique and differentiated (and ultimately valuable).
Pricing: How you will package your solution and what it will cost.
Messaging: A clear and compelling message that explains why your solution is worth buying.
Go-to-Market: The channels that you will use to market and sell to your customers.
Investment required: The costs required to make the solution a success.
Growth opportunity: The ways that you will grow the business, including key partnerships if you need them.
A good business model is simple and easy to understand. It answers the key questions about what you are trying to achieve and for whom.
Once you finish your first draft is important to get feedback and uncover any incorrect assumptions or biases. The hardest part is understanding what feedback to listen to and what to ignore because everyone has an opinion on the viability of a new business or product extension, often many of those opinions are just that or even misguided. Therefore a strong business model will protect against this. Your business model forces deep analysis and removes anxiety from your work by providing a framework for progress.
Ultimately the key benefit of a business model is that it requires you to make assumptions and decisions whilst encouraging you to check progress against pre-defined success metrics.
How have you approached building a business model?
If you would like support with your business model or a fresh pair of eyes, please get in touch.