A Guide to Defining Your Business Model

Your business model is make or break for your startup. Behind every great business is a meticulous plan which lays the foundations for success and growth. To put it simply, the better your business model, the better your chance of success. A strong model will detail exactly how revenue, profit, market trends and scalability will impact the future of your company.
But, where do you start? Here are some essential tips for how to define your business model.

 
 
 
 
 

Cover All Areas of Your Business

‘A shared vision will inspire your team, but make sure they have the resources they need to thrive.’– Richard Bradshaw, Head of Operations, Foodit.

Your business should provide a solution to an existing problem. Your business should answer a need of your target audience, not ask a question.
Unfortunately, having a USP isn’t enough. Your business model should explain how you plan to create, deliver and capture value from your unique selling point.

Make sure your business plan covers all areas of your proposition. Here are some key elements to consider:

  • Value propositions
  • Target customer segments
  • Distribution strategy
  • Customer relationships
  • Value configuration
  • Revenue model
  • Core capabilities
  • Commercial network
  • Partner network
 
 

Use Templates

‘Use frameworks and templates that ask fundamental questions about business goals and brand vision.’– Asli Sonceley, Co-Founder, Xtensio.

Templates make life easier! Following a template should ensure that you detail all the key elements of your model.
Templates allow you to refine your business model and present it in a clear and concise way.

There’s nothing wrong with following a tried and tested construct. This structure work-through should ensure each component of your business model is given the right amount of time and attention.

There are plenty of online business model toolkits, such as the Business Model Canvas. If you’re a younger entrepreneur, you may find resources from the Prince’s Trust beneficial in getting your concept off the ground.

Validate Early

‘Offer your product to impartial target users before launching, sparing guesswork and discovering pain points.’– Thomas Smale, Founder, FE International.

The best way to prove your business model works? Achieve results early. Revenue sustains a business, therefore generating income early-on will validate your model and reassure any potential partners.

Before launching, reach out to some of your target audience. Testing your business in the real-world is the only way to know whether it will work.

Find out the answers to questions like:

  • Do your potential customers find your product/service valuable?
  • Would they be willing to spend money on it?
  • If so, why?
  • If not, how can you overcome this obstacle?

It’s important to see your business through the eyes of a consumer. If your business doesn’t fulfil their want or need, work out how to change it.

Continuously Refine Your Model

‘Reviewing and adapting your business model is crucial to surviving and thriving as a company.’– Dave Bennison, Director, HBD Associates Ltd.

It’s important to keep updating, changing and adapting your business model. Think of it as a continuous work-in-progress.

There are a number of both internal and external factors that can impact your business, such as changes in market conditions, consumer needs and challenges from competitors. So, adapt your model to meet these changes. The best business models are those which reflect current climates.

It can take multiple attempts to create a good working business model!

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