Wednesday, June 12, 2013

Creating A Business Model


A business model is a company’s explanation of how they intend to serve their customers, deliver value and generate revenue; it represents the fundamental characteristics of a business.  It is used to define and evaluate a business, explain the business to employees or investors, or it can even be used to determine how you are going to sell a specific product. 

It is important when creating a business model that you develop one specifically designed for your company and that takes into account your product and consumers; no one business model is going to work for every company.  For example, bowling alleys have four different business models, as they are catering to a wide range of consumers.  There are traditional alleys for leagues, family entertainment centers for families and young children, boutiques for the younger generation looking to go out and socialize, and hybrids, a combination of family entertainment centers and boutiques.  Brunswick goes into more detail about those business models here.

Creating your business model


·         The first step to creating your business model is knowing your product and deciding what industry your business falls under.  This will help you determine who your target customers are and how you are going to reach them. 

o   Developing a relationship with your customers is crucial for the success of a business.  You want to keep your customers happy, engaged, and returning to you for your products and services. 

o   You also need to decide how you are going to connect with your customers and promote your product.  There are many distribution channels that you can use to reach your consumers, whether it be virtually, in your store or through partner companies. 

·         The next step is to define your value proposition: how you are going to meet the needs of your customers through your product and services.  You can do this through cost, efficiency, convenience, performance, and many other ways.  This is important for your business because it will make you stand out among your competitors. 

·         Calculating your finances is a very important step in creating your business model.  There are many things to keep in mind as you try and figure out how your business is going to make a profit: 

o   Fixed costs (costs that remain unchanging)

o   Variable costs (costs that vary depending on demand, production, distribution, etc.)

o   Manufacturing and distribution of your product or service (how much does it cost to make your product and get it to your customers efficiently and timely)

o   Marketing and advertising your brand

Remember, revenue may not come in right away, especially if you are a startup, so budgeting is essential!

·         It is important to write out your business model and come up with a plan on how you are going to achieve it.  One helpful tool you can use is the Business Model Canvas, a template designed by Alexander Osterwalder that is widely used to help businesses get a kick start on creating their business models.   

By following these steps, you will be on your way to creating an ideal business model that is just right for your brand.  The most important thing to remember is you are creating a product and selling it to your consumers – you just have to find the most efficient way to do this for your business!