A business model is a plan for how your enterprise will run and offer value. In short, it is a blueprint for everything involved with your business: the financials, processes, target audiences, service offerings and any USPs. As such, it is vital to make sure yours is secure.
By creating a bulletproof plan, you will ensure a considered, comprehensive strategy for your company that you can continue to refer to over time.
If you haven’t created a business model before, it may be hard to know where to start and what to include. In this blog, we have put together our top tips of what to consider when creating a model, so that you can enjoy strong foundations for your enterprise.
- What you will do
- Decide your audience
- Know the competition and how you will differentiate
- Define goals
- Establish the logistics
- Identify what resources you need for set up
- Understand the financials
What you will ‘do’
The most natural place to start when creating a business model is what it is that your business will do. This means detailing the products or services you will offer and what beneficial purpose you will offer your customers.
This should form the introduction of your model and will underpin everything else you plan for. When determining what it is you will do, ask yourself what industry or sector you will sit in, how someone might describe your company and why there is a need for it.
Try to provide as much detail as you can to pin down your offering. With this in place, you can then focus on how you will offer it, who to and how to ensure success.
Decide your audience
The first step of creating your business model is to determine who your target audience is. By doing so, you will understand your customers and be able to adapt the rest of your model accordingly.
Your products and services will naturally determine your audience, and who would be best served by them. Depending on your product or services, you may have multiple audiences you wish to aim for.
Once you have broadly determined who you want to target, it is vital to dive in deeper to have a full understanding of your potential customers. You will want to look at their key demographics, as well as their interests, pain-points and lifestyles. Using this, you will be able to create set customer personas.
Your customer personas will inform the rest of your model, such as how products and services will provide value to them and what marketing and sales processes you will have in place to reach them. In this sense, your planned customer base will be central to your model – so it’s essential to carefully consider them at this stage.
Know the competition and how you will differentiate
Next, you need to check out the competition for your business. This will allow you to scope out the existing marketplace, which can help to determine what you need to have in place in your own operations. Further, it will enable you to seek out gaps in the market and differentiate yourself from the crowd.
When researching your competitors, take a look at their offerings and any processes they might have. Use this to inform your products and services, particularly if there are aspects that your competitors do well. At the same time, look out for any areas where you believe there is room for improvements or there is a way to provide additional value for your customers.
By considering this and incorporating it into your business model, you can ensure you are able to gain an advantage over your competitors and increase your market share while carving out your unique space within your industry.
Define goals
Another critical part of your business model is involved with the future ambitions of your enterprise. It is crucial to identify what you want to achieve over time in your company to give a sense of momentum and make sure your operations and offerings will allow you to reach those goals.
Look at the big picture and consider where you want your company to be ultimately. This could include turning over a certain amount of annual profit, expanding to a particular size or becoming a nationally known firm. You should also set out what you want to achieve and when, as this will give you a timeline to work towards.
Once you have set out these goals, outline these in your business model document and identify how you will make those goals a reality. For example, will you add new products to your roster? Will you need to achieve a certain amount of revenue by a certain point? By considering this, you will be able to layout the path you intend to follow as a business.
Establish the logistics
With your customer base, market position and goals pinpointed, your business model needs to set out how you will make your enterprise a reality. It is vital to ask how you will serve your target customers, how you will reach your ambitions and how you will be able to make money.
Identify the different processes you will need to have in place across key business areas, including marketing, sales, back-office, production, customer service and so on. Document what these processes are and how they will work in unison.
Ultimately, your processes should all be fully functional, able to meet demand and allow you to provide your products and services effectively. By setting these processes out in your model, you will be able to highlight the logistics behind your enterprise that allow it to operate efficiently.
Identify what resources you need for set up
Every business needs to have certain assets in place to operate. While setting out your processes, it is, therefore, essential to identify what resources you need to fuel those processes. This may include supplies, equipment and machinery, premises and staff.
Make a note of any resources you will need so that your company can function, including things like plant and machinery, computer, software, telephones, stock and so on. You should also work out the cost behind these assets so that you can incorporate them into your financial planning. Many of these may be needed before your business launches, so having them set out will allow you to identify what you need to have ready and the role that each will play.
Similarly, you should set out how many employees you will need to fulfil the different required roles in your business, what each position will be responsible for, and the skills necessary for those filling them. This will help you to create comprehensive and efficient operations for your company, as well as make it clear what every person is contributing to your overall business.
Understand the financials
One of the most substantial parts of your business model will be the financials. This will be key to the success of your company.
Firstly, you will want to calculate the costs to running your business, encompassing staff wages, supply and materials, utilities, loan repayments (such as mortgages), purchase of equipment and another other outgoing expenditure you will need to fund.
Secondly, you will need to create a financial forecast that predicts your revenue over time and how your sales will grow. Part of this should include at which point you will break-even and how much profit you expect to make over time.
It is vital to consider your outgoing costs and your revenue so that you are able to make sure your business is running at a profit and determine how you will be able to grow financially long-term. As your financials improve, you will be more likely to expand, so your financials projections will also be vital to determining how you can reach your goals and evolve the company in line with your business model.
You may also want to consider any funding or loans you intend to utilise so you are aware of the financial support you will use at each point and how it will work in line with the rest of your model.
Get advice
When creating a business model, there is plenty to consider to make sure you are setting the right foundations. However, it is also an exciting time for many entrepreneurs: this is the point in which you are crafting precisely what your enterprise is and how you will make it a success.
The tips outlined above cover the essential areas of any model: your offering, your customers, your operations and the finances that will make it a reality. It is crucial to cover each of these off in your plan so that everything can work together cohesively and enable you to run your company smoothly.
By creating a thought-out business model, you can continue to refer to this as your company grows and develops, using it as the backbone for your future strategies.
If you need help in establishing your business model or setting up a new enterprise in general, we are here to help. Our team of advisors have expertise in a variety of different sectors, with companies at various stages of growth, so we can provide tailored guidance for your start-up.