When it comes to writing a business plan, the first step is figuring out your business model. This post is Part I in a four-part series on how to write a business plan. Today’s focus is crafting your business model.
Developing Your Business Model
There are a lot of moving parts when it comes to launching a business. But with everything you’ve got to do before you start your business, don’t be tempted to skip the important step of establishing your business model. This is crucial for the establishment of a well-executed business endeavor and ensuring that your business will become successful. Your business model is all about how your business makes money.
Once you start writing your business plan, identifying your business model will be a key aspect that you explain in the plan. This is why I want you to do it first. Your business model outlines your strategy and often includes information or processes that may be considered proprietary or confidential.
A well developed business model details the viability of your business concept and goes in-depth to explore the demand of the marketplace, the competition, competitive advantages such as pricing, quality or availability and the ins and outs of getting the product or service to market. The business model makes you think about what you plan to offer your customers. It answers questions about the price, distribution (including where and how you will sell), your niche customer and when the market will be ready. Your business model is often completely confidential, and while it may be alluded to in the business plan, it is rarely completely revealed.
In general, you need to clarify your business model before your write your business plan.
If you’ve got a business model, but no business plan yet, you have a third of the work already done. The exploration necessary in developing a solid business model often will help you streamline the process of writing your business plan.
As you grow your business, you may find need to make substantial changes to your business model. Your niche or product offering could change. The needs of the market may change. If you stay on top of the trends in your industry, you will not be surprised by changes over time. These changes are unavoidable and often serve to strengthen your business concept and ultimately your business.
When I first started in business in 1999, I was a video production company. Then by 2003, we evolved into a video and web development firm. Most of our clients wanted us to produce videos for their websites, so we started building the websites too to increase our profitability. By 2007, social media was just starting to become popular. I realized that if we could jump on the bandwagon early, becoming super-users, that we could build a huge business with focus on social media marketing, which remains one of my firm’s, Quintessence Group, specialties today.
I simply point out that over 16 years, my business and the market has changed tremendously, and it’s important for you to pay attention and tweak your business model from time to time so that you don’t get left behind.