Opinions expressed by Entrepreneur contributors are their own.
Creating a business model isn't simply about completing your business plan or determining which products to pursue. It's about mapping out how you will create ongoing value for your customers.
Where will your business idea start, how should it progress, and when will you know you've been successful? How will you create value for customers? Follow these simple steps to securing a strong business model.
1. Identify your specific audience.
Targeting a wide audience won't allow your business to hone in on customers who truly need and want your product or service. Instead, when creating your business model, narrow your audience down to two or three detailed buyer personas. Outline each persona's demographics, common challenges and the solutions your company will offer. As an example, Home Depot might appeal to everyone or carry a product the average person needs, but the company's primary target market is homeowners and builders.
Related: The Science of Building Buyer Personas (Infographic)
2. Establish business processes.
Before your business can go live, you need to have an understanding of the activities required to make your business model work. Determine key business activities by first identifying the core aspect of your business's offering. Are you responsible for providing a service, shipping a product or offering consulting? In the case of Ticketbis, an online ticket exchange marketplace, key business processes include marketing and product delivery management.
3. Record key business resources.
What does your company need to carry out daily processes, find new customers and reach business goals? Document essential business resources to ensure your business model is adequately prepared to sustain the needs of your business. Common resource examples may include a website, capital, warehouses, intellectual property and customer lists.
4. Develop a strong value proposition.
How will your company stand out among the competition? Do you provide an innovative service, revolutionary product or a new twist on an old favorite? Establishing exactly what your business offers and why it's better than competitors is the beginning of a strong value proposition. Once you've got a few value propositions defined, link each one to a service or product delivery system to determine how you will remain valuable to customers over time.
Related: How to Develop and Evaluate Your Startup's Value Proposition
5. Determine key business partners.
No business can function properly (let alone reach established goals) without key partners that contribute to the business's ability to serve customers. When creating a business model, select key partners, like suppliers, strategic alliances or advertising partners. Using the previous example of Home Depot, key business partners may be lumber suppliers, parts wholesalers and logistics companies.
6. Create a demand generation strategy.
Unless you're taking a radical approach to launching your company, you'll need a strategy that builds interest in your business, generates leads and is designed to close sales. How will customers find you? More importantly, what should they do once they become aware of your brand? Developing a demand generation strategy creates a blueprint of the customer's journey while documenting the key motivators for taking action.
7. Leave room for innovation.
When launching a company and developing a business model, your business plan is based on many assumptions. After all, until you begin to welcome paying customers, you don't truly know if your business model will meet their ongoing needs. For this reason, it's important to leave room for future innovations. Don't make a critical mistake by thinking your initial plan is a static document. Instead, review it often and implement changes as needed.
Keeping these seven tips in mind will lead to the creation of a solid business plan capable of fueling your startup's success.
Related: 5 Strategies for Generating Consumer Demand
FAQs
According to Investopida.com and Nerd Wallet, most business plan templates include seven elements: an executive summary, company description, products and services, market analysis, marketing strategy, financials, and budget. You will also want to include an appendix that contains data supporting the main sections.
What are the 7 components of a business plan? ›
According to Investopida.com and Nerd Wallet, most business plan templates include seven elements: an executive summary, company description, products and services, market analysis, marketing strategy, financials, and budget. You will also want to include an appendix that contains data supporting the main sections.
What are the elements of business model? ›
Business model components
There are three main areas of focus in a business model: value proposition, value delivery, and value capture. The proposition outlines who your customers are and what you will offer. The delivery details how you will organize the business to deliver on the proposition.
What does it mean to have a strong business model? ›
A strong business model helps a company to stay ahead of the curve by providing a clear roadmap for growth and success. It enables a company to identify its unique value proposition, target the right customers, and generate revenue in a sustainable and efficient manner.
What are the seven 7 factor to consider in starting business? ›
The seven factors to consider before starting a business are: a great business idea, passion, business plan, budget and finance, legal documents and equipment. What is the most important factor to consider when starting a business?
What are the 7 key steps in product development explain what occurs during each step? ›
Although the product development process differs by industry, it can essentially be broken down into seven stages: idea generation, research, planning, prototyping, sourcing, costing, and commercialization.
What are the 8 sections of a business plan? ›
What are 8 common parts of a good business plan? Some of the most common components of a business plan are an executive summary, a company description, a marketing analysis, a competitive analysis, an organization description, a summary of growth strategies, a financial plan, and an appendix.
What are the three C's of a business plan? ›
These three C's include: (1) having a concept of what your business is all about; (2) identifying who your customer or client will be; and (3) figuring out how the cash flow in your business will actually work.
What is key business model? ›
Key Takeaways
A business model is a company's core strategy for profitably doing business. Models generally include information like products or services the business plans to sell, target markets, and any anticipated expenses.
What is the ideal business model? ›
An ideal business model is one that is designed to deliver value to customers while generating profits for the company. You do need both. Your business won't be around long if you are only able to fill one half of this equation.
Developing a successful business model requires careful consideration of several key factors. Conducting market research, understanding your target audience, choosing the right pricing model, and incorporating customer feedback are all essential components of creating a sustainable and profitable business.
What is the 7 stage new product development process? ›
The product development lifecycle is essential for any business looking to develop successful products. The stages of the product development lifecycle include ideation, validation, prototyping, marketing, development, launch, and improvement (we'll explain what each entails a bit further on).
What are the 9 elements of the business model? ›
The Business Model Canvas consists of nine essential parts: Customer Segments, Value Proposition, Revenue Streams, Channels, Customer Relationships, Key Activities, Key Resources, Key Partners, and Cost Structure.
What are the 5 phases of the business model? ›
Churchill and Lewis proposed five- (5) stages of small business growth: (i) “existence,” (ii) “survival,” (iii) “success,” (iv) “take-off,” and (v) “resource maturity.” Each stage, they argued, is achieved based on a combination of attributes, such as size, diversity of operation, and business complexity, and requires ...
What are the 9 business model? ›
A business model describes the rationale of how an organization creates, delivers and captures value. It can be described through 9 building blocks: Customer Segments, Value Propositions, Channels, Customer Relationships, Revenue Streams, Key Resources, Key Activities, Key Partnerships & Cost Structure.
