Importance of business model and why your business needs one.
What is a Business Model?
Business Model is the way a company plans to create value, deliver value and make profit from creating and delivering such value.
Business model is the foundation upon which any business is built. It provides the framework upon which every component of the business lays. Typically, a business model is not meant to be a voluminous document. In fact, a business model can be captured in just a page. Yet is is very very important to the success of any business.
Importance of Business Model
Developing a business model is one of the most important aspects of turning an idea to a profitable venture. And no one can undermine the importance of a business model to the success of an establishment. Whether new or existing businesses, they all need business models.
Today, I want to quickly share 5 major importance of business model and why you business must have it.
1. It helps the entrepreneur recognize the key elements in a business idea
An appropriate business model helps an entrepreneur to recognize different important elements in the business. Such elements as what problem the business is solving and for whom. It also show how the entrepreneur will generate customer value and how the product/service will reach customers. Finally, it shows how the business will remain competitive; and all costs and revenue the entrepreneur can assume.
2.It Shows How The Business Will Generate Revenue
Another core importance of a business model is that it describes how the business will generate revenue. It is the business model that shows how customers are going to pay for services rendered.
3. Competitive Advantage
Another significant advantage of a solid business model is that it can give you a competitive edge over other companies in your industry. Implementing a unique business model can give your company a unique reputation in the marketplace. Such reputation can create buzz among consumers and encouraging first-time purchases. And since it is unique it will equally give you first mover advantage. In fact, such would make nonsense of competition.
4. Attracts Investors and Partners
To survive in any business is relatively easy. All it takes is just to ensure you break even each month. However, to be able to expand the business will take more than that. It oftentimes require external financing for expansion. A solid business model may be necessary to attract that external financing. So investors want to be sure the business clearly states how it is going to make profit.
5. Financial Sustainability
The largest advantage of a robust and proven business model is the contribution it makes to organizational sustainability. And also the ability to weather economic storms or shifting market conditions. A large percentage of businesses close their doors each year solely due to poor financial management. A business model forces an entrepreneur to keep abreast of exactly how much profit is being made each month.
Conclusion on the Importance of Business Model
Every business, whether a new player or a seasoned veteran, needs a solid business model to survive and grow. A business model is a plan for earning a profit. Business models also known as profit model helps in getting investors and developing partnerships for entrepreneurs.
So it is clear that every serious business needs a business model. Therefore, it is in your own best interest to ensure you get a professional business model for your business.