A business model can be defined as a strategy of how the entrepreneur will make profit. A business model consists of 3 major things : what is the product/business all about, how much has one invested in it and what are the sales and profit earned from it.
Make it or break it
The business model of a company may defined based on the factor on how it’s making money.Your business plan represents the entrepreneur and his business. If it is designed right, it will be worth millions, else it will be the other way around. A new business in development has to have a business model, if only in order to attract investment, help it recruit talent, and motivate management and staff. Investors need to review and evaluate the business plans of companies that interest them.
Why do you need a business model ?
A business model should be the foundation on which the business is built and started. A business model bridges the gap between the idea of the entrepreneur and successful business.
A business model is executes a design for the successful operation of a business. It creates value for yourself (e.g. make money) while delivering products or services to your customers.There are numerous types of business models, and they can all be mapped onto physical chart called the “business model canvas”.
How a Business Model Works ?
Effectiveness of a business model = The gross earnings of the company
A business model works in a specific marketplace for a specific audience. It is essential to identify who are the target customers and their needs. Value proposition plays a major role in a business model. The value proposition states the product or service the company has to offer to the customers, their uniqueness among the competitors and the benefits that the customer will experience on choosing it. A change in the market trend may lead to the failure of the business model.
Types of business model
There are almost enough number of business models as the number of businesses that occur in the marketplace. The business models are classified on the basis of what the business is all about.According to Harvard Business Review,some of the basic types of business models include : Crowdsourcing, Leasing, Bundling, Pay-as-you-go, Subscription, Advertisement.
How to design a better business model
Having the courage to accept and rectify the problem if it is present
The greatest mistake one can make about the business model is assuming that their business does not require it if it has to be huge. A successful business is a by-product of a good business model.
Focus on what needs to be done and take breaks regularly
Procrastination and stress will break the man some day or the other even if we underestimate it. Sufficient time to self is also necessary for an overall growth of the entrepreneur.
Short term goals are easier to accomplish than long term goals and increase productivity
Not understanding what is your final goal may mislead the entrepreneur and bring unexpected obstacles in their way. Therefore, the final goal should be set in order that it must be achievable.
Know your target audience and age group
The product must focus on a greater audience and age group. For example, if we take the example of the cell-phone then we may consider everyone as the target audience of all the age groups because such is the need and market trend.
An outdated object or trend will always fail
A thorough market research and analysis of what target audience needs must be done before building the prototype of the product. Therefore it is a waste to repent after the loss has been incurred. So do your homework correctly.
Persistence and Consistency is the key
And finally, no matter what do not give up, because some times your idea becomes the market trend.
Advantages of having a business model
On implementing a successful business model, both customer satisfaction and good sales can be achieved which are the major factors that lead to the growth of the company. A plan is made which makes the execution of the tasks easy and gives clarity to it. On the investor’s point of view, if the business model is correct then the entrepreneur goes from rags to riches benefiting the investor also.
Disadvantages of having a business model
The quality of the business model is inversely proportional to the risks involved in execution of the model.
Some people may disagree on this topic but there is both a good and a bad hidden behind every concept. So there are also the downsides of using a business model but they can easily be resolved if wished so.
One small mistake in the business model can destroy a million-dollar business. Not every business model works unless we experience the risks and failures that are involved in it. Established businesses need revise their business plan regularly in order to stay with the trend and challenges ahead.
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