Why do you need a business model? Every business has a business model. Just like every piece of ground can be mapped. It doesn’t matter if you’ve ever looked at the map.
I’ve worked with well over 1,000 entrepreneurs and business owners now. There’s one group of them who are super smart and focused. However, when I ask them a single question it all starts to unravel.
What does your business do?
The question is
What does your business do?
There are several variations on that question – “How do you make money?” is another favourite. When the entrepreneur is still talking after 5 minutes I begin to worry. When he (or she) is still talking after half an hour I know that they have no idea of their business model
You can sketch out the business model onto a piece of paper, you can condense it down into an elevator pitch. The business model is the essence of your business. It is how it works at a high level. Easy to explain, easy to understand. Easy to act on.
Why do you need to understand this? All business models aren’t equal.
When I first started out as an entrepreneur I almost started a kebab shop. I can’t remember why I didn’t now. My business model, there was the same as every other kebab shop. The crucial difference was that I didn’t have a young immigrant family to provide cheap or slave labour to run it.
I had no idea about that, and so it was fortuitous that I didn’t open the shop. My business model was going to be crap and I’d have underperformed compared to all the other kebab shops out there.
Why do you need a business model?
Most entrepreneurs and SME owners are like me then. They don’t look at the business model and so they end up being significantly less competitive than they should be.
If you don’t know your business model you are driving a second-hand car without an MOT.
If you don’t know your business model you can’t improve it
What do you need to do?
The first aid step is to quickly sketch out on a napkin what you do.
- Who are your customers? Choose your best 3 types
- How do you change their lives? What you are selling isn’t what they are buying?
- What do they give you in exchange for changing their lives?
- How do you reach them?
- How do you make them feel when you are helping them?
- What are you doing to create the change in their lives?
- What do you need to make that change? A factor? A chip fryer? a big heart?
- Do you need other people to help you? outsourced workers or factories, government licences
- Where is your money going to go?
Nine simple questions. Most can be answered in a word or two. Don’t worry about making a full sentence.
That’s your basic business model. If it’s still fluffy or unclear spend some time on it. If there are big holes, spend time on the business model now! and if what you wrote is the same as all your competitors start thinking about how you can change it.
FAQ
Yes. You have one even if you don’t know it. Knowing what it gives you another tool to become more competitive?
Use the 9 questions above to find the skeleton of your business model – then write the answers onto the business model canvas
Because having a good product or service and delivering it well is no longer enough. The business model is your business system. If that system works better than your competitors you will face far less competition
Then you can only get the same results as anyone else. And if the industry gets hit by a technological, environmental or economic crisis then you will die alongside them. Just like the dinosaurs did
Don’t sweat it. You can’t get it wrong. Draw the first map of your business. Then keep thinking about it. After a while, you’ll realise that you could have done it better. So spend a few minutes making it better.
It’s a sheet of A4 with some nice guidelines that help you write down your business model. There’s more stuff on the business model canvas here.
Stuff that is complex and messy in your head becomes clearer. That makes it easier to create strategies, brief staff, sell to customers and raise money from investors
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