The objective of this post is to remind and help a better understanding of the term Business Model and to explore some essential characteristics and connections with the management of companies and entrepreneurs.
It is surprising to know that after my own research, there is little literature on this topic, both theoretical and practical, particularly in the context of entrepreneurship.
Very often when I finish a lecture on business models, I am surprised to see how many attendees of my talk are left in awe of this term.
Importance of a business model
Imagine you want to build a house. You have the land and now you need to know what materials you are going to use, if you are going to build a flat or two, who is going to live there, etc. It is not the same to build for a couple who are starting their life than for an already established family with several members, for example. Building with wood is very different from building with bricks and mortar. That is, before you start building, you will have to ask yourself several questions, sketch a close-up and work from there.
Creating a model for a small business means planning, on paper, the fundamentals of your business. It helps you, as an entrepreneur, put aside emotion and make a realistic assessment of the potential success of your business idea.
The vast majority of the attendees told me that they had never heard of this term or that they were not very clear about it. Another part of the attendees told me that they did not know that companies inherently operated under a business model.
My own experience as an entrepreneur and coach tells me that a business model is the weapon of every entrepreneur and that it is an essential requirement to know how to use it in our favor.
The reality is that all businesses operate under this concept, whether they are traditional or high-tech businesses.
The main objective of every entrepreneur is to create a scalable and sustainable business model. These last terms may not be familiar to you and it is for that reason that I describe them below:
Scalable: It is a term used in the field of technology and in business it refers to those companies that have a very high growth potential that can grow in an international context. The key is to succeed in large markets using a minimal structure that offers high returns.
Sustainable: This term comes from ecology where it refers to something that is capable of being conserved or reproduced due to its own characteristics without the need for external support. In short, it is to make the company profitable and generate its own income through its customers.
A business model is an analysis tool that would allow us to know for sure what we do, how we do it to whom we sell it and how much it costs us to do it. It is the DNA of your business.
With a good business model, we have the opportunity to enter large regional, local or international markets. It gives us a clearer view of the hidden potential of our company.
My experience tells me that a good business model challenges many paradigms and fears that you have when starting a business.
In this post I described some factors, but there are others when it comes to designing a business model that many entrepreneurs do not take into account.