How creating a Business Model will benefit your small business
- Business Rescue Business Growth
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With so many do's and don’ts in business, it’s difficult to know what you should and shouldn’t do. But there are some must do’s for small business owners. A Business Model is something you simply must have. Done correctly it provides a framework for the workings of your business and the all-important strategy that underpins it. The Cambridge English Dictionary defines a Business Model as: “A description of the different parts of a business or organization showing how they will work together successfully to make money.” A Business Model will help you understand the fundamentals of your business and will pave the way for success. At Be Rescued, we’ve shown our clients the value a Business Model can bring to their business and want to share how it can benefit other small business owners.
The Business Model framework
Whether you are a solopreneur or run a business with staff, times are tough. We are in Lockdown 3.0 and at the time of writing, do not know when it will end. But despite everything, many small businesses are continuing to operate, and new companies are being formed.
In East Anglia, where Be Rescued is based, an article in the Eastern Daily Press reports that; “The East hit record highs for new company formations in 2020 - despite the economic challenges posed by the coronavirus crisis, figures show.” (Source: https://www.edp24.co.uk/news/business/record-year-for-new-companies-in-east-anglia-6923036). This is really positive news for the region.
If you are starting a business now, it’s even more important that you get things right from the get-go to increase your chances of success. Taking the time to formulate a Business Model will pay dividends for your business. It will help you visualise all the essential elements in your new business such as your customers, your core activities and your value proposition.
You will need to adapt your Business Model as you develop. It can be invaluable if you want to shift any aspect of your business, which many small business owners are doing in the current crisis. To bring about change you need to revaluate what you are selling, how you are selling it and who you are selling it to. The Business Model helps you do all that and more.
The main framework of the Business Model is as follows:
- Customers
- Value proposition
- Revenue streams
- Channels
- Customer relationships
- Activities (core)
- Resources
- Partners
- Cost structure
At Be Rescued, we think there should be an additional step in the academic model - a point 0. Purpose. Without understanding your WHY, your reason for being, you can’t truly know your business. If you need help distilling your ‘Purpose’, Maria Pombo at Be Rescued can help. Book an appointment with Maria.
The business Model explained
What should be included in a Business Model:
0. Purpose
Your business purpose is super important, it allows you to define the why you do what you do and your values around it. This is not the same as your vision or your mission, rather Your business purpose is the reason you have formed your company or business and sets the basic foundation and theme to a structured business model framework.
1. Customers
This is where you detail everything you know about the customer base for your business. You need to consider your ideal customer and what problems your products or services solve for them.
Develop customer personas - look at their lifestyle, spending power, their dislikes, their characteristics and behaviour. Has your customer base changed over the past few months? Can you shift your business to meet their needs. You should update any information on your customers regularly as understanding them is crucial to the success of this framework and your business.
2. Value proposition
The value proposition is closely linked to the first section, it tells your customers why they should buy from you, chiefly the problems you solve and the benefits of using your business.
This is why people will buy from you and not your competitors. Your value proposition should be communicated across your marketing channels such as your website and brochures.
3. Revenue streams
The Collins Dictionary states that: “A company’s revenue stream is the amount of money that it receives from selling a particular product or service.” It is how you generate cash. To be successful you need to look for a constant revenue stream.
You need to break down the different ways you generate revenue in the Business Model. If you are worried about your current revenue streams in these challenging times, Be Rescued can help your business recover through our Turnaround Services.
4. Channels
Your channels are the way that you deliver your products or services to your customers. This could be in a bricks and mortar shop, online or via field sales representatives.
Channels can also refer to the way that you communicate your value proposition - the reason people should buy from you. For example, in marketing you will look at raising awareness of the benefits of using your products or services among your target audience.
5. Customer relationships
In this section you need to clearly describe the type of relationship you want to develop with each segment in your customer base.
You should also consider how you will acquire, nurture and retain customers, which could involve a different approach for each customer segment. This is a crucial part of the process, without customers, you don’t have a business.
6. Activities (core)
Here you detail the key activities you need to perform to make your Business Model succeed and for your business to make a profit.
Core activities could include production of products, marketing, research and administration. These will vary from business to business. Not sure what to include, Maria at Be Rescued can help. Book an appointment with Maria to find out more.
7. Resources
This section is for documenting the essential resources you need to operate, get business and generate income streams.
Essential resources could include:
- Assets such as equipment, tools, buildings, a manufacturing plant, company cars, technology, etc.
- Human resources such as your employees and any external support such as accountant, bankers, marketing consultant and business advisor.
- Technological resources such as your website, bespoke software, payment, stock, other logistic platforms and customer databases.
The way you manage your resources is key to the success of your business.
8. Partners
Every business has external partners that are an essential part of their operation.
Whether it’s your suppliers and manufacturers or other firms you’ve forged partnerships with to help your business grow, you need to document any partners in your Business Model.
9. Cost structure
It is crucial that you understand your costs as this will keep your venture running. Your Business Model really comes into its own when looking at cost structure.
You will need to consider all the elements listed so far including resources and activities to formulate your cost structure. You should include your fixed and variable costs.
Advantages of using a Business Model
Whether you are just starting your business or you’re well-established, a thoroughly researched Business Model will help you to achieve success.
If you don’t have one, now is the time to create a Business Model for your business. It allows you to see your business as a whole entity, not just your products and services. You can see clearly how the different elements work together, with particular focus on the customer and the value you offer.
If you already have a Business Model, try to find time to update it, as the chances are things are looking different for you right now. We have all experienced change in our businesses over recent months. The Business Model could help you shift your business to become more productive, resilient and ultimately more profitable.
At Be Rescued, we think a Business Model is an essential part of a small business owner’s tool kit. This blog is the first in a series focusing on the model. In future posts we will be looking at the different sections in more detail.
In the meantime, if you need help formulating your Business Model, book an appointment with Be Rescued founder Maria Pombo.