A business model is a plan for the successful operation of a business, identifying sources of revenue, the intended customer base, products, and details of financing.
Your business model is important to investors as it promotes trust and transparency. It outlines to them precisely what their money is going towards and how it will contribute to the effective, successful operation of your business.
In your business model, you can identify your company's:
- Sources of revenue, or "revenue streams", describing how your company makes money as well as projected revenue growth, based on the market trends, size and company development,
- Product or service distribution, describing how you plan to distribute your product/service. This might be through your website, a smartphone application or a physical store.
- Intended customer base, indicating whether your margins are high or low. In other words, are you producing a product directed at a smaller customer base for a higher price, or vice versa? Is it scalable, able to flexibly increase or decrease according to demand?
- Key Resources, the infrastructure that will enable you to create and deliver your product, revealing which assets in your business are indispensable.
- Key Activities, describing what you'll need to do to perform well.
- Key Partnerships, illustrating the companies or individuals who will help you perform your key activities.
- Customer segments, the people you are creating value for. This includes users and paying customers.
- Value propositions, the aspect of your product that creates value for your customers.
- Market Analysis & Strategies, detailing the competition in your market segment and your consequent marketing strategy. A competitive analysis establishes your product or service's main competitors and demonstrates how your product or service differs from them. From here, you can create a market strategy to ensure your product or services meets the needs of your target market and communicates its benefits to them. The long term goal of a market strategy is to build up a lasting, profitable relationship with your customer base.
- Cost structure, once you have all the above in place its easier to calculate how much your project is going to cost.
Ensure your business model looks professional, is easy to follow and is factually correct. If you are finding the task of creating a business model daunting, perhaps you should employ the services of one of the FundedByMe expert partners!