What is a business model?
Your business model defines the way your SME operates. A good business model outlines exactly how you’re going to make your business work and essentially explains how your business is going to make money.
Because your business model combines your vision for your SME (the why) with the means of achieving your vision (the how), it’s critical that you take the time to put one in place and work to refine this on an ongoing basis.
The difference between a business model and a business plan
Don’t confuse your business model with your business plan. Remember that your business plan is an operational document that’s usually in place for a three to five-year period. It outlines your plans to grow your SME and make it sustainable (i.e. expansion projections; how to drive sales; when to introduce new products etc).
Your business model on the other hand, defines how your business will make money. As such, it functions as the engine-room of your business plan, showing you how your business will actually operate.
How to develop your own business model
Develop your own business model by asking yourself the following questions:
- What is the flow of transaction within my business?
- Who are the key players involved in making these transactions?
- What is my value proposition to the market? (What makes my business unique?)
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