How to create a foolproof business model for your new venture

Plan your path

What really is the difference between the success and failure of a small business? While there are myriad variables to take into account, growing a successful venture might just come down to creating the right business model. To get you started, we’re going to answer a few key questions in this article:

  • What is a business model?
  • How does a business plan influence the business model?
  • Where can you find free business model and business plan tools?
  • What are the things you need to know about creating a business model that they aren’t telling you in books or business school?

Ready to get started?

What is a business model, really?

There’s startup mentality in the technology world that embraces innovation for innovation’s sake. But does the idea have to be completely new in order to sell?

Just look at industry disruptors that flipped existing business models:

  • athenahealth created a SaaS (software-as-a-service) model for EMR (electronic medical records). They improved existing technology normally installed in a physician’s office and put it in the cloud. #Boom.
  • In transportation, Uber democratized the taxi business by opening the door to the entrepreneur in all of us.
  • H&R Block teamed up with IBM’s Watson to change tax filing. Now you can get your taxes done by artificial intelligence. This is the first wave in some serious CPA-disruption.
  • Ikea completely changed how we buy furniture. Who knew brick-and-mortar retail could get a makeover?

My point is that a good business model is about learning from others and applying it in new ways to your own venture. The scientific method is built on the backs of research that has already happened. Why shouldn’t your business model do the same thing?

Your business model starts with a plan

Business Model Writing

With all the innovation, writing a traditional business plan as the first step to figuring out your business model might feel clunky. But it’s the exercise itself that can get you there.

Like Yoda says: Patience you must have.

The traditional business plan usually has:

  • An executive summary for those who like to cut to the chase.
  • A company description that covers what the product or service is, where you’re selling it, and why it will sell.
  • A description of your ideal customer.
  • Market analysis capturing what’s happening in your industry, your competitors — and why you’re going to kick their butts.
  • A marketing and sales plan. What are your metrics for kicking butt? How will you attract and retain customers?
  • Operational details including distribution, technology and the approach necessary to sell the product or service.
  • Management and organizational structure. What are the unique characteristics that set your internal team apart? Why will you succeed where others have failed?
  • A financial plan including expenses, cash flow, three to five years’ worth of projections, and what funding you need to get started.
  • An appendix with a business license, a patent (if applicable), a schematic of the product or a credit history (important for funding).

Sometimes old-school models are actually the best, and in this case, I believe that more entrepreneurs should pull their heads out of — the cloud — and get back to the basics on what they’re trying to accomplish.

Create value for customers

“The rise of the Internet, outsourcing and, most of all, the increased willingness of companies to partner in creative ways to serve customers has resulted in every industry creating innovation in business strategy. This gives you opportunities, but also makes it imperative that you stay on the creative edge to fend off competition.” ~ Don Debelak, for Entrepreneur

Business Model Customer

Today, the most important part of any business plan is to create value for the customer. This means figuring out just what the heck you’re selling by understanding the audience you’re selling to and the value your product or service provides.

My biggest gripe with entrepreneurs is that many of them simply aren’t focused on the customer experience as the key reason for their existence. If you haven’t developed customer personas as part of the business plan that will inform your business model, how will you understand what kind of marketing plan will help generate new sales?

Understanding your audience will help define how you reach them.

 

It will help you understand the customer journey and the most important question that any business model should answer: How do I get and keep customers?

This question applies to any industry and any business. If you can figure this out, all the rest will sort itself out. Key activities and workflows, core business partnerships, what resources are needed to make this happen — all of this hinges on the customer experience and meeting their needs.

Be flexible

Once you’ve nailed down the foundation for your business model, a well-thought-out business plan that will help minimize risk, here is one final piece of advice: Don’t forget to flex with the market.

Creating competitive advantage is a continual process.

 

Businesses that fail to analyze and adapt to market change because they’re so busy catering to their existing business lines and the revenue being generated for stockholders are going to ultimately lose. That’s why companies like Nationwide Insurance and Barclays Bank have innovation teams.

Even the most traditional companies are learning to confront new ideas.

New entrepreneurs can learn from the big market players who are now carefully framing their strategies with a simple question: How would Amazon do it? Challenging the logic of traditional frameworks is how these companies – and your startup — will continue to stay ahead of the curve.

Free resources for traditional business plans

If you’re heading to your bank for a business credit line, you’re going to need a traditional business plan. Here are some of the best resources for creating a business plan:

  • The U.S. Small Business Administration has a free planning tool that will give you a nicely impressive document that your bank will appreciate.
  • Score.com — If you want the voluminous traditional business plan, this template will give you all the pages you need.

But here’s the rub. These traditional business plans might not fit our digital world anymore. While I’m not suggesting that a huge amount of planning and thought shouldn’t go into your startup, there are new business plan templates out there worth considering.

Free resources for impatient people

Here are some free tools that break the business school entrepreneurial exercises into bite-sized chunks:

  • The $100 Start-Up offers a one-page business plan document.
  • LawDepot has a business-plan-for-dummies kind of a click-and-write template.
  • Canvanizer.com has a simple, free business plan template that could be used on a whiteboard or in a printed format.

Here’s the most important thing to remember about your business plan: It is a living document.

Don’t create this monster paper document and shelve it. The market is moving too quickly. While innovate or die is a cliché, it’s the real deal — and I’m not just talking about technology. The business world is salted with stories about companies that failed to adapt. Don’t be Polaroid.

Good videos about business models

These videos can help you come up with the right business model for your new business:

Closing thoughts

At the end of the day, the success or failure of your next venture might just depend on the strength of your business plan and the business model that springs from it. This isn’t the time for shortcuts. As you begin to explore your business model options, keep these tips in mind:

  • Learn from others and apply those lessons to your new venture in new ways.
  • Develop a strong business plan.
  • Focus on creating value for your customers.
  • Remain flexible.

Armed with these tips, you’ll put your startup in a stronger position to succeed. Good luck!

Image by: Maksym Kaharlytskyi on Unsplash

Robin Walters
Robin Walters is a seasoned but not too salty full stack marketing nerd. She likes long walks on the beach with her five dogs, but she’s landlocked in the Midwest. By day, Robin is an IT recruiter for a software firm. At night and on weekends she writes a crap load of copy. Robin lives on a farm with her partner of 25 years. It’s a good life and she’s happy to still be in it.