What's a business model, and why do I need it?

A business model is no more than your thought process put in a formal workflow. As a startup founder, early employee or even investor, great care must be taken when mapping out and defining the startup's business model, for maximum value for the company as well as its customers.

Therefore a business model is a formal way to define how value is being exchanged in the marketplace between the company and its customers.

The following are some key questions to ask:
1. What is my target segment of customers?
2. What is my revenue model?
3. Can my business have multiple revenue streams?
4. What is my cost structure? Can I improve it?
5. Can my pricing me customised for each target segment?
6. What basic value and benefits is my business providing?
7. How can I package and market these core benefits to potential consumer?
8. What is my service/product delivery methodology?
9. Who are my critical vendors, suppliers and partners?
10. What resources are critical to the functioning and success of my business?
11. What are the focus areas to provide my company competitive advantage?

There is a long list of such critical questions that a startup must ask. Business model generation is probably a more critical input than business plan analysis. Or, in essence, Business Model Analysis is probably the most crucial part in Business Plan Analysis.

Do post your comments below in case of any questions or additions that you would like to make. Thanks!

(Ahmer Khan is the founder of Stratagaze Consulting Pvt. Ltd., a business and marketing strategy consulting company that deals specifically with challenges for startups and medium sized companies. For Business Model Generation services and other startup services, do get in touch.)

Comments:

Yogender Verma's picture

Hi Ahmer, the post is quite thought provoking and yes it indeed makes one think about few more questions; like, what is the best stage to prepare a business model, some easy DIY way to prepare a business model, what should be the structure of a business model or how one should go about finding the answers to some of the key questions from the list given by you. How about writing a blog post including these question also, we would love to publish and promote it on W2E as a guest blog :-)

Ahmer Khan's picture

Hi Yogender. Thanks for your kind words, and also for your relevant and thoughtful questions regarding business models. Yes, it would be interesting for me to share more insight on Business Models. I could certainly put together a blog post on some of the aspects, and maybe perhaps even present some useful insights in any of the upcoming meetups.

Yogender Verma's picture

That sounds great. Let's explore the possibilities of an event for the group members on this subject. And also about writing the blog for the members. I've PMed you my number, let's talk about it sometime :-)

Vipul Meehnia's picture

Hi Ahmer / Yogendra,

Another thing I have observed with my interactions to various VCs and PEs that they don't tend to devote much of their time on business model if they are not in proper format and contains the relevant details for them to get interested to call you. I suppose all of these have been mentioned by Ahmer and an empty base template with heads can be uploaded on the portal to help the community.

Revenue modelling is quite complex itself as you need a lot of data to support your model, more specifically when your business model is first of its kind and you don't have any other model to compare it to. I have developed a few model myself for my companies and assisted some startups for the same. I can tell you that this is worth the effort if you are trying to raise funds.

Operational Plan/Model should not be the part of a business model but as an add-on a white paper perhaps as this will tend to change a lot during the course of time.

The most important takeaway from my experience is not the wait to develop a business model and its ingredients till you are ready for investment. A founder's time should be devoted to this before starting of with the development of the product itself. This will keep you focused & motivated. A planned execution as we all know pays of well.

Regards,

~Vipul

Yogender Verma's picture

Hi Vipul, thanks for the wonderful insights, I loved your idea of creating a template to help w2e members to work on their business models. And as you said, people would be able to create their business models using such a template etc. and it will help them ask some important questions to themselves and stay focused. Vipul, Ahmer, as I said earlier, why don't you people take lead in helping other members, we are already setting up the framework to facilitate this. I'll talk to you about this :-)

Vipul Meehnia's picture

Hey Yogender,

I'm available at +91-9911124666. Please feel free to contact me anytime you wish.

~Vipul

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