What is the importance of a business model

By developing a business model, you are committing to planning – the basic foundations of a successful business. After all, ‘if you fail to plan, you are planning to fail’.

So what is a business model?

Removing any technicality – a business model simply refers to a company’s written plan for how they intend to make a profit. It assists the business in developing a realistic assessment of the potential success or failure of the business concept or product.

It 100% forms part of a company’s core financial strategy for profitably doing business.

The business model encompasses or pulls together all critical information such as: purpose, values, revenue, expenses, volume, products, pricing, drivers, etc

Why is a model so important?

Every business needs to generate profit to ensure sustainability. Plans need to be made – period! Every business has a need to develop a plan on how they intend to make a profit to ensure they survive.

No matter what part of the business cycle a company is at [whether start-up, growth or maturity] – models are the critical review of strategy to operational plans.

They should be regularly reviewed and updated as business needs change or as opportunities and challenges present themselves.

Important takeaways

• There is no ‘one size fits all’ approach to a business model
• A business model provides focus and clarity to business owners
• A business model acts as a guide for deciding what actions should be taken and which direction to take
• A business model can bridge the gap between where the business is currently at to where it wants to be

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