By Cooper Nelson
Virtually all businesses have at least one thing in common: They depend on effective business plans. A business plan serves as a road map for your company, outlining the steps you will take to reach customers and generate profit.
But before you create a business plan, you must first determine your business model. This is the type or platform your business will engage to become profitable. Business models might include product types, financial plans, sales forecasts and other details that outline your plan for success.
Whether you’re an established CEO or an entrepreneur starting your own business, a business model and a business plan form important steps toward defining your company’s future. Partners, company executives and any other business professionals invested in a company’s future can regularly reference their business model and plan to maintain progress toward goals.
It’s never too early to begin studying, building or optimizing your business’s success plan. Even if you only recently obtained your business degree, you can advantageously influence your company’s business model and plan in several important ways.
A business model is just one step in starting your own business. Explore the complete guide to entrepreneurship on our blog!
Your business model is meant to serve as a comprehensive guide — one that leads your business toward success. The best business models and plans also help companies navigate their market while identifying potential risks and avoiding setbacks.
Put simply, your company’s business model outlines the ways you plan to add value or grow and maintain a business. You’ll likely include details like employees, available resources, price points, competition, customer behaviors and potential expenses in your business model — all to help you forecast how your company might perform in the future.
If you’ve completed a business degree, you can use your business experience to help inform your company’s business model. In addition, earning an MBA can give you the tools to handle investments and high-level decisions that come with deciding on or switching up your business model. However, whether you’re a business management student or an experienced executive, it’s important to consistently evaluate your company’s progress and discover new business models that could propel that growth.
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Business models also might have a direct impact on your company’s success. If you’re starting a new company, your business model should help you attract talent and generate sales. Existing companies should update business models regularly in anticipation of any changes in customer behaviors or market trends.
Among other critical points, your business model should allow your organization to offer high-quality, affordable products or services. This key component will allow your business to change, scale and evolve as necessary. Include figures like cash flow, gross sales and net income in your business plan to maintain companywide accountability as you grow.
Business models provide more than just fiscal direction for your company. Your business model should also outline short- and long-term goals and provide a foundation for corporate culture. Take the time to include details about your organization’s identity in your business model.
Depending on the type of business you operate, you can choose from a wide selection of business models. Some business models primarily outline costs and anticipated sales; others include processes, formulas, workflows and other details that contribute toward corporate success.
Here are a couple of the most common components of a business model:
These and other business model types can help you identify the purpose and direction of your organization.
No matter the type of business model you’ve elected to create or follow, most include similar elements. A quality business model or plan often includes several unique elements, where each element helps to further define your vision and direction.
Your comprehensive business plan should contribute to your company’s business model. Ideally, your business model contains the following nine components:
These essential pieces of a business model help you define every aspect of your company’s operations. When you understand your company’s available resources, liquid capital, recurring revenue, customer demographic and related details, you’ll position the business itself for long-term success.
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