What is a business model?
When we talk about a business model we are not exactly thinking about how a brand, or an individual, would generate profits from the sale of a product or service. In reality, when we talk about a business model we are talking about the formula to follow to ensure the success of a company or freelancer. And this depends on the type of solution we are giving to the market.
The market is extremely competitive, so when we offer a product or service we are forced not only to sell, but to innovate further with what we make available to our audience. This is to make clear the value that our products have and the benefits that their consumption brings to customers.
A business model is an iterative process and may require adjustments as market conditions or business objectives/freelancers change.
What does a business model entail?
So if it's not just focused on sales, what else? Well, the business model looks at all the aspects involved in creating the solutions your product or service offers. It also considers what those products or services contribute to the quality of life of our customers. And if you want to go even further, it is to think about how you are better than the competition.
To summarize, the business model is everything you need to think about a service or product sale before you go out into the world to sell it. For example, key information that will help you get investors, how to put the project plan into action, costs, pricing, sales strategies, etc. fall into these categories.
Steps to create a business model:
Identify your ideal customer:
The first step in creating a business model is to understand who your business is targeting. Identify your ideal customer and learn as much as you can about them, their needs and wants.
Define your value proposition:
Define what you offer and why it is valuable to your customers. Your value proposition should answer the question, "What problem does my product/service solve for my ideal customer?"
Identify your distribution channels:
Decide how you will reach your customers and how you will deliver your product or service - will you sell online or in a physical store? Will you offer home delivery or in-person delivery?
Establish a revenue structure:
Decide how you will generate revenue and how much you will charge for your product or service - will you charge per hour, per project or per product sold?
Define your costs:
Identify the costs associated with delivering your product or service and determine how much you should charge to cover these costs and make a profit.
Analyze the competition:
Research your competitors and compare their business models to yours. Learn from their strengths and weaknesses and find ways to differentiate yourself.
Refine and adjust your business model:
Once you have developed an initial business model, review it and adjust the elements that are not working. Keep a focus on innovation and continuous improvement to ensure that your business model remains effective over time.
How important is it to have a business model?
Having a solid business model is extremely important for any business, large or small. Here are some reasons why:
It clarifies vision and goals:
A business model helps define and clarify the vision, objectives and strategy of what you will sell. It helps you understand how your brand, or service, works and how it relates to customers and suppliers.
It guides decision making:
A business model provides a framework for decision making and helps you prioritize and focus on the activities that have the greatest impact on the business. It helps you know what to do and when to do it.
It helps you understand the market:
A business model helps you understand the market and design products or services that meet customer needs. It helps you know your competitors and find ways to differentiate yourself.
It makes it easier to obtain financing:
A solid business model is an essential tool for obtaining financing and submitting applications for loans and grants. It helps you explain profitability and growth potential to investors.
It allows you to track and measure success:
A business model helps you set clear goals and metrics to measure success. It helps you track results and adjust your strategy as needed.
In short, having a solid business model is critical to the survival and success of any business or individual.