“Business model” is one of those phrases that gets tossed around, we’re all sort of sure what it means: the mechanisms by which your organisation makes money or changes what people think or whatever its objective is.
So who needs to write down how they do that? You just make stuff and people buy it. Simple.
Well, some people, of course you have to get it to the right people. Right place, right packaging and so on.
The product’s critical really, how it matches market needs and how you track and respond to changes.
And pricing, you have to work on the price, to get customers buying but not give away too much margin.
Then you have to pull out all the stops to get that customer to buy again.
Really though, profit mostly comes down to how you manage internally, work efficiently, buy well.
It would help if everyone in the organisation actually understood all of this and worked in with it.
If you want to work on your business model, to understand it and test it and refine it and get all your people invested in it, call me Michael Woodhouse from Glide. Call me direct on 0417 928 904 or email Michael@glide.co, that’s dot co for company.
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Your business model is what makes your organisation tick: it sets out how you make money or achieve your objectives. It shows how all of the things you do contribute to and work together to achieve that goal.
Useful documentation will include an engineering-style drawing or a flow chart, that can be load tested, at least conceptually, and used to make testable marketing predictions.
Most organisations don't bother to document their business model.
If you've ever been in a situation where you can't seem to turn things round and every new suggestion someone shoots it down with, "We tried that before and it didn't work," then chances are it's not the lack of a good idea that's the problem – it's a broken business model.
Failing to document their business model means organisations miss out on a really powerful way of testing the value of each action and expenditure and refining the overall system for maximum result.
Often when organisations first try to map their business model they find that bits of it don't make sense. They don't work on paper. And most often those bits don't work in reality.
It's true, some things look fine on paper but don't actually work; it's rare to find that something that can't be shown to work on paper but nevertheless works in the real world.
So a documented business model can save money and time in the real world and get you to your goals faster.
If you've got a division or project that's struggling, a business model analysis may tell you why – and if it's fixable – before you pour more money in.
That's how most people come to the business model, but it's value is not just negative: it's also a powerful tool for planning expansion. And of course it is vital for raising investment capital.