Creating a business model
What is a business model? The business model demonstrates as clearly and simply as possible how the opportunity will create revenue and financial value from its operations. This is at the heart of opportunity plan and needs to show who is doing what; for whom they are doing it; and the financial assumptions and results on which the plan is based. Here are some deceptively simple questions we ask people with ideas for new business ventures:
- Who are your target customers?
- What value will you create for them?
- Why will they buy from you?
- How is this superior to competitors?
- How will the business generate cash flow through sales?
- How will the business generate profits?
- What financial investment does the business require?
- Can you draw a simple diagram to show the business model?
One format for a simple business model is shown in Figure 6.3. This starts to include basic financial measures. If you are not familiar with these, they are explained in the financial toolkit. The business model includes