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Why a business model is so important

By Samantha Garner | March 13, 2010

creating a business planSo you’ve had your A-ha! Moment. You’ve come up with a great small business idea and are ready to start a small business.

But, are you?

Before you start your small business, you need to create a business model – your roadmap for small business success.  And no, a business model is not a business plan.  You can’t even begin to write a business plan until you’ve created a “blueprint” for your success with a business model. Confused? Let’s take a closer look at a business model.

A business model is a roadmap for small business success

Building a business is a lot like building a house – and who can imagine a house built without preliminary sketches? Creating a small business model means planning – on paper – the fundamentals of your business. It helps you, as an entrepreneur, to put aside the excitement and make a realistic evaluation of the potential success of your business idea. A proper business model helps you to figure out elements such as: Your business concept – what problem are you solving for whom; how you will create customer value; how your product or service will get to customers; how your business will stay competitive; and all revenue and costs you can anticipate.

Take your time creating a business model

You may have a few ideas scribbled down on a sheet of paper – name ideas, product prices and ideal locations. This is a great start, but a proper business model takes time. Starting a small business is exciting, but you also need the strongest foundation possible to ensure small business success. Don’t guess what your business’ customer value will be – research! Survey your friends and work your business network to find the true value of the solution that your product or service offers to the marketplace. Taking your time creating your business model will ensure you don’t underestimate – or overestimate – anything.

Consider all possible areas of concern

There are many moving parts when it comes to running a business and you don’t want to be caught unprepared. For example, how exactly will your product make its way to your customers? Make sure your business model is thorough and covers all the bases. Once you’ve proven the feasibility of your new business or your business expansion plan on paper with a business model, you’re ready to write a more comprehensive business plan. Proper planning takes time and effort, but you’ll see the return on that investment when your great idea has become the great, successful small business you envisioned.

Topics: Small Business Tips and Advice | 4 Comments »

4 Responses to “Why a business model is so important”

  1. Are you ready to start a small business? | Canadian Entrepreneur Training Says:
    April 5th, 2010 at 9:02 am

    […] Do I have a business model? […]

  2. Bill Bower Says:
    December 16th, 2010 at 2:02 pm

    Contrary to popular wisdom, the business model is far more important than the business plan. I recommend the business model assessment at http://businessmodelevaluator.com

  3. What’s the secret for writing a business plan? There isn’t one | Canadian Entrepreneur Training Says:
    February 12th, 2011 at 6:52 pm

    […] Business plans begin with a business model, which are two very distinct things. A business plan is really just the written execution of a good business model. Find out why a business model is important here. […]

  4. Ron Says:
    July 24th, 2011 at 7:43 pm

    A business model should tell you how and why a business should work.

    For example if your idea is to sell land line phones, your model should show a lot of warning red flags.

    If you have a great new product your model should say that you can be successful.

Comments