Smart businesses understand the importance of developing and maintaining a business model for their company. A business model is a map to follow when it comes to generating revenue and making profits. It’s an essential aspect of running an effective and profitable business. Your business model accounts for 50% of your organization’s success. This makes it an extremely valuable tool for continued success and performance.
Many organizations don’t make it a priority to review their business model regularly. Of those that do, there are far too many that only review it once a year. It is all too simple to get carried away with the actual work and day-to-day aspects of running a company and overlook the need for regular review and strategy updates.
We recommend that our clients review their business model at least four times a year. Why? Aspects of the organization change from quarter to quarter making it a constantly evolving entity. Even small changes can stack up over time and require an adjustment or even complete overhaul of any of the nine components of the business model. This regular review keeps our clients from being blind sided by potential problems and concerns and put them in a proactive, rather than reactive, state.
Also, if the organization undergoes any significant changes, don’t wait until the end of the quarter to review your planning. If the company finds it is experiencing growth, adding staff, developing new departments, or purchasing new assets – then it’s time to pull out the business model and do some updating. Other reasons a business owner should feel compelled to review their model include feeling uncertain about performance, extreme shifts in company direction, adverse reactions to market demands, or the business isn’t meeting it’s full potential.
Break down the company’s performance into the nine components of a business model and calculate ways to measure each area’s level of success.
- Customers – Who is your targeted audience and ideal client? Has it changed? Have you recently identified the most appropriate places to find and connect with them?
- Value Proposition – What pain points are you solving? Are your customers still seeking solutions to these problems? What are your discriminators? How are you different than your competition? Has the value your business brings value to solving a problem changed?
- Channels – What channels have been working recently? Which have not been as productive? How do they stack up in terms of investment vs profit?
- Customer Relationships – Review your client retention efforts. What more could you be doing to enhance the connection with your customers?
- Revenue Streams – Are they still profitable? Are they bringing in enough revenue to justify investment of money, time and effort? Is it time to consider an additional revenue stream?
- Key Resources – Is there an area where an additional resource would make the company more efficient or profitable? Are any of the current resources in need of an update?
- Key Activities – What areas are excelling? Which could do better? Is more staff needed? Are they overwhelmed with tasks or have time to also be creative/problem solve?
- Key Partnerships – Are there any partnerships that would benefit the company now? Would collaboration be profitable? Have you identified your power partners lately? Is the list still the same?
- Cost Structure – Navigating the fine line between what a product or service should be worth and what your targeted audience is willing to pay is always a balance. It needs to be reviewed often.
Do you want to be ahead of the curve or constantly playing an invisible game of catch up? The formula for effectively using your company’s business model to its best advantage is simple.
Right Business Model + Right People + Doing the Right Things + The Right Way = Right Results
Need help with this topic or leadership coaching? Contact Mission Critical Teams.