Building a Business Model

by Dr John Hendrikse

The business model is the essence of the Strategic Plan

BUSINESS MISSION AND THE BUSINESS MODEL 

The mission of every company and business is to have a viable, profitable and sustainable operation that gives a desired return to the owners – the shareholders and proprietors.

To achieve this objective, the company and business must have a business model that provides products and services, to satisfy customers and clients and that is rewarded in terms of profits and cash flow.  The survival and success of a business is dependent on it making the right business decisions, being goal driven and effectively executing the necessary action to achieve the desired business goals.  Part of this implementation is the control function – the accounting, monitoring and measuring business performance – the mission control of business.

To understand the important role of mission control – accounting, reporting and analysing financial and operational information – one needs to understand what business is all about in terms of the strategic business decisions and the goals of business.  The starting point is the understanding of the business model and customising your unique business model.

WHAT IS A BUSINESS MODEL?         

A business model describes the rationale of how an organization creates, delivers, and captures value (economic, social, or other forms of value). The process of business model construction is part of business strategy.

Whenever a business is established, it either explicitly or implicitly employs a particular business model that describes the architecture of the value creation, delivery, and capture mechanisms employed by the business enterprise. The essence of a business model is that it defines the manner by which the business enterprise delivers value to customers, entices customers to pay for value, and converts those payments to profit. It thus reflects management’s hypothesis about what customers want, how they want it, and how an enterprise can organize to best meet those needs, get paid for doing so, and make a profit.

Business models are used to describe and classify businesses (especially in an entrepreneurial setting), but they are also used by managers inside companies to explore possibilities for future development. Also, well known business models operate as recipes for creative managers.

For every new start-up and existing business, yearly one needs to review the business model. In fact, the SWOT Analysis should be conducted against the elements of the business model.

Business Model Structure

The business model “canvas” and “landscape” identifies the business model elements with a strong focus on the marketing and sales function and activities.

The 9 elements of the business model:

1.  Key Resources

Infrastructure

2.  Revenue Streams

Products and Services

3.  Target Market

Customers

4.  Channels

Distribution and Sales Channels

5.  Value Proposition

Customer Relationship

6.  Stakeholders

Key Business Partners

7.  Pricing

Cost Structure

8.  Key Activities and Operations

Deliverables

9.  Control

Controls and reporting

The business model has to be embedded in relation to each core business operation and the business goals and objectives.

Has your business an up-to-date business model and is it effective and efficient?

To facilitate an in-house and customised Business Model Workshop for your business, contact Dr John W Hendrikse at 021 782 0765 / 082 820 5338

John is a BAN alliance partner and CEO of OnlineMOI, OnlineBizValuations and ProfitPoint Solutions that provide value-added online solutions to support accountants, attorneys, auditors, company secretaries and business professionals