What is a Business Model?
Many businesspeople ask, “What is a business model?”
“A business model is the proprietary methodology used to acquire, service, and profit from customers.” — Jim Muehlhausen Author “The 51 Fatal Business Errors and How to Avoid Them”
Your business model is your secret sauce. Your model is what makes your business unique. Your business model is the formula you use to outsmart your competitors, provide ongoing value to customers, and continually grow your business. There are eight essential areas to a business model
- Must have excellent margins
- Must be easy to sell
- Must have The Four Capitals©: Intellectual Capital, Financial Capital, Human Capital and Brand Capital
- Must be able to maintain ongoing competitive advantage
- Must have quality customers
- Must have longevity of the industry
- Must provide for the owner’s graceful exit
- Must avoid pitfalls
A business model is not a business plan. A business plan is how you will execute your business model. Your business model is the single-most important factor in your business’ success. The short version is, if your business model isn’t working well, your business won’t be working well. Most CEOs spend far too much time on everything BUT the business model. However, without a great model, no amount of great leadership will produce stellar results.
