WHAT IS YOUR BUSINESS MODEL
One term Entrepreneurs use a lot is business model and it sounds sexy but do we really know what it means? Ask someone “What’s your business model?” and you’ll get all types of answers from “We are a business that sells cakes and muffins”, “we are in the oil business”, or “A penguin swimming in ice cream business”.
In short a business model is simply how a business is designed. In French the word “Model” means “Design”. When you hear the question “What’s your business model?” What it really means is “In what way is your business designed to make money?”
If I sell blue jeans and Person B sells the same blue jeans, and you asked me what’s my business model I’ll tell you we source fabric, we have an in house manufacturing factory and we sell directly to the customer.
If you asked Person B the same question he might say, we do the design and have a 3rd party manufacturer, then we sell to retailers.
Same blue jeans but our businesses get and sell the same thing in different ways, and that is because our business is designed (modeled) differently. Those who have experience with other businesses, may not need the whole details because they can fill in the rest of the missing details (the pros and cons of your business model).
How big your business can scale depends on how your business is designed/modeled not the type of business you are in. Just like how much stuff you are able to draw isn’t dependent on what you’re drawing but depends on if the page is an A5 size or an A4 size (hint: you can draw a lot of stuff on an A4 page size than you can draw on an A5 size).
When next you are asked, what is your business model? Know you are asked in what way is your business designed to make money.
By Nick Alegria
South Africa