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What's a Business Model and Why Should I Care ?
A business model is an integral part of the business plan that
you really should develop to help insure the viability of your
business. The business plan is an all encompassing document
which relates to how your business is to be structured,
managed, financed and operated. The business model
describes the business market you are in, an analysis of the
possible approaches to the market, and how you plan to
structure your business to meet the market approach you
have chosen.
The business model can be simple, it can be complex or it can
be anywhere in between. The chances are that if your business
is relatively simple and straight forward, then the business
model can be simple as well. Obviously, the more complex
and convoluted your business becomes the more complex the
business model becomes. In any case, the purpose of the
business model is to focus your attention upon the alternatives
available to you -- and suggest the correct one for you.
Your business model should be developed to take into account
such things as whether you intend to generate revenue from
space rentals only or whether you will charge a commission.
Will you have a "bricks and mortar" business only or will you
incorporate the internet into your it ? What business
"personality" do you want to choose and encourage ? What
dealers do you want for your mall and what merchandise do
you want them to display and advertise to encourage customers
to visit and buy.
What kind of customers do you need and how will you attract
and retain them ? How will you advertise your mall and where ?
Is there a local Chamber of Commerce or tourist bureau which
can assist you ? Will you accept consignments, where will you
solicit them and what commission structure will you employ ?
Are you willing to make an minimal initial return on your
investment to build the foundation for a much more prosperous
business ? Is there a major local or regional attraction to which
you can tie the theme or personality you have chosen for your
mall ?
And a good business model forces you to think about the
unique business aspects which you should be considering.
Who are your targeted customers and dealers ? Is your
location conducive to attracting and retaining them ?
Is your business seasonal or is it year round ?
Where are you going to operate your antique mall ? If it exists
should you consider moving it ? Is the location chosen for the
right reasons such as: high visibility, high traffic, accessibility,
suitable building, good neighborhood, sufficient parking, or
does your mother own it ?
You will no doubt come up with many questions, the answers
to which are important to you. The business model format
need not be overly formal, especially if you business is simple.
It should, however, be written and considered carefully when
you are in the planning stages or reevaluation of your antique
mall business. If you intend to approach sources for financing
your business, the business model will be very helpful.
Lenders and potential investors like lucidly conceived business
plans and the business models they incorporate.
In any case your business model will help you with sound
decision making and provide the guidance you'll need. One
major and very important reason for going through the exercise
of developing a business model for your antique mall business
is to be sure that you have given all aspects of the business
adequate consideration.
The supporting documentation for your business model should
contain information about what you considered, what decisions
you made about it and why. Most of all, what you end up with
should be a working document, to be used, periodically
reviewed, and revised if necessary. Any fundamental changes
in the business, in the marketplace or in your interests should
be considered so you don't get blindsided by them.
There are some areas of your business where the business
model analysis can be particularly valuable. It can lead you to
choose the way to structure your business revenue system.
For example, a simple floor space rental plan versus a fairly
sophisticated commission structure. Or, soliciting, accepting
and profiting from a well structured consignment business.
Sometimes adding complimentary products to your merchandise
mix or services mix can be financially attractive.
Consider your business model not just for startup. Also
consider developing one for your ongoing business. If done
properly, your business model will point up weaknesses and
potential chinks in your business armor and suggest needed
changes. Your business model will help provide answers to
questions you might ask such as Where am I ? Where do I
want to be ? How am I going to get there ? Should I expand ?
It is a powerful tool and relatively easy to use. Developing one,
especially in conjunction with trusted associates can be a very
important and worthwhile exercise.
by
David P. Cunningham, P.E.
Copyright 2003
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