Business models are probably one of the least mentioned causes of business failures. The very term seems to be shrouded in ambiguity. For the purpose of this discussion, my definition of a business model is simply how a business creates and delivers its value (services or products) to its customers and how it generates income doing so.
So its an end-to-to overview of your supply chain. Most business singularly focus on a a simply and traditional”product to market” model which is least profitable in this competitive global market.
The complexity of the business model depends on the size of your business operations.
Although, there are a lot of factors that could be contributing to your businesses performance, a business with a strong business model is better placed for profitability. Below are 3 simple reasons why a review or redesign of your business model may be needed.
1. Your currently model may not be scalable
If your whole plan revolves around swapping hours for pay then there is a cap on the amount of revenue you can generate. This is usually a problem for most service providers. The key is to diversify your businesses offering beyond the time swapping model. What other complimentary offerings could your business introduce simply be repackaging your current offerings a little differently?
2. Your current cost structure may be crippling
The costs underpinning your businesses operations may very well be preventing you from making any significant breakthrough in your business. These are normally businesses with very high start up and running cost. Cost you produce and deliver your services in a different way. Some innovative thinking my be required to redesign your business to reduce its costs base. For service providers, could you deliver some of your services virtually? Could they be outsourced?
3. Timings of key transactions may be unfavourable to a healthy cash buildup
The timings of various activities in your current business model may be the cause of your cash flow problems. If you always find yourself caught between a rock and a hard place then your business model may require a continuity or recurring income model backed up-with favourable credit terms on both the supplier and customer side.
If your business is struggling, then you may need to go back to the drawing board and see how you can redesign your business to really deliver its value in a more rewarding, efficient and scalable way. The best model is one that has incremental cash flow supported by a linear cost base.The usual quick marketing fixes won’t work if your business model is flawed.