How to Set Up a Business Model

A business model should be designed and set up so that it will support growth and strategy changes. A business model is simply the method by which the business will use its resources in order to satisfy its customers and maximize profit. It provides the framework needed to deliver its products and services to its target market, while also giving customers the support they need. Set up your business model so that it will support your business in the beginning and provide the room it will need to grow.

Examine the required components of the business. List and review each department and vendor needed in the business model. Ensure that employees will be able to communicate efficiently with each other between departments, as well as with outside vendors. In addition, make sure that departments are not duplicating processes or tasks. For instance, if your business requires inventory, then verify that the purchasing and marketing departments are not both conducting the same analyses. You can prevent redundancy by setting up a system so that multiple departments can share data, reports and information.

Conduct a cost analysis. The business model should be cost effective, so investigate whether there is newer technology, outsourcing opportunities or cheaper vendors. While it is important to keep costs low, do not sacrifice quality to save a few dollars, as you could end up losing customers in the long run.

Assess whether partnerships are needed. Partners can bring additional financing opportunities, network connections and industry partnerships. However, partnerships carry the disadvantage of requiring that you split decision making and profits.

Confirm that customer relationships are supported in the model. Customers should be able to reach the company through their preferred channels conveniently, and the company needs to be able to communicate efficiently with customers. For instance, if customers for your type of product or service are accustomed to using live chat (instant messaging service through the company’s website), then you should have this feature available.

Record all vital resources. Keep a record of all the resources that are vital for the company’s success in this business model and create backup and contingency plans in case something were to happen to one of them. Resources can include equipment, suppliers or even specific employees.

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About the Author

Carrieanne Larmore has been a professional writer since 2004, mainly writing marketing studies, business plans and research papers. She has held management and executive positions in multimillion-dollar corporations within the United States and Canada, created the E-Commerce Business Journal, and founded Royal Summit Consulting Inc. Larmore holds a Master of Business Administration in entrepreneurship, plus a bachelor's degree in finance and management.