Developing a sound business model is key to the successful launch of a business.
But you should never assume the business modeling is finished once the business begins to grow. Keeping a business model current is critical for long-term success.
A business model helps to ensure that all of the "moving parts" of the company are working together.
What is the value that is offered to the customers and what is it worth to them? Who is my target market? What do they expect out of me as my customer?
How do I get information to them, and how do they want to get the product? What are the key activities to make this all come together, and what will it cost? What are the resources I need to make this happen (money included)?
Developing a sound business model in a startup venture helps improve the chances that the business will survive the launch, begin to gain acceptance in the market and grow.
While a business plan may be important to secure financing, a business model is what will guide the entrepreneur through the inevitable trial and error of finding the best fit in the market.
Changes that result from forces such as technology advancement, demographic trends and new customer preferences can all require adjustments.
For example, a recent study by the Pew Research Center found that more than one third of all American adults now own a smartphone, which is changing customer preferences in how they want to communicate and engage in transactions with businesses.
These changes can have a profound impact and at the same time open many new opportunities.
Businesses expanding into new products or new markets should also give careful consideration to the business model.
I personally learned this lesson the hard way.
When we expanded our health-care business from Raleigh into Charlotte, N.C., we assumed that the business model we had developed in our first market would work equally well in the new market. However, we quickly found out that assumption was wrong.
There were significant differences in customer preferences and expectations in the new market. Unfortunately, we had made major commitments to space and staffing based on a flawed business model. As a result, our operation in Charlotte never reached profitability.
Even a more established business should revisit its business model, as every market experiences changes over time.
For most of its history, Best Buy had been a business that catered primarily to men, as they were the main purchasers of consumer electronics. However, a report in Harvard Business Review chronicles how over time more and more women became customers.
Best Buy found that these women were highly dissatisfied in their customer experience, as their approach to buying electronics was quite different from men's.
To remain competitive, Best Buy made significant modifications to its business model.
Don't assume just because you had your business model right when you opened your doors that it will always work smoothly. All businesses experience changes over time. Assessing and revising a business model is the best way to ensure that your entire business keeps pace.