Building Your Business Model
When someone asks "So what's your business model?" what they really want to know is how you plan to make money and how soon you plan to do so. In simplest terms, a business model is a realistic explanation of where your business revenues will come from. Cover the following points:
Value proposition: The want or need your business addresses and the benefit it delivers.
Competitive strategy: How your offerings are different and superior to existing alternatives and how you'll successfully compete.
Target customer: The location, size, and growth trends of your market, as well as customer purchase patterns.
Marketing approach: How you'll reach, acquire, and keep customers.
Revenue-generation approach: How you'll offer and sell your products. For example, retail sales, direct sales, sales to distributors, multi-level sales, franchising, licensing, product-plus sales (for example, razors plus blades), hourly fees plus commissions or markups on supplies or subcontractor fees, leasing, subscriptions, ad sales or sponsor fees, freemium-to-premium offerings, and so on.
Revenue and cost structure: How much you'll charge for your offerings, what your offerings cost to produce and deliver, and your profit margin.
Timing and success milestones: Key dates for achieving customer and sales levels, profitability, and positive cash flow.