Michael Lewis in his book “The New, New Thing” offers us possibly the best distilled the definition of a business model:
“All it really meant was how you planned to make money”
That is the ultimate purpose of all businesses, enterprises and Not-for-Profits, it is to make money. Don’t believe me; see what happens to a NFP that does not make a profit continually? They cease to exist, I was working with a NFP in crises and they could not even get a loan on the building they owned outright. The banker stated that he did not want to have to kick the NFP out when they could not pay back the loan. In spite of no help from the bank, I was actually was able to work with the Executive Director and get the NFP stable and profitable; I left after working with them for 15 years.
Peter Drucker’s theory of the business modeling was to create a set of assumptions about what a business will and won’t do. “These assumptions are about markets. They are about identifying customers and competitors, their values and behavior. They are about technology and its dynamics, about a company’s strengths and weaknesses.” Does this concept fit into your business model? The concept was developed by Mr. Drucker for Vanguard Funds.
Others consider Business Modeling to be the framework for finding a systematic way to unlock long-term value for an organization while delivering value to customers and capturing value through monetization strategies.
In my business I embrace the Michael Lewis definition and incorporate some of Peter Drucker’s ideas into my forecasting model. But mine is a series of topics with bullet points beneath. My topics include:
- Goals
- Advertising/Marketing
- Centers of Influence
- Best Practices Review
- Education
- Ares for review or improvement
Granted these are broad topics, they get broken down into sub-categories; but for the most part I use bullet points, I know the details in my mind and I review. Your modeling if you do it may be graphs of a thousand page document. I have found there is no right or wrong way to build a business model, because if it is not working you are modifying it to make it work.
If you need help let us know, we enjoy digging in and analyzing businesses.