At the core of the business plan, there is the implicit and sometimes the explicit business model. This model shows how the business will actually make money. The four major pieces of the business model are:
1) the money,
2) the timing,
3) the competitive advantage and
4) your core competences.
First we ponder where we expect to make the money. Here the basic assumptions we have outlined will dictate if we are offering products, services, or a combination of both. This thinking reveals the strategy envisioned by the writers of how to provide the offering to the public and how the public will react to it.
Questions to consider include:
1) Are we going to sell a product directly to customers for profit and make money from that?
2) Will we sell a product at a loss or for a break-even price and make money on some other reoccurring aspect (eg razor blades)?
3) Is the way we deliver the goods unique making our offering very attractive (eg movie downloads)? Are we going to create an offering that creates a high barrier of entry for competitors (eg Apple music players)? The answers focus our efforts into a more narrow range so that our business plan will be appropriately concise.
Next, we must consider is timing. It is not just necessary to sell what we are offering to the world, we must also receive money. When will we receive it? Will it be some time so we need to arrange bridge financing to continue operating until we are paid (eg flooring)? Where will the financing be found? What is the cost of the financing and how will it impact our profits? Will our offerings be sold year around or will they be focused around a specific time frame (eg Christmas decorations)? How will we budget the income to insure long-term health in the fixed and variable costs of our business? These answers are documented in the business plan in several places but the results of the timing analysis dictate how the budget is determined, money is apportioned and what return-on-investment is expected.
Third, is our competitive advantage. Our business plan must outline what the advantage will be. Will we fill a niche? What size of an area will be covered? Will it be local, national, or international? What new standards will be set for our industry? How about our service and support, will that be unique enough for us to be number one? Will we reward our customers for their loyalty? How will our offerings encourage repeat business? How will we dominate our competitors? All of these influence our business plan pieces.
Finally, our business plan must outline what we have that represents the best of our abilities. This is commonly called our 'core competences.' Our core relates to the vision and competencies of our executives, their relationship building abilities and the ability to manage complex operations. Too, they must be able to change strategic direction to address new challenges or failures in their ability to execute the plan. How we combine the key abilities and assemble a business team that implements and complements these skills will reveal our chance for success.
All of these areas are all extremely important and require much thought, review and modification to pare them down to the essential elements that our enterprise can execute. Take too little and we will starve in the market place. Take too much and we risk failure without enough resources to compete. Our business plan documents this and our result is our business model.
