As 2011 approaches business leaders are scurrying and hurrying to complete their business plans so their stockings of 2011 can be filled with lots of good treats from Santa.

For big business it often comes easy as it’s in the DNA of business leaders. It’s how we were educated, trained and simply wouldn’t be able to keep a job long in corporate America without a solid plan for success.

However, when it comes to small business, I see many business leaders and entrepreneurs struggling with not only developing a business plan but developing an overall strategy for conducting business. It gets worse when we add the internet and social media. What a recipe for disaster with random acts of marketing (RAMs) and random acts of social media (RASMs) if you’re not careful!

It’s not always that people don’t know how to develop a plan. Often times small business owners and entrepreneurs do know how, they simply don’t.  They think skipping the planning will get them to market sooner. It often times seems so much easier to conduct small business practices, that a plan would be overkill.  However, in small business a small mistake can have a greater impact for a longer duration if it’s in regard to a core business model broken or objective lost.

So, what is your business model? Do you have one?

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Business Model (Wiki Definition)

A business model describes the rationale of how an organization creates, delivers, and captures value - economic, social, or other forms of value. The process of business model design is part of business strategy.

In theory and practice the term business model is used for a broad range of informal and formal descriptions to represent core aspects of a business, including purpose, offerings, strategies, infrastructure, organizational structures, trading practices, and operational processes and policies.

The brand is a consequence of and has a symbiotic relationship with the business model since the business model determines the brand promise and the brand equity becomes a feature of the model. Managing this is a task of integrated marketing

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A properly executed business model will help you make decisions such as:

1. Your core purpose and value you will offer your customers.

2. Core differentiators with a focus on unique value.

3. Products and services to be provided to customers.

4. How the services are provided.

5. Infrastructure for providing services to customers.

6. Organization structures to support business.

7. Operational processes and policies for conducting business.

8. Trading practices.

9. Partner practices.

10. Product development methodologies.

It is critical to establish a business model before any core decisions are made.   Too many businesses fly by the seat of their pants in many aspects of business.  There are great risks associated with doing such as without the structure of a business model and business plan it’s easy to get caught up in short term objectives versus longer term strategy & tactics that will  grow your business for the short term as well as sustain business for the long term.

If you are in planning mode and have not yet defined your business model, stop whatever you are doing and make your business model a priority!

14 Questions To ask Yourself When Developing a Business Model:

1. What is my core value I offer customers?  Be honest with yourself.  What is the core, foundational value you offer customers. How is it unique? What value does it bring your audience?

2. What is my zoom factor, how are my services unique? What is your zoom factor? What makes you unique above all competitors.  If you don’t have a competitive differentiator then why are you in business?

3. What intellectual capital do I need to protect? This should be based on a combination of the value you offer your clients as well as your unique differentiation.  What is your secret zoom factor? What is at the core that makes you different? Whatever this is, you must protect it.   If your intellectual capital is the process by which you develop websites, execute branding strategies then you must take the steps necessary to protect your intellectual capital.  This includes non-disclosure agreements, selecting the right partners, as well as security of online and offline data.

4. What is my sales model? How do you conduct sales? Is it high or low touch? Via sales representative telemarketer? Direct or via a distributor? Will you include a middleman or not?

5. What is my service model? Similar to the sales model, is it high or low touch? Is service a differentiator? Self-serve or hand holding by customer service representatives?

6. Should I sell my products online, offline or both? This question should not come lightly.  Regardless of what platform you decide to sell your services, be sure you build the infrastructure to support.  This includes sales, customer service, escalation, returns, communication and more.

7. Who should I partner with to develop and deliver services? This is key and an area that puts many businesses at risk. Do not take partnership and collaboration decisions lightly.  Just because a client asks you to partner with one of your competitors so they can get a better deal doesn’t mean you should.  Choose the partners who compliment your services, not replace them.  Be very attentive to your intellectual capital.  If you are sharing your “secret zoom factor” with a partner (or competitor) who offers the same services you do just to make one customer happy, think twice. Even a non-disclosure can’t always protect you. Once the information is shared, it’s shared.

8. What type of clients should I target and serve?  This is a tough one for any size business.  Often times it’s hard to look past the short term revenue gain for the longer term right decision.  This is where the business model and plan can really help you make the right decision.  If your business model states your core value and intellectual capital is in product A, then by no means should you give away the farm with product A even if it means a short term large check.  Also, if the client distracts you from your core business, core objectives then run.  A short term gain is never worth a complete distraction from your core business model and plan. Have the guts to say no even if it means you skip the steak dinner Friday night.

9. What type of clients should I not serve? Decide this early on in the business planning cycle.  Gather your key stakeholders and have a candid discussion about what your target client is not.  Who should you not serve. This is as important as determining the clients you should serve.  If your business model defines a low touch service based on intellectual capital delivered online then the last thing you should do is modify the service to a high touch offering just to win one deal.

10. What is an ideal partner for me to collaborate with? Define the characteristics of what an ideal partner is for you.  For example, if your business provides social media services then good partners are probably people who understand social media. Partnering with a design firm, telemarketing company, website consultant, or  SEO expert who do not understand the first thing about social media is probably not your best decision. Why? Because you are going to spend more time training them and transferring your intellectual capital than you will obtaining value from them.  Successful partnerships should include a give and take.  There are plenty of businesses you can partner with who can offer you value regardless of your market niche. Take the time to select the right ones and don’t be afraid to say no!

11. What should I outsource versus do in-house? This question is quite obvious but the answer is not always so simple. Why? Because we get caught up in the short term deals, partners who want to help speed time to market yet offer no value and the list goes on.  Leverage your business model and business plans to make data driven decisions so you can avoid the emotion.

12. What type of pricing models should I implement? Should I offer a free version of my product for a limited trial? Should you consider a subscription pricing and packaging model that starts with a “freemium” price point and scales to higher touch.

13. What infrastructure is required to support my business? Without a business model it is impossible to define organizational, process, sales and any other type of infrastructure needed.  The  sales, service and delivery model are key drivers to determining the needed infrastructure.

14. What mediums should I use to market and advertise my products and services? How should I use social media to market my business? The best way to market your business will depend on a number of factors including your target audience, the value you offer them, your sales and delivery model and the core attributes, demographics, buying patterns of your audience. This is not a decision that should be decided over coffee with your boss or owner of the company.  Do not invest heavily in any marketing medium including social media without setting goals and objectives.  Social media is not free and will steal your greatest asset, which is time if you let it.

A business model can be leveraged as one of the most valuable tools for making decisions if done correctly.  It takes the guesswork out of partner, product and sales decisions.  It helps remove the emotion and keep discussions and decisions focused on data, fact and plans.

Take the time to build your business model if you haven’t done so already.  Start somewhere.  It doesn’t have to be perfect.  Perfection is the enemy of good.  Start with defining the core value you offer your audience and simply walk thru some of the questions I define above.  It’s not an end all be all for a business model but hopefully it will give you a solid start.

Your Turn

Do you have a business model for your business? How often do you update yours? What other planning tips can you offer others as they prepare for 2011?

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