Building Your Business Model: Why the Process Outshines the Outputs

Summary:
A business model is the blueprint for how you create and capture value, showing how the pieces fit together and work towards a common goal.

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Building Your Business Model: Why the Process Outshines the Outputs

As a founder and business owner, building out a business model is an invaluable process. Not only does it showcase the potential results of your business, but more importantly, it involves a journey of discovery and insight that helps shape your business strategy.

A business model is the blueprint for how your business creates and captures value – a hypothesis that you test and tweak as needed. It shows how all the pieces fit together and work in unison towards a common goal.

A well-thought-out forecast model ensures that the strategy driving your business aligns with growth potential and supports achieving your desired outcomes.

Will it be 100% accurate in three years?
No, definitely not! But it will guide you to make informed decisions, teaching you valuable lessons about your business’s performance along the way.

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Valuable Outputs of a Robust Business Model

A strong business model provides numerous benefits, including:

• Communicating commercials and metrics to investors pre/post-fundraise.
• Making informed month-to-month business decisions.
• Keeping a close eye on cash flow.
• Knowing when to hire and raise capital.
• Understanding how to achieve break-even.
• Visualising what your business could look like in two years.

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Why the Process Matters More

For me, the real magic lies in the process of building the model. It forces you to critically examine your business, prompting you to answer tough questions such as:

• What are the key drivers of your success?
• What assumptions are you making about your customers and market?
• Which channels and distribution strategies will work best for marketing?
• How could you optimise pricing?
• How do your unit economics evolve over time?
• What knowledge/resources do you need to bring the model to fruition?
• What does your sales mix need to look like?
• Will you need external investment, and when will it be required?

These questions are crucial to think through, understand, and communicate throughout the modelling process.

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The Real Benefits

By engaging deeply with this process, you’ll:

• Uncover “aha” moments.
• Spot potential hurdles early.
• Have more time to plan and react effectively.

Being able to confidently answer these questions is particularly important in the early stages of your business. It demonstrates to stakeholders that you’re capable of running the business successfully.

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Continuous Review and Adaptation

Your business model isn’t static – it’s something you’ll continually review and evolve as you test your assumptions in the real world.

Stay proactive. If results fall short, use the model to identify areas for change, implement those changes, and measure their impact quickly. Regular updates to the model ensure that it remains a valuable tool for steering your business toward success.