Creating a Business Model

A business model is plan or diagram for how it  intend to compete, use its resources, structure relationships, interface with customers, and create value to sustain itself on the basis of the profits it generates.

        Creating a business model is important for several reasons. The main reason is it serves an ongoing extension of feasibility analysis. Once a firm’s business model is clearly determined, the entrepreneur can continually ask the question, such as ‘Does the business make sense?’, ‘Will the businesses I need as partners participate?’ and others.  Thus, this will help the entrepreneurship to figure out the most effective way to do his new business.

        Besides that, one the importance of the business model is the entrepreneur can focus attention on how all the elements of a business fit together and how they constitute a working whole. The entrepreneur always follow his business model and this helps him to identify the method to fit all the business elements such as business concept, the ways to keep business stay competitive, the ways to create the customer value and others in a holistic manner.

        Moreover, the business model describes why the network of participants needed to make a business idea viable are willing to work together is also one of the importance of business models. Through the business model, the entrepreneur can determine the external relationships with suppliers, customers and other key relationships. This will help the entrepreneur to fulfil or satisfy the potential suppliers and target markets for his business. Therefore, the entrepreneur will know who needed involving to implement his business idea successfully and how to do his business.

        Furthermore, one of the importance of the business model is it articulates a company’s core logic to all stakeholders, including the firm’s employees. A clearly business model will make sure that the firm’s employees are moving forward to the right direction of the firm consistently. External stakeholders who are being recruited to join a firm such as investors and potential business partners are the second audience for a business model. A good business model will attract more investors invest in the company. This will allow the company have more capital to run the new venture in an effective way and earn more profits.

        In short, the business model plays a very important role for a firm in order to succeed a new venture.