What is a business model?

It is an analysis tool that lets you know who you are, how you do it, at what cost, with what means and what sources of income going to have. Define your business model is to know what your DNA, how it is made, how it can change, how polished, how to change, how to mold…

Could be days and days wandering about the ‘business model’ concept, but as entrepreneurs we presume to be very practical, define your business model is to know what the DNA of your business. In other words: it is a previous tool to the business plan that will allow you to define clearly what will you offer the market, how are you going to do, who are you going to sell, how are you going to sell and how you go to generate income.

What is a business model

And why is it even necessary, vital – define your model? Because, among other things, it will help to know “what will happen and who will pay what, when and why. The simpler the business model works best. “The more complex you have, the more difficult to implement” – says Rodolfo Carpintier, founder of Digital Assets Deployment (DAD).

“One accepted definition is He points Javier Mejías, an expert on strategy and business models how a company creates, develops and captures value. But this is very ethereal. In the end, the business model is a vision, a set of everything that is your business.”

For Joan Riera, professor of Esade Business School and CEO of Active Development, the business model is like the pillars of future business: “They are the foundation. If you’re building a building, which would be your business, you’re defining where the columns are. So the business model is very important to think before launching an idea to market, even before the business plan. Many entrepreneurs start with the business plan without having thought it through your model. It’s like building a house and start getting the furniture and then you would reconsider spaces. And you meet a problem: ‘Sorry, I was wrong. I will move a couple of columns to fit me the furniture’. Back it is usually very costly and difficult and usually enters stages of confusion and collapse.”

Much more than income

When speaking colloquially business model is usually specific in the way that a company has to make money. And it is that, but it is much more. “It is often relativist business model with revenue streams and business model speaks not only how to make money but also who your customers, how you will reach them, what they have to do to give them your value proposition, what makes you unique, what you cost structure, etc; is a systemic vision of your business,” – said Megías.

And so it is win -generate money income would be the consequence of the process. For that to happen it is necessary to define and fit a number of pieces (discussed later). “The key questions that any business should be able to answer are: Who is my client? What is offering to the market? how ?, will offer what mechanics has my business to make profits? And how I will do it sustainable over time?” -says Joan Riera.

Designing a business model is not only true for entrepreneurs who start but also for established companies seeking their model is not depleted. “And after drawing and structure, you must test it, iterating, i.e. changing some parts and seeing how it behaves all,” recommends Riera, who adds: “And they can be pieces related to the client or the part to produce that value. For example, you can change a number of channels and innovate there or try other sectors or in part cost.”

How many customers do you pay?

Thus, to validate all the assumptions on which you are building your business model, ideally down to the market, that is, talking to customers to find out what they think, experts in the market in which you operate, etc. “Although obviously the best test to see if it works is to have customers pay you because ultimately an investor will ask how many customers you have to pay you,” – says Riera.

To Megías, which defends the idea of running as soon as possible the business model to see if it works, “the entrepreneur must design their minimum viable product to show customers and to give feedback. And the keyword is a client, because it is well to think or you will like your product, but the reality is that whoever has to say right or wrong is your client.”

Customer and product

One of the key issues is how I build products for my clients or customers looking for my product? “When you’re a big company you know who your customer, know and you design products for it. When you are an entrepreneur you have no idea of who your customer. You imagine the best. I always recommend entrepreneurs to build a product that they believe is really good for your customers and find customers for your product. If you’ve searched and have not found, obviously your solution did not make sense,”- says Megías.

This expert believes the mantra of any entrepreneur should be to bring your product to market quickly, “fast try it and fail fast and cheap. How do you get to validate your business model? Not because a client tells you that your product is interesting and that meets your needs. The only way a customer validate your business model is to buy your product. Many entrepreneurs are wrong to think that, as they have created a beta or offer it at a ridiculous price and some customers have told them they liked, your product is good. But that is a mistake because it is not a qualified opinion. How he will not like something that is free; very bad would have to be to not like it!”.

Start small, think big

You need to start small but thinking big: “Typically when you start the engine is put in place to see if it holds. You must start with a cylinder and when you see that this does not stall, becomes a more powerful and larger engine,” – says Riera, Active Development.

Megías recalls that one of the questions that make many entrepreneurs is how can they protect your idea? “Ideas are difficult to protect. The best thing is that you protect with a clear path and time. That is, if you just throw in teeny your project and you copy comes a competitor and you already know (or should know) what are the other many steps you will take next and how going to give, but then you have to swing around your business model and make changes, but you have many things clearer, or should generals – your competitor, you will have a quite reactive strategy.”

And who manages this model?

The secret is how you run your business model and that will make the team,” – said Riera. Or as recommended Megías: “You have to fail soon, quick and cheap. For that, we must design a good team and, above all, that is scalable.”

One of the most common mistakes says this expert “is that the entrepreneur should not start with the team that will be the final one. Your first step as startup, which for me is not a company but a temporary organization that has to explore its business model possibly not require or himself of the figure of a financial, but in the second, and by the necessary evolution of the project will have to change financial, i.e. there is a founding team that will have to evolve and others who have to change. Another mistake is to catch a super financier in the first phase because it is bored, and also cost quite has it in the company.”

Have much waist

According to Riera, the team should be able to reorient your model: “It must be flexible and dynamic to redefine the business as you are finding. This allows us to know what your personal and professional needs are.”

Carpentier advised paying close attention to this piece, fundamental gear every model: “It is important to define the type of equipment that you need because it is not the same to sell software to a fashion; It is not the same is producer-distributor. The team should set will be different depending on who the final customer and who your suppliers. For example, in the case of the online outlet, the important thing is the relationship with the brands they have with you and give you the opportunity to sell to your customers discounted brands. And at that point, you have to have the figure of the interface with the marks, which is a buyer who will be dedicated to carrying, treat, care for and pamper them to make them happy and give you more and more products.”

Complementary experiences

For Fernandez, when it comes to several partners, “it is good that complement each other, having different experiences, so they can have different roles. And there is chemistry between them. Life in business is long and it is important that human relations are good”.

Megías advised that when undertaken by many, “not everyone should have the same because not all provide the same, or will commit all alike. Must be set from the beginning, all assumptions between partners when things go wrong, democracy is not a solvent system in a company.”

Fernandez highlighted the figure of a CEO: “I do not believe in projects that, as we are three, we all alike. No, because the hierarchy must be clear and then everyone assumes its role. It is important that the team has leadership ability. At first, the project has no people, is small but growing projects become an organization and you need someone with leadership skills and management. In these growths, sometimes entrepreneurs suffer from lack of capacity delegation. If not given, the entrepreneur himself ends up being the bottleneck of your project. The important thing is team and project, but if you have a good project, but distrust team better not to invest.”