Maintaining our cars, going to the dentist for an annual checkup, updating the software on our computers and having our air conditioning serviced in time for summer are all routine things that we do regularly. But can the same be said for regularly reviewing our business model to see if everything is working the way it should be?
According to Trevor Gosling, CEO of SME services provider Lulalend, a business model is your business’s plan to make a profit. It’s an outline on how your business plans to make money which allows you to identify your target market and their needs, the expenses you should anticipate as well as the products and services your business plans to sell.
“Business plans are important for both new and established organisations, as they help businesses attract investment and talent. Importantly, they help assess whether things are working the way you want them to.”
Gosling believes that SMEs should constantly keep ahead of trends and changes in their respective industries and implement these insights when reviewing their business model.
“There are four practical ways in which businesses can consider reviewing their business model. These steps include customer value proposition, profitability, resources and processes.”
Customer value proposition
Reviewing a business’s value proposition is a great way to establish relevance in meeting customers’ current problems, or how one can adjust products to keep improving their situation.
Gosling explains that business owners should implement extensive customer research to establish what their customers need.
“It can give you quantified feedback on the specific benefits of your products. It could also spark ideas that you may have overlooked initially. Remember to solve real and important problems for your customers, maintain your differentiation from competitors, and remind your customers why they should trust your brand,” he says.
For small businesses, it’s imperative to understand that profitability is at the heart of the success of a business. The profit your business makes should be used to help secure growth opportunities.
Gosling recommends analysing how a business brings in money and opportunities for growth.
“Start with a profit and loss statement. If you don’t already have one in place, you can start by individually listing how your business generates income and spends money. Also consider doing a pricing review to understand if you’re making enough margin to be profitable. Once you’ve consolidated the audit, you can try to eliminate work that costs you money and focus on opportunities that generate income.”
According to Gosling another key point that SMEs should remember when reviewing their business model is to take some time to consider if the resources currently available to them are appropriate for their business model and how it’s evolving.
“Do you have access to the right people, and are you meeting your financial goals? Whether the answer is yes or no, it’s always a good idea to review this aspect of your business. Consider your capacity and demand management, your resource utilization as well as your progress and time tracking. It’s important to establish your actual resource availability and to get a realistic view of your demands and capacity to deliver. Understand what roles and skill sets you need and streamline communication between your employees and the business, as well as with your stakeholders,” he explains.
Lastly, to run a business, processes are used every day. In the quest for efficiency, it’s important to review them and keep the ones that make sense and improve the ones that don’t.
With rapid changes in technology and the evolving demands of your target market, dysfunctional processes can lead to breakdowns in communication, increased costs, or unhappy customers to name a few challenges. For this reason, Gosling suggests that SMEs make this an important step to review in order to help streamline tasks and business activities.
“Running a business is hard work, but regularly reviewing your Business Model can make planning for the future easier. Make it a priority to keep up with the ever-evolving needs of your clients, talent and expectations of any investors so you can stay relevant. Try not to overlook the components that make you successful and how you can upgrade them,” concludes Gosling.