Three Stages of Business Model Development

In everyday conversations, when you ask somebody to explain what a business is, often they immediately paint a picture which involves the hip couple who own the local corner shop, or even the freelance graphic web designer creating the work for some quirky internet client on the rise in the trendy part of town. However, business is much more complex than that. It’s not just about business and getting clients and making money. It also about business relationships, sales, marketing, operations, and ultimately, the success or failure of the business. Therefore, understanding business can be broken down into the different stages of business (which I’ll discuss in this article) and each stage can then be further broken down into sub-scenes of business:

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Three Stages of Business Model Development

In everyday conversations, when you ask somebody to explain what a business is, often they immediately paint a picture which involves the hip couple who own the local corner shop, or even the freelance graphic web designer creating the work for some quirky internet client on the rise in the trendy part of town. However, business is much more complex than that. It’s not just about business and getting clients and making money. It also about business relationships, sales, marketing, operations, and ultimately, the success or failure of the business. Therefore, understanding business can be broken down into the different stages of business (which I’ll discuss in this article) and each stage can then be further broken down into sub-scenes of business:

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Sales – This is probably the most important aspect of small businesses. Without sales, an enterprise simply cannot exist. It’s the lifeblood of any enterprise and without it there can be no success. It is important that all employees in a small business understand the critical importance of selling the enterprise’s goods and services, as this drives revenue and can literally make the difference between success and failure.

Number of Employees – All businesses have a number of different sizes, and every enterprise has employees. Typically, however, most businesses have one size standard. This size standard can often be detrimental to the success of a small business because many small businesses try to operate as franchises when in reality, each franchise might be operating at a substantially different scale. Franchises come in a large variety of sizes and there are often multiple franchises within a particular location, with one franchisee assuming management of numerous locations. This can often lead to confusion among franchisees, as well as the problem of miscommunication between franchisees and parent companies. Therefore, in order to ensure long term success, it is important that all employees in a small business understand and comply with company policies and procedures.

Employee Turnover – Many small businesses only employ a few people on a permanent basis. At best, these businesses employ two or three people. At worst, these businesses hire several hundred people, some of whom may be on temporary contracts and others who are on contract through long-term relationships. The larger the company grows, the larger the percentage of employees who are on temporary or contract-based.

Number of Customers – One of the most common mistakes small businesses make is underestimating their potential customer base. Small businesses must account for both existing customers and potential customers. These customers can come from all walks of life and all industries. For example, fast food restaurants may be targeting a younger generation that is not interested in fine dining. Likewise, a small business targeting middle-aged and older women might want to broaden its target market by targeting more diverse consumer groups.

Managers – One common mistake made by new business owners is overlooking the importance of good managers. In order to run a successful enterprise, one needs to possess strategic management skills. While many small business owners focus primarily on the sales side of the business, it’s also important to address the managerial aspects of the enterprise as well. A manager not only needs to be a good communicator, but he or she needs to be able to delegate tasks and organize staff to work in accordance with the owner’s plans.

Strategic Planning – This refers to the ongoing process of establishing and maintaining an effective plan to achieve a specific goal. Many businesses fail because they do not effectively plan for success. A strategic plan will involve a series of activities aimed at creating long-term viability for the enterprise. A series of activities should include an executive summary, a mission statement, business objectives, a management plan, risk management strategy and a strategic business plan. A business owner should also conduct periodic employee evaluations to ensure that the management plan is achieving its goals.

These are just three of the primary stages that should be examined in order to determine the appropriate business model for a particular small business. It’s important to realize that there are a variety of models out there and not every model is right for every small business. Each business must first determine its unique set of circumstances before it can determine which strategic planning model will be best suited for its needs. Once these issues are addressed, the business owner should then be able to determine how its current situation can be leveraged to create a greater future success.

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