Jim Muehlhausen

Designing or updating your business model becomes easier when you think through your offering, monetization, and sustainability. As you work on your business model, keep important tips in mind, ask questions to stay on track, and browse different pricing models to determine what's best for your business.

A business model plan combines the components of a business plan with business model analysis. This document augments or substitutes for the traditional business plan and has the following basic layout: Background: Follow the traditional structure of the business plan for this section. Breakdown of the business model into the crucial areas: Market attractiveness Unique value proposition Profit model Sales performance Ongoing competitive advantage Innovation factor Avoidance of pitfalls Graceful exit from the business Operational overview: Follow the traditional structure of the business plan for this section.

Many businesspeople mistakenly believe that a business plan and a business model are one and the same. Your business model is the core concept upon which you build your business plan. Therefore, your business model should be a significant portion of your business plan. Many business plans gloss over the business model in favor of lengthy financial projections and operational details that go along with business plans.

A business model that says, essentially, "I used to work for a company that did the same thing," is not something investors want to hear. This plan has a good and a bad aspect — the bad part is a successful company is already using this business model. Without significant change to the model, why bother? The good part is a proven business model and management that understands the model.

Most business models have customers that are neither exceptionally attractive nor exceptionally unattractive. Most business models don’t need to focus on customer attractiveness for long because the old mantra “all customers are good customers” is true most the time. However, you do have to study customer attractiveness.

Great business models command better margins than the competition. Sometimes, a business model can be improved simply by clever pricing strategies. The list below offers some methods to potentially raise prices and corresponding margins. Premium pricing: You can't help but think that expensive products are better.

If your current business model is no longer effective, it's time to make some changes. When you're designing or re-designing your business model, keep these questions in mind: Does the model generate margins superior to the competition? How easily can your idea be copied? What can you do to slow down the competition?

When designing a business model, you have a lot to remember. Refer to this handy list of business-model reminders to make sure you stay on track: Different is always better than better. The better mousetrap plan rarely works. No margin, no mission. Great business models have great margins. If it's not easy to sell, it's not worth doing.

When you're ready to create and analyze your own business model, jot down your ideas while using the business model wheel. This practical tool is also useful when you revisit the ideas you come up with during your annual planning process. The business model wheel focuses on the following areas: Offering Market attractiveness: The industry, niche, and customer segment you will sell to.