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The Journey, Part 3: The Business Model

You’ve completed the discovery process and are committed to starting your company. You know the risks and challenges. You are all in, but realize what professional investors – and every successful entrepreneur before you – already know: you’ll need a clear and convincing plan, and you can’t do this alone.

In this series, my audience is the first-time founder. I’ll help you understand the unique challenges, decisions, and impacts you’ll make on the road towards a successful launch.

The Journey, Part 3: The Business Model

It’s time to think about hiring talent, telling your story to a broader audience, and connecting your vision, objectives, and end game to the business planning process.

Your next step will be to assemble the following:

  • A clear description of the problem or need your concept will solve.
  • A primary list of assumptions used to conceptualize your value proposition.
  • Your objectives for starting your company.
  • A concise vision statement describing how you see the future.
  • A preliminary mission statement.
  • A clear understanding of your endgame.

Keep it to a single page and keep it handy; you’ll refer to it often.

It’s time to define how you’ll turn your idea into a business, attract investors, and generate cash. If you can’t identify a clear way to create positive cash flow, you don’t have a business.

I’m going to discuss the decisions you will make early in the Business Model and planning process that sets the stage for all that follows.

Shyam Jha, a Principle Consultant with Cayenne, wrote an excellent article, Your Business Model is the Foundation of Your Business Plan. Shyam uses the Business Model Canvas approach used by many successful enterprises. Shyam suggests that “It is the company’s DNA, represented on a single sheet of paper. Its brevity is its key strength.” He describes how you and your future team will develop the company’s Business Model in detail. I urge you to read it.

Your company starts with you. It’s part of you; you brought it to life. And now you are guiding it towards your endgame. As you bring on talent, advisors, talk with potential customers, and business associates, you’ll identify several ways to monetize your concept. You’ll find additional market opportunities and delivery methods. You’ll also get bombarded with distractions and risk losing focus.

To stay focused, refer to your list. Don’t let your dream get hijacked by the views of others or by your insecurities. You are the expert. You make the fundamental decisions related to why, how, when, and your endgame. Once your core team is in place and developing your detailed Business Plan, you’ll refine each of the decisions, but not now. It’s your dream, and you’re still taking all the risk.

As a founder, you define the starting points. You know some things will change as your plan evolves. Don’t use the likelihood of future changes as an excuse for not determining the fundamentals now. Stay focused on your vision, mission, objectives, and endgame. It’s time to contribute your DNA to the plan.

The Business Model Canvas consists of nine related parts. I’m going to discuss the fundamental questions regarding value. These are the parts most influenced by your DNA. As you move forward, you and your team will address value creation, value capture, and other Business Model segments based on your organization’s skills. These involve operational aspects of future execution.

Value Proposition

If you can’t effectively communicate your value proposition, stop now. Knowing how your solution will benefit your target customer is why you decided to leave your high-paying perk-filled career. You are the expert on the problem and your solution; be seen as that, and don’t wing it.

Your target customers are already coping with the problem without your technology. Think of all the ways electronic communication has changed: Morse Code, the Telegraph, Telephone, Email, Mobile Phone, the Internet, and Text Messaging. Each new technology improved the prior solution – accuracy, speed, global reach, and cost.

Your competition consists of the currently available solutions, not other companies, at least not yet. Know why your solution is better, why someone would pay for it, and be able to communicate all of this concisely and effectively.

Value Delivery

Who has the most to gain from your solution? Your target customer or someone with broader access to that specific market? Do you want to promote technology or produce a final product? Maybe you want to build an operating company with a global reach. Decide how you’re going to deliver value and get to your endgame.

You’ll be distracted by many options along the way. People in your organization will have differing views and personal objectives. Consider them, but stay on course. You’ll analyze other approaches after you’ve fully assembled your team.

Why not just pull a website together, hire a few people you know, and get your deep-pocket friends to write you a check? Because you’ll fail to launch. 

As the founder, you have to communicate key aspects of your Business Model to attract talent, advisors, key partners, and potential customers. You’ll give this pitch hundreds of times. You have to be clear, consistent, concise, logical, and inspiring. I can’t overstate how important this is. I’ll discuss effective communication later in this series.

To convince talent to leave well-paying, stable jobs to be part of your dream, they need to see the upside. Does your model make sense? Can you deliver for them? They need a reason to bet on you. Key vendors, potential customers, and advisors have the same questions. You need to provide answers.

I’ve intentionally left potential investors off of this list for now. No matter how badly you want to go there, don’t. Always assume you only get one chance with a potential investor. If you wing it, you’ll lose. Your idea is worth nothing to them without solving a significant problem, a sound Business Model, a convincing Business Plan, and a team that can execute. You aren’t there yet.

Many new founders get tempted to post a website, thinking it will give their new venture a level of legitimacy. Secure the company name and buy your domain, but don’t go live until you can say something meaningful. Your website is an essential aspect of your communications program. There is no advantage to launching your site prematurely.

In the next installment, I’ll discuss how to develop your personal SWOT Analysis. It’s not an easy exercise. You’ll need to put your ego aside, be clear on your value proposition, and stay focused on your endgame. The combination of your preliminary Business Model and your personal SWOT Analysis will guide your Business Plan development and provide a clear picture of how to build your organization.

Avatar for Werner Nennecker

Werner Nennecker

Werner has founded and managed private and public companies in the manufacturing, natural resources & industrial sectors for 35 years. He and his teams have secured over $500 million to successfully execute international growth and diversification programs in Europe, North and South America, Central Asia, and Australia.

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