Why You Need a Business Model

A Business Model?

You need a business model so you can predict, track, and refine how your business generates revenue in exchange for the time you allocate to it. 

If you're a budding wantrapreneur, you've probably read countless articles on why you need a business plan for you new business. That's generally good advice. Particularly when you're dealing with operations, employees, bank loans, and everything else that goes into starting a typical small business or startup company. In many cases, the formal business plan may be a requirement for something like small business loan.

You Need a Business Model (Not a traditional business plan)

Here at CubeBreakers, I'm focused on the Solopreneur. A solopreneur does NOT need a full blown 20 or 30 page business plan. Don't get me wrong - It won't hurt you to write one, but time is a valuable thing, and everything has an opportunity cost. So let's focus that valuable time on the single most important part of your business - The process of acquiring clients and generating revenue. 

A solo business is unique to each individual. It's not good enough to just figure out how much you're hourly rate needs to be, or how much cash you need to keep to replace your day job. Instead, you need a model that tells the story of how your business generates the net cash necessary to meet your goals.

The Four Building Blocks of Your Model

You're personal business model is built around a few core concepts.

1. How much money do you need to generate?
2. How much time (hours) is it going to take you to generate the money you need?
3. How much does it cost to operate your business (fixed expenses)?
4. How much does it cost to acquire new customers (variable expense)?

We can't dive too deep into this in a single blog post, but these are the key elements the makeup the business model for a solo service business. If you go into this without a detailed model, you are setting yourselves up for failure.

What We Learn from Our Business Model

For example - if you had a service you could sell for $1,000, and it required 10 hours worth of work, you might think that equates to $100 per hour. 

But what if you landed one new client for each 8 leads you spoke with? Between consultations and proposals, each lead takes about an hour of your time. 

What about the cost to acquire those leads? Perhaps your advertising channel costs you $50 per lead. 

So now, we've spent $400 and a total of 18 hours to secure $1,000 in revenue. Your effective hourly rate is now about $33. Did you take all that into account when you were scoping and pricing your service offerings? 

Figuring out your hourly rate is not enough. You need a big-picture system that ties all of this together. You'll go into it with not just a plan, but an adaptable framework that you can tune and refine to create winning strategy.

So don't worry! This is what I'm working on at Cube Breakers. I'm going to be sharing exactly how I approached this with my solo service business so you can take the guess work out of planning. Stay tuned!

 -Zack