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Determining a business model

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A good business model will have a spiral structure that evolves over time to stay competitive and relevant. As a business owner, you must know how to make this circular flow smooth and uninterrupted. Sometimes you may want to predict the business model of your competitor in order to be successful.

A business model is needed to strategize and successfully apply a profit-making decision. It is important to understand your business model’s relationship with the outside world. If your business depends on a supply chain then you need to understand how your model is interacting with your supply chain’s business model. Does it complement with your supply chain or contradict against its business models? This helps you stay competitive. For example, if you order more will your supplier increase the unit cost? Does he have to? Can you help your supplier keep the cost at the same or even further drop to a minimum unit cost?

You must identify the moving parts of your business model. You must also identify how these moving parts influence decisions within the model. Knowing more about these moving parts can help you formulate a perfect strategy and take a profit-making decision. Learn from where your competitor is sourcing, learn how much they are sourcing, what tactics they use, what is their refund policy, what are their service level agreements. How each of these refund, service level agreement, etc are related together to make their business strategy.

A perfect business model must enlist how you do what you do. It must also go further exploring your target market and why someone should do business with you. The business model must explain the market demand along with your unique position in the market as a business to generate results sustainably. Furthermore, your business model must have a formula for success, key performance identifiers and crucial business processes listed as well as explained very clearly. Documenting everything helps envision external interactions very clearly. A CEO will find a business model helpful for his next strategic steps for success. Every major initiative starts by first reviewing the business model. For example, any change to manufacturing unit, employee remuneration, material procurement, vertical integration, sales and marketing innovations, etc. needs a very thorough knowledge of companies operating procedures.

A good business model must be in line with your organization goals and must also be continuously improving. Your competitors must not be able to copy your business model. It is important to ensure that your competitors must not be able to influence your decisions. For example, can your competitor buy more raw material and block your access to inventory? Can your competitor remarket to your buyers using social media? Can your competitor make your product less attractive by reducing their selling price? Can your competitor do more for their customer for the same price you are offering?

Yet another important factor is to avoid achievement satisfaction. It is easy to be satisfied with a profit which is a little greater over break even profit. Let us say you invested 100 pounds and earned 110 pounds. Now you may be tempted to apply the same formula but on a larger scale. It is very normal to invest 1000 pounds this time and expect 1100 in profit. It does not work like this always. The most dropshipping business ends up in failure due to this type of scaling.
It is important not to be just yet another dropshipping website.

earn off business model spiral diagram
earn off business model spiral diagram

The business fails when your only option to make sales is relying on an impulse purchase. Most dropshipping business models are 100% reliant on one basic strategy – Be the first to sell a trending product and be the fastest to sell the trending product. In this formula whoever spends more money reaches the ideal impulse buying customer first. A seasonal dropshipper does this to perfection and makes quick sales quicker.

A business strategy in a business model must let an organization to build assets, not a liability. A website that does not make any sales in a liability. In case of a seasonal dropshipping store, your profit-generating sales are only until the product is trending and until your user impulse buys without checking other competitors. If you set up a business model properly then it will have business strategies that keep it always running. It becomes very difficult to break the spiral growth in a strong business model. Sometimes you can slow down a successfully crafted business model. But this slow down gives you enough time to make amends and get back on track. Everyone must build a business model that is unstoppable.

Now let us say something slowed down your business model activities and you could not make any profitable amends to fix it. This is when your business model activities need a major rework. If you do not consider a rework then the same successful spiral will do negative effects on your bottom line. This is when your business model has started to lose its edge and starts to demand a major rework. This could happen because someone has started to influence your business model in order to make it ineffective. Typically a good business model will give you enough time to reach when this happens. Also, you will be able to see the warnings of this happening very early before any major damage is done.

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