Why Use a Business Model?

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Your business model permeates all business decisions, including the way you dress.
Your business model permeates all business decisions, including the way you dress. (Image: Stockbyte/Stockbyte/Getty Images)

A business model is important as a principle unifying your daily business activities and long term goals. It is important to use a business model because it can provide your company with a framework that simplifies complicated decisions and presents a clear face to customers. A business model can be a deliberately articulated principle or a general orientation defining your company's shape and purpose.

About Business Models

All businesses actually use business models in the sense that even a company that was created without much thought has a character reflecting its temperament and its origins. But you can use a business model to your advantage by evaluating and clarifying the shape and scope of your business activities. Even if your business model is relaxed and casual, reframing this as a deliberate choice rather than an accidental default can help shape your company's direction by providing a context for daily decisions.

Uses of a Business Model

It is easy to get bogged down by the day-to-day mechanics of running a business such as paying bills and meeting immediate customer demand. Although business owners regularly become immersed in these details, running a business also requires you to take steps and make choices that reflect your company's direction, even without consciously doing so. For example, if you are torn between getting behind on payments to a large supplier or a small vendor, your decision of who to pay uses a business model that involves either doing what is most expedient or acting in ways that are consistent with your values.

Employee Training

Using a business model enables you to train employees to operate your company effectively and in ways that are consistent with its long term vision. If you teach your employees at the outset that your company is a learning organization that aims to create high quality products, they will make daily decisions that reflect this model. For example, an employee who has this vision in mind will be less likely to cut corners and more likely to admit that he needs more information in order to effectively do his job.

Marketing

Using a business model enables your company to promote itself and serve customers in ways that reinforce its larger purpose. Many customers choose whether or not to support a business of the basis of its business model. For example, customers who choose to support the family owned hardware store on Main Street rather than driving to a WalMart in a strip mall on the outskirts of town are demonstrating a preference for a particular business model. By understanding your business model and integrating it into your marketing message, you can more effectively reach these customers.

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