Business Modelling

Even a simple, high level business model can be extremely helpful in documenting and understanding the key elements of your business. Over time, this model can be developed into a key tool that will be fundamental to your business decision making processes.

Key Ingredients

Typically, the focus of developing a business model comes down to a combinations of:

  • Sensitivity Analysis – allows development of a series of “what-if” scenarios to assess the impact that changes on key input parameters (eg prices, volumes, interest rates) will have on your key indicators eg profit and cash
  • Business Analysis – we look at cost structures, revenue and competitive structures, return on investment and business risk
  • Operating Model – does the business operating model and related infrastructure properly support the strategic direction of the business and allow for well managed growth?
  • Connection – ideally all modelling should be fully integrated eg if we develop Profit & Loss, Balance Sheet and Cash Flow models all the dots need to connect so changes in one area flow through to show the impact on all the others

Profiling
Business Modelling is not just about numbers on a page.

Underpinning any business (and, as a consequence, any Business Model) should be a clearly defined Value Proposition. The Value Proposition represents the combination of key customer offerings – price, quality, range, convenience – that you believe separates you from the competition. In order to deliver on your Value Proposition you need to design an appropriate Operating Model.

In addition, in today’s super-competitive market, our view is that all businesses need to operate at a certain minimum level of technological excellence in order to survive. Technology and systems may never be at the very core of your business (depending on how you define your Operating Model) but it needs to at least be working at a satisfactory level.

To take this forward we will normally look at the following:

  • Value Propostion – let’s define it
  • Operating Model – what model best supports our value proposition – where do we need to allocate our inevitably limited resources?
  • Leverage – where are we going to focus and, in particular, to what degree does the application of technology need to be employed to maintain a viable market offering

Coping with Growth
A growing business presents nearly as many challenges as a shrinking one.

We need to have a mechanism for modelling and assessing:

  • Return on Investment – it is great to have opportunity but we need a way to determine which opportunities are best and key to this is the capacity to assess risk adjusted return on investment. Ultimately if you spend money that does not make a return sufficient to justify the risk then you are just buying yourself extra problems
  • Scalability – to really make money, the operations that support the sales force need to grow at a slower rate than sales – known as having “shrinking jaws” – this should be achievable if we have the infrastructure and operating model right
  • Opportunities for Delegation – we can help you put in place the fundamental tools need to make delegation work – to allow you to focus on whatever is most important to you – and to give staff an opportunity to learn and grow