Credit Matters Blog

Business Models - Are They Valid In Today's Business World?

Kim Radok 21 September 2016


When I hear the words "Business Models" during a business discussion, I often wonder if people really understand the implications of such words. Describing a business model for your desired business as a starting point is completely valid. After all, we have to start process of building a business somewhere.

The other positive aspect of developing a business model, is that it allows financiers, stakeholders and other professionals to understand that you have a firm grip on how you are going to operate the business from day one. 

The real problems start after this first building phase. If there is one thing we do understand from the modern business environment, nothing stays the same. Once the business commences, there are four main emotional problems, which all business owners and their management teams will face when their business model concept confronts the real business world.

1  There is a level of comfort in using the words business model because it sounds like the owners know how the business structures and processes will achieve the desired outcomes. Even if the business doesn't work as first planned, the business owners believes they must stick with the original business model at all costs.

2  Pride is the downfall of many a person. Sticking to a failing business model because it affects the owners pride, is no different. The problem is; starting a business is such a personal issue because the business model becomes a part of the business owner's identity. Therefore, if the owner has to change the business model, the business owner may feel like they are giving up something of themselves.

3  Business owners are often reluctant to make changes to their business model as they may believe it indicates that they are a failure. In the fast changing world of today, making measured changes is one of the strategies which might allow you to stay in business.

4 The owners and management team struggle to understand that a business is subject to outside forces, sometimes beyond their control and understanding, especially in a fast moving business environment. It can be daunting to make any changes. As a consequence, to avoid the hard issues and achieve a level of self-comfort, the owners fall back on the original business model.

Using the words "Business Model" in any business setting, should only be used or maintained as long as the concept of having a business model remains useful. Too often however, business owners and their managers appear to be welded to the original business model because of emotional rather than practical issues.

At the end of the day, a business model is only as good as the cashflow and profits which are achieved from operations that keep your business operating.