How to develop a business operating model

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Your business operating model is the basic framework that your company follows to get your products into the hands of consumers. Models vary by industry and market conditions, but there are several things to consider whenever you develop or refine your template.

Skill level:
Moderate

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Instructions

  1. 1

    Examine your entire production process and figure out if there are external services you could cut out. It may be cheaper in the long run for you to make small components, rather than buy them from a supplier. Also, some things that you make yourself may be cheaper to buy from someone else.

  2. 2

    Remember that the end of your business operating model is always the consumer. Refocusing some of your services around the needs of the consumer is one way to help increase your business, but you'll also need a marketing plan to reach the customer.

  3. 3

    Figure out what you need to deliver the best product. These needs can vary from things like state of the art manufacturing facilities to highly trained professionals managing your factory workers. Your requirements can also include intangible things like marketing campaigns and grassroots support.

  4. 4

    Consider geographic locations for your business when you develop your model. A centralized location will help decrease transportation costs, while basing your company in an educated area could make more qualified workers apply to work for you. Property cost, taxes and development must also be considered as part of your start-up and operating costs.

  5. 5

    Incorporate environmental policies in the plan that you create. Sustainable development guidelines preserve the environment and also help your business appeal to people who are very interested in conservation.

  6. 6

    Work a production threshold into your business operating model so you know how much growth you can sustain before you need to expand your facilities. Your limit may depend more on capital than space if you are in a small start-up company.

  7. 7

    Create a target operating model that details how the company will develop in the best case scenario. In addition to things like market share and financial goals, the target model should include infrastructure, personnel and technology growth.

Tips and warnings

  • Once you develop your operating model, try to sum up your plans in just one sentence that explains what you make, who you sell it to and why you're doing it. Use this sentence in your company literature to lure investors to your company.
  • Your operating model must also include things like company culture, decision rights and use of technology.

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