Recently I’ve noticed that a surprisingly simple concept trips up a lot of new entrepreneurs as they begin the planning process for their new business: the difference between what your business offers and what your business model is. It’s so simple this will be a very short post, but I see lots of people struggle with this distinction, so I’m going to try to clarify it for everyone so that none of my lovely followers get into trouble.
What you offer is simply what product or service you provide and the benefits of those products or services, and there may be many of them. Your business model, however, is much more than that. It is the overall framework of your business – what you offer, but also specifically how you generate revenue and keep that revenue above your costs for delivering your offerings.
The reason this issue can get tricky is that, for many businesses, there isn’t a lot of a difference between what they offer and what their business model is and the two often get conflated in conversation. Then that lack of distinction gets carried over into similar conversations about different businesses, however, and those other companies may have business models that are not just what the offering is and now the lack of distinction is a big issue because the conversation’s gone off track.
Let’s flesh this out with some examples:
Company One is a clothing retailer. The company buys clothes from suppliers and sells those clothes to consumers. What the company offers is clothing and its business model is to sell clothing to consumers for a profit. Nothing complicated there: there isn’t a big leap to get from the offering to the business model.
Company Two, however, isn’t as straight-forward. Company Two is a website that provides home improvement information and tutorials to the public through a blog and DIY instructional videos. What the company offers to consumers is this information, but that’s not how it makes money. It also offers advertising opportunities to companies that would want access to its readers and that advertising is its revenue source. So, in this case, there isn’t as straight a line between what the company’s offerings are and its business model. Its primary offering is home improvement information but its business model is to sell advertising to companies and show those ads to its readers.
You can’t build a successful business if you don’t understand your business model so it’s important that you understand the difference between what you offer and what your business model is. If you need additional help, check out my book or take my Business Builder Workshop and you’ll get access to some worksheets and exercises that will walk you through exactly how to determine what your offerings and business model are.