The Importance of the Business Model and Systems

“Build systems within each business function, let Systems run the business
and people run the systems. People come and go but the systems remain

— Michael Gerber

The Importance of the Business Model and Systems

What came first, the chicken or the egg? Some may argue that a business needs to articulate the
business model first, and then create the systems and processes to drive the business model.
I believe that every business is born out of the embryo of an idea that gets fleshed out and built
into a business. Although there will be an initial business model around how the business may
work, that is all theoretical. It is not until you create and perfect the processes that you know where
to take the business model.

It seems obvious that having a system should make things easier, but I think a lot of people believe
it’s difficult. Perhaps this is because they don’t have experience creating systems, and as humans
we typically don’t like change. Learning and implementing something new requires change.
In order for a business to work, it has to be modelled on an existing system or process that has
been proven to work.

Systems are not designed to complicate business, but to simplify.

There are systems in every aspect of our life. It’s what give us order and keeps things under control.
If you think about our life, systems start in families with the way we are expected to behave. When
we are old enough, we go to school and progress through the school system, and school is designed
to prepare us for future life. It requires discipline; to get up in the morning, pack lunch, catch the
bus on time, move between classes, learn, study, and hopefully graduate.

There are systems in all relationships, whether they be interpersonal, friendships, or lovers. In all
relationships, there are expected behaviours. In business, there are methods and processes that
cause us to act in a certain way. Every country has a political system, whether you like them or not,
and there is a way that we as a population are governed. So, as you can see, systems are in action
in every aspect of our lives.

The reality is, if something needs to be completed in a business, there needs to be a procedure for
it. It doesn’t need to be perfect to start with, as it will get perfected over time.
Business doesn’t have to be that systemised, but if you’re going to complete a function in business
there’s a process. It just needs to be documented and the best person to do that is the person who
performs the function. Someone who’s good at writing can pretty it up later.

“Done is Better than Perfect”
—Mark Zuckerberg

So, What Is a Business Model?

At its core, your business model is a description of how your business makes money. It’s an
explanation of how you deliver value to your customers at an appropriate cost.
In their simplest forms, business models can be broken into three parts:

  1. Cost of Goods: Everything it takes to make something: design, raw materials,
    manufacturing, labour, and so on.
  2. Cost of Sales: Everything it takes to sell that product: marketing, distribution, delivering a
    service, and processing the sale.
  3. Pricing & Payment: How and what the customer pays: pricing strategy, payment methods,
    payment timing, and so on.

Franchise Business Model

In a franchise business model, you are allowing the franchisee the blueprint for starting and
running a proven business model to someone else. You’re providing access to a national brand
and support services that help the new franchise owner get up and running. In effect, you’re
granting access to a successful business model that you’ve developed.
Understanding the problem you are solving for your customers is undoubtedly the biggest
challenge you’ll face when you’re starting a business. Customers need to want what you are selling,
and your product needs to solve a real problem.
But ensuring that your product fits the needs of the market is only one part of starting a successful

The other key ingredient is figuring out how you’re going to make money. This is where your
business model comes into play.

There are a number of questions that you need to ask yourself and evaluate.

  1. What is the problem that your business or product solves?
  2. Is there a market for your goods and services?
  3. Who are the competitors in your market?
  4. What are their strengths and weaknesses?
  5. Does your product or sector have a life cycle, and what stage is it up to?

A business model needs to include a description of a company’s:
• Products
• Target customers
• Value proposition
• Distribution channels
• Core capabilities
• Commercial network
• Partnership model
• Cost structure

So if you’re thinking of buying into a franchise business you need to make sure that it has a solid
business model and well documented systems because that will ensure your best chance of success