Creating a successful business model is essential, whether you are starting a new venture, expanding into a new market, or changing your go-to-market strategy. You can use a business model to capture fundamental assumptions and decisions about the opportunity ahead, setting your direction for success.
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What is a business model?
A business model is a framework for how a company will create value. Business models distill the potential of a business down to its essence. A business model answers fundamental questions about the problem you are going to solve, how you will solve it, and the growth opportunity within a given market.
Business model vs. business plan
Business models and business plans are both important tools that help you create and refine your strategy. Many times you will use both when pursuing a new business initiative, but they each serve a different purpose.
A business model is the foundation for your company and products. It captures the main idea of how your business will generate revenue. A business plan goes into greater detail — it is a document that explains how you will make the business model work. Your business plan will likely include your company's goals, the resources and methods you will use to achieve those goals, and even your expected timelines and financial performance. Together, your business model and business plan describe the intended value of your product and how you plan to deliver this value to your customers.
What are some business model examples?
There are many types of business models. Each one varies considerably based on the type of organization and offering. For example, a manufacturing company will have a very different model than an advertising agency. Even within a specific industry, business models vary. Here are some common types of business models used by technology companies:
Freemium business model: A basic product is provided for free but you charge for additional services or features.
Free trial business model: Customers can experience the full product for free for a limited amount of time.
Licensing business model: Technology or innovations are monetized by licensing them to other companies.
Open-source business model: Your product is free but you generate revenue through other means such as crowdsourcing.
Subscription business model: Customers pay a recurring fee to access your product or service.
Most businesses end up using a combination of business models to reach their customers and grow over time.
What is the best business model?
There are numerous business model examples to choose from, and the optimal business model will vary for each company — depending on the industry you are in and the problem you are trying to solve for your customers.
Some types of business models are more popular and work better for certain industries than others. For example, Software as a Service (SaaS) companies often use subscription and freemium business models. This makes software more accessible to customers while providing valuable recurring revenue for the business. On the other hand, many social media platforms use hidden revenue business models to make money through advertising. By providing full access to the platform for free, these companies attract more users. In turn, this creates a more valuable audience for advertisers.
It is also worth considering the types of business models your competitors use. Say that your competitor uses a subscription business model with no free options. If you offer a freemium model, you may be able to attract new customers (including some of your competitor's customers) who prefer to try a product for free before purchasing. In this example, choosing a different business model from your competition could give your company an advantage.
Ultimately, the best business model for your company depends on what is right for your product and your customers. But whether you use a business model example template or invent a new one, building out a business model takes significant research, planning, and analysis.
How do companies use business models?
Companies across every industry and at all stages of maturity use business plans and models. Some rely on lengthy processes and build complicated models, while others move quickly to articulate the basics. Having the discipline to work through this planning tool forces internal alignment.
For established enterprises, a business model is often a living framework that is reviewed and adapted every year based on changes with customers, employees, and the market. For companies launching new products and services or entering new markets, a business model can help get them off to the right start and ensure that early product and marketing decisions are tied back to the business strategy.
How do you create a new business model?
A business model should answer important questions about your business and set out a strong vision for the business. The key components of a business model should include relating to your target customers, the market, organization strengths and challenges, essential elements of the product, and how it will be sold. Establishing this foundation guides the next planning tool — your product roadmap.
Building your business model requires researching and defining a few core components. Here is a list of the essentials to include when you create a business model:
Component | Definition |
Vision | High-level overview of the core essence of your product strategy, including what is being built and why |
Key objectives | Definition of your top-level goals and how they will be measured. |
Customer targets and challenges | Description of the different types of target customer and their pain points |
Solution | How your product will solve those pain points |
Value | Key characteristics that differentiate your product or service |
Pricing | A view into what your solution will cost and how it will be sold |
Messaging | External explanation of your product that communicates key points of value to customers |
Go-to-market | Channels you will use to reach and sell to customers, such as social media |
Investment required | Costs required to make your solution successful |
Growth opportunity | Identified ways your business will grow |
Business model canvas and template
Many people associate business models with lengthy documents that describe a company’s problem, opportunity, and solution in the context of a two-to-five-year forecast for costs, growth, and revenue.
But business models do not need to be a long document. A concise, visual document is an effective way to distill the key elements of your strategy and ensure everyone understands the high-level approach.
Below are two types of business model example layouts you can use to succinctly and objectively assess what is possible and what challenges could arise for your business:
Aha! business model canvas
Articulate the foundation of your product or service in a flexible canvas-style format with the Aha! business model canvas. This type of business model developed by Aha! is the most complete template available. It is based on the Aha! team's 20+ years of experience building breakthrough products and software companies. The focus is on capturing key elements like why the solution is worth buying (messaging), pain points of the buyers (customer challenges), and ways you will grow the business (growth opportunities). You can drag and drop each component into a custom layout.
As organizations and companies become more focused on delivering real business value, it becomes increasingly essential for the board of directors and senior executives to focus their attention on investments that deliver true value. Initiatives throughout the organization, including new products and services, innovations, CAPEX proposals, IT projects, investment opportunities, new business ventures, and factory relocations, are either accepted or rejected based on their business value.
To get the board, the executive team or external stakeholders and investors to approve a project, it is necessary to build a robust and compelling business case that demonstrates why the project is needed and what the benefits of the project will be when it is finalized. The reasons and benefits of a project may seem perfectly obvious to you and others intimately involved with it; however, they may not be so apparent to stakeholders and other decision-makers. Often, they deal with a myriad of business units, objectives, and tasks that need to be done. Therefore, a well-prepared business case can help your project stand out amongst the competing priorities within the organization and may be the key to getting approval and finances for the project.
The business case is a process of critically examining the opportunities, alternatives, project stages, and financial investment to recommend the best course of action that will create business value.
Business cases help organizations make better investment decisions.
5 Steps Business Case Framework
The five critical steps for creating the business case are:
Step 1: Confirm the Opportunity
Describe the situation and the business opportunity that your proposal will impact. This will include the background to the project, the investment logic and the high-level business requirements.
We develop the strategic logic for the business case. Then, we define how the project supports the organization’s strategic objectives. It’s much easier to justify the business case if you can show how it helps achieve one or more strategic objectives. Then, we get the sign-off from our business case project sponsor.
Step 2: Analyze and Select the Short-listed Options
Identify the alternative approaches and select three or four options to analyze. Gather information about each alternative, analyze the options and develop the shortlisted options.
We develop a long list of alternative solutions before selecting our short lists of options.
The longlist should include a wide range of reasonable options and a detailed evidence-based assessment to determine a shorter list of these options.
Step 3: Evaluate the Options
Evaluate how the options will deliver the business objectives, quantify the benefits of each potential solution, and then select the preferred option, taking into account the strategic, financial and societal value created and the risks.
Quantifying the business benefits is central to strategic planning, financial, cost-benefit, and business case analysis. So first, we develop the financial projections. This includes the detailed revenue and operational cost model and financial model. Next, we create the cash flow statement for our discounted cash flow projections (or DCF) analysis. Finally, we confirm the hurdle rates are the minimum acceptable internal rates of return for investments, which is an essential metric for investors, private equity firms and management teams to evaluate potential opportunities.
Step 4: Develop the Implementation Strategy
Create the implementation plan for the preferred option, detailing how to achieve the business objectives, the resources needed, the project team, who will be accountable for each milestone, and how to mitigate the project risks.
In these steps, you confirm the total project cost. In addition to estimating the total project cost, we break down the project costs for each milestone.
This step helps you quantify the CAPEX costs and the ongoing costs.
Step 5: Develop the Recommendations and Get the Approval from Decision-Makers
The objective is to get approval from the board, executive team, external stakeholders or investors for the business case.
Confirm the recommended option. Create the business case documents and present the business case recommendation to the board, executive team or investors for approval to proceed.
It's writing the business case, a pervasive document recommending your organization's best course of action.
How you frame the business case recommendations is essential. The proper business case structure helps the decision-makers understand what needs to be done and why. It also provides information about how much time and money will be required to complete the project.
It answers the questions the board, executive team, external stakeholders, and investors will ask. What are the risks? What are the upsides? What is the cost of doing nothing? What is the financial impact of this investment?
How to write a good business case?
You must complete all these steps to create a solid business case.
Our Five Steps Business Case Framework helps you write a business case that can help you get the resources you need to get the approvals and manage and implement a successful project.
A compelling business case outlines the expected benefits of this investment decision.
The business case document should explain the following:
The investment decision.
Key objectives for the project.
The business needs.
The project definition. Provide necessary background and supporting information to put the investment into context.
Describe how the investment aligns with the organization's strategic business plan.
Describe the different options explored and why you are recommending this option or solution.
Provide a robust budget, an estimate of the whole-of-life costs of the investment and its financial benefits and the projected financial statements.
The business benefits include an estimate of the non-financial benefits.
How to make sustainability core to the recommendation and outcomes.
Describe the implementation approach, including timelines, resources, the procurement strategy, project governance, and how to embed sustainability practices.
Rigorously assess the inherent risks, different scenarios and sensitivities, including how they are likely to affect the investment and outline strategies for mitigating them.
Convey the level of uncertainty surrounding the proposal.
Provide options for the board and management to consider in reaching a decision.
In large organizations, there are often guidelines defined for the business case writer to help them write what's called an "investment appraisal" for their business case.
Any leadership or professional role may assume responsibility for producing and writing the business case if the decision-makers trust that individual. Thus, executives, business leaders, project managers, business analysts, internal and external consultants, and IT managers are included.
The project sponsor or project manager may lead the development of the business case.
The goals of the recommended project, the project customers, users and stakeholders, and the business outcomes and benefits are more important than technology, domain knowledge, or deliverables in a robust business case.
The business case writer focuses on evaluating, analyzing, quantifying and delivering the business value. Poor project results can result from insufficient attention to the details of a business case and accompanying analysis.
The depth of analysis documented to support your case will be based on the size and complexity of the investment decision. For example, the business case for an investment of $5m or less is much simpler than the business case for an investment of $500m or more.
The business case sets out a justification for the investment that a potential investment would require.
Preliminary and Full Business Cases
A preliminary business case is often prepared for large investments and high-risk projects as the first step in preparing the full business case. Then, it is used to decide whether the potential project merits being investigated in more detail. For example, the preliminary business case may include cost estimates with a 20% tolerance, whereas the full business case would include costings with less than a 10% tolerance.
The business case should be prepared early in the project before any decision has been made to initiate. It allows the organization to explore high-level options for meeting business requirements. This may include an assessment of comparable projects.
Experienced organizations may have in-house expertise allowing them to prepare a business case. However, some organizations will not have the full range of skills required and may wish to appoint an independent management consultant to assist them.
These six business case examples highlight the essential information required in developing business cases for recovery and growth.
New product business cases justify the investment in developing a new product. They are created to evaluate the merit of the new product idea by determining the costs and revenues associated with the product.
This business case example justifies the investment to introduce a product or service into a highly competitive market.
The business case addresses:
Strategic positioning of the new product/service/innovation in the market.
Market demand and pricing.
The Go-to-Market strategy.
The product and production feasibility, and the financial viability of a new product.
Most new product business cases include a roadmap describing a new product's development.
Service delivery model.
Customer service and supporting clients and channel partners.
The equity investment business case is a detailed document to present the case for financing an investment opportunity. It outlines the proposed investment, the projected return on investment, and the risks involved.
The business case focuses on how to finance the investment, such as whether or not debt or equity financing would be most appropriate. In addition to presenting the financial details, the business case describes how the funding will be used.
The business case addresses:
The opportunity and return on investment for the investor or financier.
How does the business or joint venture scale up to achieve the projected growth.
The proposed investment, the projected return on investment, and the risks involved.
How to finance the investment, such as whether or not debt or equity financing.
How will the financing be used? First, it details where the funding will be applied in the business, such as capital, working capital, operating expenses, etc.
Explains the return on investment (ROI) from the investment.
CAPEX business cases are documents that show the financial justification for planned capital expenses.
CAPEX includes the costs of purchasing new or replacing existing physical assets, the cost of acquiring, constructing, or refurbishing a building, and the costs incurred in starting up a new business.
To win the approval of a CAPEX business case, you need to demonstrate that its benefits outweigh its costs.
The business case for a CAPEX project will include details about how the project will save the company money.
These details may consist of benefits like reduced operating costs, increased efficiency, improved revenues, and new or improved capabilities.
A high-risk CAPEX project offers the potential for a high return on investment but comes with a high level of uncertainty. Therefore, it is not a viable investment without a detailed business case that clearly shows how it will benefit the company.
The business case summarizes all the factors that make a CAPEX project worth investing in. It summarizes the financial, strategic, operational, and organizational factors influencing the decision.
Customer experience (CX) refers to how customers perceive your brand based on their exposure to it. Therefore, customer experience is the sum total of the customer’s perception of your organization.
Customer experience business cases recommend a project or initiative to improve client experience.
The business case makes the recommendation for the decision-makers to approve the project, funding and resources. The business case explains:
How the client experience will be improved
How improving the customer experience (CX) will impact the bottom line.
How can the investment in CX reduce operational costs, such as the cost to serve?
The critical CX metrics:
Net promoter score (NPS)
Customer satisfaction (CSAT)
Customer Churn
Annual recurring revenue
Sales conversion rate
Customer long-term value
The return on investment (ROI).
A government grant business case is the document a business submits to a government authority for grant funding.
It is an important part of a grant proposal. It illustrates why the grant request is a good investment.
This business case justifies the investment to expand or diversify the business and achieve the government’s policy outcomes.
The business case addresses:
Why is a government grant needed?
The expansion strategy and the proposed investment.
The market demand, export growth and import replacement.
The roadmap to expand the business.
The jobs growth from the investment.
The outcomes for the industry or sector.
How will the grant bring forward the investment?
How will the business fund its contribution?
Infrastructure business cases are economic business cases to justify infrastructure projects or significant industry or sector projects.
Major infrastructure projects take many years to build and cost multiple billions. They also employ thousands of workers at their peak. Several business cases are developed along the investment journey until the final business case is approved. Multiple options are explored and analyzed to create the best possible business case. Then the shortlist options are evaluated in detail to recommend the best option. These types of business cases also address environmental impacts.
Three types of business cases are developed in high-risk, high-value projects:
Strategic or Initial business
Preliminary business case
Full business case.
The preliminary business case or feasibility study can be more than 1,000 pages, including appendices costing several million dollars. The full business case can cost millions and take at least 12 months to develop, including significant community consultations.
Chase Consulting has been developing business cases for over twenty years. A common characteristic of our successful business cases is that we followed the Five Steps Business Case Framework for developing business cases and used a comprehensive set of business case templates. This approach ensured that we created high-quality business cases, saving us time and increasing productivity.
A robust business case is at the heart of all new initiatives and significant business decisions.
Here are six successful business case examples:
Improving the customer experience (CX)
Accelerated investment to enter new markets - Government grant business case
Equity investment to scale up the business
Customer service improvement
Service planning to meet population growth
Business expansion to enable revenue growth
These six business case examples were successful because we clearly articulated:
The Recommendations and the Investment Decision
We framed the recommendations for the decision-makers in a way that clearly communicates the value of getting the approval to proceed.
The Strategic, Financial and Societal Benefits
We used an evidence-based approach to recommend the preferred option.
We focused on business benefits realization.
The Options Analysis and Scenario Analysis.
We strategically evaluated the shortlisted options.
The Project Financials
We strengthen these business cases by including solid financial analysis, such as Net Present Value, Rate of Return, Profit to Investment Ratio and Discounted Pay-Back Period.
Deliverability and the Implementation Plan
We developed a feasible project plan, planning each milestone and addressing the implementation risks.
The Risks
We identified, analyzed and evaluated the major risks, recommending mitigating actions to increase the project’s overall success.
If you want to be sure that your business case is the best that it can be, here are a few things that you should keep in mind:
Think of your business case as a sales pitch with robust analysis and justification - you are creating a compelling business case.
The process of developing a business case - use our Five Steps Business Case Framework
Use the proven business case templates so you can easily start your business case without all the headaches.
Write the business case for decision-makers to approve your recommendations.
Present the business case as a persuasive presentation.
Consider getting business case help.
To get funding for your opportunity, you need a strong business case. It will help you get up and running as soon as possible.
Our free Business Case Guide explains the 5 Steps to Developing a Solid Business Case.
Using a set of proven business case templates, how-to-guides and sample business case will increase your productivity, save time, and improve the quality of your business case.
Plus, a high-quality business case makes your project stand out amongst the competing priorities within the organization; it may be the key to getting approval and funding for your project.
So how do you write a high-quality business case with compelling recommendations? You know, the evidence and recommendations that the executive wants to support, agree with and approve.
Here's how - download proven, customizable business case templates.
The Business Cases Course is designed for individuals and teams who want to build their business cases using the Five Steps Business Case Framework for successful business cases.
The course will benefit individuals and teams from all organizations, including private and public sector and non-profit social enterprises. You learn how to create, analyze, evaluate & communicate a successful business case to meet your organization's needs.
The course can help you save up to 30%-40% of your time and cost in preparing business cases.
We help business leaders expand their capabilities through professional development and business case advice.
We bring over 20 years of experience to help you strengthen your business cases and present the value of your project in a manner that enables you to get the funding and support you need.
Chase Consulting is a professional member firm of the Australian Institute of Management Consultants, recognized in 58 countries representing evidence of the highest consulting standards and adherence to the profession's ethical standards.
We will help you achieve your business case goals and professional development objectives.