Creating an Attractive Business Model

Bill Warner Wednesday, March 11, 2009

Now, more than ever, investors need to see a business model that both provides an attractive return but is easy to understand and implement.

*It starts with a solid value proposition and customer traction*

Tom Taulli talks about some of the important elements of an attractive business model. Certainly having a compelling value proposition is necessary. Its key elements are:

  • Solving a compelling and important customer problem
  • Offering an innovative solution to the customer’s need
  • Clearly fitting into the customer’s purchasing priorities
  • Having a solution that is a winner over all competitors
  • Providing an attractive return on the customers investment

The more you can bring this value proposition to life by citing real customer traction will make the value proposition much more believable. Reflecting potential customer reaction resulting from your market research, describing customer satisfaction from early use of your product or service, and certainly early sales results all tell investors that you have something that buyers really want.

*More is needed to round out a business model*

Investors have to see even more than a strong value proposition. Some of the additional things they consider are:

  • Is the marketing and sales approach easy to implement and can it be scaled up quickly, looking for sales cycles that are well understood and easy to navigate
  • As a result, will the company be able to achieve attractive revenue growth quickly, looking for revenue streams that are easy to accomplish and also easily renewed
  • Is the barrier to entry to competitors high and is their good protection of the intellectual property and know-how of the company
  • Will the company achieve financial results that have the potential of providing the investors good returns in a relatively short period of time

Of course, investors always look at the management team to ultimately decide, but their story about their business model has to be compelling and convincing, and the management team has to show that they can really pull it off.

Filed Under: Angel Investment, Financing a Company, Managing Business Financials, Starting a Business



Bill Warner is the Managing Partner of Paladin and Associates, a business consulting firm in the Research Triangle Park area of central North Carolina, and is the Chairman of the Triangle Accredited Capital Forum, an angel investor network with over one hundred members throughout the southeast.

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