We want to identify the core needs so we can create a blueprint our suppliers can use. Let’s start from the bottom up. Let’s look at the most critical needs of your business. Let’s first explore how your business generates a revenue.
It’s your business model that describes this process. A business model looks at monetisation. From distribution to retail. From manufacturing to subscription. Business model’s are varied.
We can fall into the trap of thinking this detail is self-evident. Whoever is encountering your business won’t have your insights. We shouldn’t make assumptions.
We need a laser sharp blueprint so it’s important to describe this in your specification. If you don’t mention it, then your supplier may not know.
Fulfilling your business model is your key goal, your primary need. You are investing in this project for a return on investment The business model is the means by which you can achieve that return.
There might be multiple business models or a single business model. For example I have seen e-commerce sites which have the following:
- Direct retail – business to consumer. Selling direct to the consumer.
- Subscription – A monthly payment for a product of service.
- Wholesale – We have business to business sales as well.
In this instance, identifying these three as separate business models helps ensures we don’t neglect any of them.
Using ROI as a guide
Hand in hand with revenue comes profitability. You may have heard the expression:
Revenue is Vanity, Profit is Sanity.
Succesful business are profitable. Our project needs to provide a return on the investment and so we should consider this as our other core business need.
We can use Return on Investment (ROI) as a measure for all our needs.
ROI is a core requirement of any business. It’s obvious but important. It’s a main guiding principle. So, when investing in your business it is important to plan for a solid return and use this to describe your requirements.
If you are not expecting a return on your investment, then you are not in business. ROI can be calculated using the following:
ROI = Gains – Cost / Cost
The only factor this ROI equation doesn’t bear in mind is time. This is something to consider.
So, when we think of ROI we should ask the following. Will it:
- Increase my gains
- Reduce my costs
- Reduce time taken
If I spend X I expect to make more than X over Y months. For the scope of this guide, ROI need not be any more complicated than this. We have the key variables: cost, time and profit.
As we look at the business needs in the coming pages, we can refer back to these primary needs. This is the foundation level in your hierarchy of needs.