From Business Plan Essentials: How to Write a Business Plan
Why the Model Matters
Your business model is the operating logic behind the plan. It shows how the offer is produced, how revenue is earned, and why margins can sustain growth. Lenders and investors use it to judge execution risk, capital needs, and scalability.
Choose a Model You Can Operate
| Model | Revenue Logic | Cost Shape | When to Use | Watch-outs |
|---|---|---|---|---|
| Product / Retail | Unit sales × price | COGS-heavy, inventory | Tangible goods, brandable SKUs | Turns, shrink, carrying cost |
| Services | Billable hours / packages | Labour-heavy, utilization | Expertise-led delivery | Capacity, bench, scope creep |
| SaaS / Subscription | MRR/ARR, retention | High fixed, low variable | Recurring value, sticky use | Churn, CAC payback |
| Marketplace | Take rate on GMV | Network effects | Two-sided demand | Chicken–egg, trust |
| Franchise | Fees + royalties | Playbook-driven | Proven format, scale | Compliance, territory rules |
Make Unit Economics Obvious
- Price: how it’s set (benchmarks, value-based, contracts).
- Direct costs: per-unit inputs (COGS, delivery labour, payment fees).
- Gross margin: price − direct cost; explain improvement drivers.
- Customer acquisition (CAC): channel mix, expected CAC, and payback period.
- LTV: retention, expansion, and contribution after service costs.
Craft a Testable Value Proposition
Template: For [segment] who struggle with [problem], [Brand] offers [solution] that delivers [measurable outcome], unlike [main alternative], because [evidence-based reason why].
Keep it specific, provable, and aligned to willingness-to-pay.
Visualize the Operating Flow
Use a one-line flow to show how value moves:
Lead → Qualification → Offer/Quote → Fulfillment/Delivery → QA/Support → Invoice/Collect → Repeat/Refer
Attach SLAs, cycle times, and key systems (POS/ERP/CRM) to prove readiness.
Connect Model Choices to Financials
- Pricing & margins must match competitor quotes and supplier terms referenced in Chapter 3.
- Capacity (hours, seats, turns) must match Ops (Chapter 6) and drive revenue ceilings.
- Working capital reflects your receivables, payables, and inventory policy.
- Scalability narrative: which costs are fixed vs variable as volume grows.
Stress-Test with Scenarios
- Base case: conservative, fully supportable.
- Upside: channel conversion or price lift with proof.
- Downside: slower ramp; show cash runway and mitigation steps.
Evidence that Builds Trust
- Supplier quotes, draft MSAs, pricing sheets, and signed LOIs.
- Early customer feedback, pilot results, churn/retention from tests.
- KPIs you will track: CAC, LTV, GM, utilization, inventory turns.
Download the Unit Economics Calculator
Simple worksheet for price, COGS, CAC, LTV, and payback.