Having a well-defined business model allows you to allocate scarce resources with precision. Time, money and people are at a premium inside a startup, and without a clear plan of what you’ll do with them, you’re doomed. From a VC’s perspective, having a plan about how exactly you’re going to make money, or at least stay afloat financially, shows a level of sophistication. It tells them you know what the game is.

When your business model is too complex, execution becomes a ‘steaming pile of crap’. As you layer on the business model concepts, make sure they can all be peeled away. The clearer your business model, the less likely your customers are to be confused about what you’re selling. That confusion represents a barrier to buying. The customer needs to be able to grasp what’s in it for them instantly.

A clear, convincing – and realistic – business model is appealing to customers, and it signals to investors that you’re smart and serious: having a plan for how you’ll start generating advertising revenues without any users isn’t going to cut it. Keep your feet on the ground.

A clear business model forces you to do the homework that you need to research your target market, understand your customer segments and know your competitive landscape. Then you can build on a stronger foundation. 

Moreover, a clear business model sets the stage for your startup to scale. This enables you to pivot more rapidly in response to market shifts, keeping you responsive and nimble.