When faced by investors or bank mangers, business owners are often called upon to describe their business model. Many do not know what this phrase means let alone how to explain their own definition. And then there is the question: Who needs a business model?

Let me answer through the use of a brief case study. Last week in Jerusalem, I met with a very experienced and erudite business woman, who was describing her new project. She had researched in depth and had created a team. There is a proven market, waiting to be tapped into. Now it was time to approach investors. How could I help?

As a business mentor, I gently asked what was the final service? How would it be packaged? How was it to be sold? Why? Who were the actual buyers and the decision makers behind the scenes?

As fewer and fewer answers were forthcoming, the conversation became quieter in tone. There was a realisation that as  a business coach, I was asking the questions people do not want to face. And as had become obvious, what I was really asking was what is the business model. This lays out the detailed theory of how any company intends to convert ideas into cash.

Time and again, I raise these questions. For example, consider what happened when one client recently ‘confided’ in me that they felt their market had shrunk overnight. When I prodded them for ideas, they replied with variations on a theme about what they are already selling. No, I demanded. What other skills and advantages can you sell to a new community and how?

Last month, I was challenged by a software company, who wanted to know why their agents were not selling. The discussion revealed that specific parameters had not been set – which potential clients agents should approach and why, and what is the company’s unique innovate offering. The result of the changes in operation? Several overseas contracts have been concluded.

The fact is the phrase ‘business model’ is banded around by many. What it means is understood by far fewer. And if I was to rank its importance? Define it properly (and test it), and you can make a lot of money.