How-to-Create-a-Business-Model-Key-Steps-Insights

How to Create a Business Model: Key Steps & Examples

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A business model is a framework that powers your company, driving how you create, deliver, and capture value. It’s more than just the product or service you offer—it’s the strategic approach that transforms your ideas into profit.

From subscription-based models generating consistent revenue to direct-to-consumer e-commerce models offering convenience, a company’s business model is the foundation that shapes every customer interaction and experience. 

It’s not just about what you sell but how you sell it—and that’s what ultimately determines your long-term success.

In this guide, we’ll explore how to create a business model and how understanding and refining it can give you a competitive edge in the market. 🚀

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⏰ 60-Second Summary:

  • Effective strategies, such as understanding target markets, market segmentation, and the role of personas and user experience, are crucial for success in business modeling 🎯
  • A business model outlines how a company creates, delivers, and captures value, driving profit, growth, customer engagement, and innovation 💡
  • Key types of business models include subscription, franchise, Software-as-a-Service (SaaS), business-to-business (B2B), marketplace, eCommerce, and freemium, each with its unique purpose 📊
  • The business modeling process typically involves defining goals, identifying the target audience, clarifying the value proposition, and refining the approach 📝
  • Using the right tools and templates is essential for creating successful business models. For instance, ClickUp Docs, Whiteboards, and Templates help you brainstorm and create a solid business model 🛠️
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Understanding Business Models

Simply put, a business model is a strategic plan of how a company will make money. The model describes how a business takes its product, offers it to the market, and drives sales.

 The key components of a business model include:

  • Customer relationships: Focuses on how you foster lasting relationships and build customer loyalty over time
  • Value proposition: Defines what makes your product or service unique, compelling, and valuable to your customers
  • Target audience: Identifies your ideal customers and their most pressing needs
  • Revenue streams: Explains how your business generates income
  • Cost structure: Highlights the main operational expenses driving your business
  • Key resources: Outlines the essential assets—physical, human, financial, or intellectual property—critical to your success
  • Distribution channels: Describes how you connect with and deliver your product or service to customers

Businesses can craft a clear path to growth and profitability by defining these elements.

Difference between business model and business plan

While a business model and a business plan sound similar, they differ in scope and size. Let’s understand in depth.

A business model defines how a business operates. It focuses on the value delivery and revenue streams. 

In contrast, a business plan is a detailed document outlining what the business aims to achieve and how it plans to achieve it. The plan contains market details, financial projections, operational details, etc. 

Similarities between Business Model and Business Plan

ObjectiveBoth are the foundational elements of a business and outline the strategies required to achieve profitability and deliver value to customers
Underlying elementsBoth comprise key elements like value proposition, customer segments, revenue streams, and price models with varying granularity
Strategic planningBoth require detailed market research and analysis for informed decision-making and strategic planning
AudienceBoth are used by internal stakeholders, such as management teams, and external parties, such as investors and lenders, to evaluate the business’ viability and strategic approach
AdaptabilityBoth need to be reviewed and updated periodically to reflect changes in the market conditions, business goals and strategies, and operational constraints

Differences between a business model and a business plan

FeaturesBusiness model3. Flexibility
1. FocusOffers a high-level overview of the business’s value proposition, customer cohorts, revenue streams, and key activitiesProvides an exhaustive analysis of all aspects of the business, including market analysis, operational plans, business strategies, financial forecasts, etc.
2. ScopeIt helps form and test the business idea, granting a clear understanding of how the business intends to create and capture valueServes to provide a detailed roadmap of business operations, attract investors or secure finances, and guide strategic planning and execution
3. FlexiblityHighly responsive to changes and can easily adapt to market shifts and feedbackIt is more rigid due to the comprehensive nature
4. When is it draftedOften created and followed in the early stages of a business to validate the concept and explore different ways to generate valueTypically created while seeking external funding or when a detailed operational roadmap is required

🔎 Did you know? The idea of business models isn’t new—marketplaces in ancient Rome had their systems for trading goods and earning profits, laying the groundwork for modern business strategies!

Think of the business model as a conceptual framework with the business plan as a practical implementation guide.

The role of unique value propositions in business models

The value proposition is at the heart of any company’s business model. 

A value proposition is a core offering that pitches a tactical solution to address specific customer pain points. It also sets your business apart from competitors and convinces customers to transact with you.

For instance, Patagonia focuses on high-quality, durable, and repairable products while minimizing its environmental impact. Its value proposition includes the following:

🌿 Environmentalism: It is committed to protecting the environment and reducing the carbon footprint. 

🌿 Sustainability: It uses sustainable practices like recycling clothes

🌿 Accessibility: Patagonia tries to make its product accessible to as many people as possible through its second-hand clothing value prop

Finally, their value prop is reflected in their mission statement too: “We’re in business to save our home planet.”

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Types of Business Models

Business models may vary depending on the type of business, organizational goals, target markets, and industries. 

Here’s a lowdown of some common types of business models:

1. Subscription business model

Subscription models focus on generating recurring revenue by charging customers a regular fee—monthly, quarterly, or annually. 

This business model makes revenue predictable and thrives on customer retention and long-term engagement. 

Companies operating this business model prioritize customer satisfaction and continuous service improvement, ensuring subscribers stay committed over time. Cultivating such loyalty also unlocks opportunities for upselling premium tiers to your most loyal customers.

✨ Here are some prominent examples to consider:

  • Duolingo: They provide free access to language learning modules with a paid subscription to advanced features like offline lessons
  • Netflix: It offers on-demand streaming, where customers pay a subscription fee for ad-free access to an exhaustive content library

Pros and cons of the subscription business model

Pros ✅Cons ❌
Guarantees predictable and recurring revenue streamsThe customer acquisition cost is initially high.
Unlocks opportunities for upselling or launching new servicesRequires the continuous delivery of value to retain subscribers
Cultivates customer loyalty through ongoing customer engagementCustomers may cancel anytime if they feel overwhelmed by too many subscriptions

2. Franchise business model

Franchising involves licensing a business’ branding and operational model to third-party operators. This allows companies to scale rapidly while franchisees benefit from an established brand reputation. 

The success of this model depends on strong business process management and consistency across locations, made possible through standardized processes, comprehensive training, and stringent quality monitoring. 

It’s an excellent model for businesses expanding geographically without directly owning all outlets.

Some prominent examples include:

  • Subway: They offer flexibility in customizing menus in franchise elements while maintaining the core brand message and processes
  • McDonald’s: It is known for its global presence and uniform services, exemplifying the operational success of the franchise business model

Pros and cons of the franchise business model

Pros ✅Cons ❌
Facilitates rapid business expansion with lower capital investment into brand buildingFranchisors have less direct control over business operations
Generates consistent revenue through franchise fees and royaltiesThis can result in legal disputes between franchisees and franchisors
Shares a proven business framework for franchisees to followFranchisee mismanagement can put brand reputation at risk

3. Software as a Service (SaaS) model

The SaaS model delivers a software product, typically over the Internet. The subscription fee offers a licensed copy of the software and ongoing support and updates. 

Such a model eliminates the need for physical installation or ownership of tangible items, adding convenience and scalability. It demands a focus on innovation and regular feature updates to meet customer needs and match market requirements. Quick product distribution through cloud platforms makes rolling out product enhancements and feature updates easier.

✨ Here are some prominent examples:

  • ClickUp: It is the everything app for work that combines project management, knowledge management, and communication, all powered by AI
  • Salesforce: They provide customer relationship management (CRM) solutions to aid businesses in optimizing sales and marketing

Pros and cons of the SaaS business model

Pros ✅Cons ❌
The low upfront cost to customers promotes software adoptionDepends heavily on reliable internet connectivity for usability
Provides a scalable model with centralized updates and maintenanceRequires continuous development and maintenance, which is resource-intensive
Generates data-driven insights through user analytics to enhance product/serviceHigh competition in the SaaS space calls for strong differentiation

4. Business to Business (B2B) model

The B2B sector involves delivering a product or service from one business to another rather than facilitating direct sales to consumers. 

A B2B company’s business model requires high trust and long-term commitments. At the same time, B2B operations often involve complex sales cycles, product customizations, and long-term partnerships that demand proactive relationship management and effective communication.

✨ Here are some examples:

  • Cisco: The tool specializes in networking hardware and software solutions that are tailored to corporate requirements
  • Microsoft: Though Microsoft also offers products directly to consumers, it offers business tools like Azure cloud services to help enterprises boost productivity and scalability

Pros and cons of the B2B business model

Pros ✅Cons ❌
Possesses higher revenue potential due to the size of the transactions involvedHas longer sales cycles and complex decision-making processes
Offers the opportunity to specialize in niche markets with high demandIt demands greater customization, which increases the complexity
Establishes long-term relationships through contractsRequires deep industry knowledge, expertise, and domain authority

5. E-commerce business model

The eCommerce business model focuses on selling goods and services through online platforms over marketplaces or dedicated websites. 

It thrives on convenience and low operational costs, allowing customers to shop from anywhere and benefit from competitive pricing. As an umbrella model, e-commerce covers born-on-the-internet startup business models, direct-to-customer (DTC), or drop shipping.

✨ Some prominent examples include: 

  • Shopify: It empowers businesses to create their online stores to establish a branded online presence
  • Amazon: Amazon is the world’s largest eCommerce platform, offering everything from books to electronics to apparel to groceries with fast delivery options

Pros and cons of the eCommerce business model

Pros ✅Cons ❌
Accessible to a global client base, which expands customer reach The e-commerce sector is heavily saturated, which calls for aggressive strategies
Data-driven insights for optimizing business strategies, like personalized customer journeysDependence on online channels for attracting traffic, advertising products, and facilitating transactions
Offers convenience to customers, which boosts sales potentialVulnerable to cyber threats and data breaches

🧠 Did You Know? The oldest business in the world is Kongō Gumi, a Japanese construction company founded in 578 AD. The family-owned business built Buddhist temples and other famous buildings. 

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 How to Create a Business Model: A Step-by-Step Guide

Creating a successful business model requires a blend of vision, strategic thinking, research, and creativity. 

Here’s a stepwise guide:

Step 1: Define your vision and goals

Start by outlining your business’ vision and objectives. 

To do this, ask yourself:

  • What is the short-term objective? What are your long-term goals?
  • What problem are you solving?
  • How will we make money? Who will we charge?

The answer to these questions would be the guiding principles at every stage of the business modeling process. 

A clear vision will also help you communicate your purpose to stakeholders, including investors, employees, and customers, to foster greater alignment and higher motivation. Such a solid foundation ensures that every decision you make aligns with the overarching objectives.

Try using ClickUp Brain to generate a vision and objectives for your company.

Step 2: Identify your target customers

Next comes the part where you scour the market to flesh out your target audience. 

To do this, ask yourself: 

  • Who is the buyer, influencer, and blocker in the purchase decision?
  • What age bracket/ gender is your target audience? 
  • What are their income levels? 
  • Where do they spend their time and money?
  • How tech-savvy are they?

Once your market research has given you a brief idea of your customers, you must dive deeper to understand their needs, preferences, and pain points. 

To make your findings actionable, develop a detailed buyer persona that reflects your audience’s motivations, challenges, and decision-making patterns. 

Categorizing your audience into groups based on shared traits, such as demographics, behavior, geography, purchasing power, etc., allows you to personalize your sales and marketing approach depending on the customer cohorts.

Tools like surveys, interviews, and analytics will bring you closer to your target market. This will help nurture strong relationships with your target customers to enhance product development, sales and marketing campaigns, and service delivery.

💡Friendly Reminder: Once you have identified your target audience segments, introduce your product in the market, and continue to survey and research your power users. In the early stages of a company, the product might be liked by different segments, but eventually, as the business matures, you can pin down the champions and core users of your offering.

Step 3: Form your value proposition

Your value proposition should clearly explain why customers should choose you over your competitors. 

Some common value proposition examples include cost savings, premium quality, convenience, innovative ideas, or superior customer service. Focus on these unique benefits to win over your customers. Keep it concise, measurable, and tied to specific outcomes. 

For example, rather than pushing “superior service” as your value proposition, you can present it using strong metrics like “24/7 customer support with a 99% resolution rate” for greater impact.

Sometimes, the value proposition may vary depending on the customer segments. For instance, budget-conscious customers may appreciate your pricing strategy more. 

On the other hand, customers with significant disposable income would value convenience, comfort, and customer service above cost-efficiency. So, match the value proposition with the defining trait of different customer segments to relate with a broader client base.

Step 4: Select the right business model

You’ve already seen several types of business models from which to choose. You have some traditional business models, like product- or service-based models, and then there is business model innovation, like SaaS and eCommerce.

Make sure you choose a model that aligns with your product/service and target market. For instance, the subscription model will generate recurring revenue. 

The business model should also support scalability and profitability. For example, the freemium model will deliver value to price-sensitive users and expand the user base with sufficient opportunities to attract and convert paying customers.

Step 5: Identify revenue streams

Next, you must identify how your business will generate revenue. 

Some typical revenue streams include:

  • Revenue sharing model with key partners: collaborating with partners to proportionately distribute profits
  • Direct sales: selling products or services directly to the consumers
  • Subscription fees: getting regular payments for ongoing access to services
  • Advertising revenue: generating income by displaying ads on your platform
  • Licensing or franchising fee: monetizing intellectual property or brand value
  • Commission or brokerage: earning a share from the transactions on your platform

Ensure your revenue model aligns with your business type, market research insights, and customer expectations. Consider diversifying your revenue streams to reduce risks and create more growth opportunities.

Step 6: Map out key resources and activities

In this stage, detail the resources, processes, and partners required to deliver the value proposition. 

This includes:

  • Key partnerships: Suppliers, vendors, distributors, etc.
  • Operational processes: Manufacturing, product/service delivery, sales and marketing, etc.
  • Critical resources: Talent, technology, intellectual property, supply chains, etc.

Break these entities into short- and long-term requirements to dedicate sufficient time, effort, and capital. 

For example, a retailer prioritizes establishing vendor relationships, whereas a SaaS business focuses on developing a robust tech team. Doing so also helps identify any gaps or bottlenecks that could result from smooth operations.

Remember, you must only focus on the key activities and resources that make it possible to extend your product or service.

Step 7: Create a cost structure

The entire business model falls apart without a solid cost structure. After all, every business needs to be financially viable, if not profitable!

Divide the costs into two categories—fixed and variable.

  • Variable costs are subject to market trends, business operations, inventory levels, etc. These could be expenses related to production, marketing, raw materials, etc. 
  • Fixed costs include expenses like salaries, rent, etc., that remain constant regardless of the production levels

Such categorization helps in financial planning and pricing decisions. It also helps set a realistic break-even point where the revenue matches expenses. Conduct this exercise periodically to identify inefficiencies and savings.

Step 8: Have a two-fold customer strategy

Every business model should have a two-fold customer strategy—one to acquire new customers and the second to retain existing ones. 

Your customer acquisition and retention strategy may involve digital marketing campaigns, referral programs, loyalty programs, and exceptional customer support. 

The objective here is to cultivate meaningful and long-term customer relationships. Deploy the two strategies as complementary forces, with one expanding your customer base and the second deepening relationships, boosting lifetime value, and promoting organic growth.

Step 9: Invest in tools and templates

Investing in the right tools and templates is crucial to efficiently managing and refining your business model. Business management software can streamline various aspects of the modeling process, from tracking key metrics to analyzing performance. 

Software solutions like ClickUp digitize the entire process and equip you with the tools and resources to make smarter, data-driven decisions. 

As an all-in-one productivity tool, it helps you organize tasks, set goals, and monitor progress in real time, ensuring that every element of your business model is aligned and optimized. 

Plus, it grants you access to business model templates to streamline your work operations. After all, there’s a lot of planning and execution involved, and you don’t want anything slipping through the cracks! 

Business Model Canvas Template

Create a successful business plan or launch new products using ClickUp’s Business Model Canvas Template

ClickUp’s Business Model Canvas is a powerful template that allows you to outline, analyze, and refine your business model. This business model canvas is a structured framework that maps out key elements—value propositions, customer segments, revenue streams, and cost structures—all in a single platform. 

Whether you’re looking to create a startup business model or generate innovative ideas to revamp the business model of an established company, this template is the perfect tool to bring ideas to life. 

Ideal for: Entrepreneurs, startups, small business owners, product managers, and corporate teams looking to create, refine, or optimize their business models.

For something more niche, you have the Lean Canvas template for startups focusing on key metrics and risks or the Whiteboard Business Model Template for collaborative brainstorming and planning. Choose from a variety of options and take flight without starting from scratch.

💡Bonus Tip: When using lean canvas templates, make sure to:

  • Clearly define your problem to keep your focus sharp 🔍
  • Identify your customer segments to target the right audience 🎯
  • Highlight your unique value proposition to stand out from competitors 💎
  • Spot key risks early to stay ahead of potential challenges ⚠️
  • Prioritize resources effectively to maximize impact 💪

Step 10: Test, analyze, and iterate

Perfecting your business model needs continuous testing and iteration. 

So, test your model by running pilot programs or launching a minimum viable product (MVP). Collect customer feedback, analyze results, and fine-tune your strategy to improve alignment between your business and customers.

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Analyzing and Improving Business Models Through Competitor Analysis

Knowing how to create a business model is just half the battle. The other half revolves around continuously analyzing and optimizing the business model to keep up with market trends, customer demand, and organizational goals. 

In this regard, watching your competitors’ strategies can provide valuable insights. This combination is the key to designing a winning business model. Here’s how you can go about it:

Entity to examine Questions to ask❓Action to take 💪
Value propositionWhat problem are they solving? What’s their unique value proposition? Why do customers choose them?Address gaps in competitor offerings by enhancing your unique benefits. Aim to solve problems they overlook.
Revenue streamsHow do they make money? Do they have multiple revenue streams? How have they blended different streams into their revenue model?Adopt or adapt their successful revenue models while introducing new and complementary revenue streams.
Target marketsWho are their target customers? What are some common customer segments? Do you notice an underserved customer segment that can become your potential customers?Develop targeted marketing campaigns or launch new products/features for underserved market segments.
Cost structuresWhat is their operational cost? Who are their suppliers/vendors? How are they making their raw materials, processes, technologies, or supply chain more cost-effective?Introduce cost-saving methods observed in competitor operations, such as better vendor deals or efficient processes.
Customer engagementHow do they interact with their customers? What are some customer engagement channels for marketing, sales, and support? Do they have a loyalty program? If so, what’s special about them? Integrate standout engagement strategies that resonate with your target audience, such as personalized experiences or attractive loyalty programs.
Performance metricsHow is the competitor performing across growth, profitability, and market share metrics? What is the general public opinion on their brand?Set performance benchmarks based on competitors’ achievements and aim to exceed them with unique innovations.

Such a detailed competitor analysis doubles as a SWOT analysis of your business model, where you can discover untapped opportunities, address weaknesses, and build on your strengths! 

ClickUp Docs

On this note, ClickUp helps you streamline your business modeling process by easily documenting ideas, tracking performance, and making data-driven decisions.

Get your entire team involved in preparing the business plan with ClickUp Docs

For instance, ClickUp Docs allows you to centralize all your business plans, value propositions, and strategies. Its real-time collaboration features allow your team to seamlessly share insights, brainstorm ideas, and refine your business model.

ClickUp Whiteboards

Use ClickUp Whiteboard to create a rich business model canvas

ClickUp Whiteboards helps you create a rich business model canvas that depicts your plans and ideas. Brainstorm customer segments, key activities, and revenue streams over a visual, collaborative, and interactive business model canvas.

We retain all the business problems in one place and can focus on each problem simultaneously through click-up. It also helps us manage our tasks and track the time invested in particular tasks.

Shikha ChaturvediBusiness Analyst, Cedcoss Technologies Private Limited

ClickUp Tasks

ClickUp Tasks
Describe every business model aspect as a dedicated task type on ClickUp

Additionally, with ClickUp Tasks, you can convert your business model process into actionable tasks. Set deadlines, assign responsibilities, and track progress so that you can develop every aspect of your business model collaboratively.

💡Quick hack: Wondering how to make the most of Google Docs Business Plan Templates?
Here are some tips to follow:

  • Customize the template to fit your specific business needs ✏️
  • Keep your language clear and concise for better understanding 📄
  • Include charts and visuals to support key points and data 📊
  • Regularly update the document as your business evolves 🔄
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Strategic Use of Business Models

When done right, business models fuel strategy and innovation by optimizing operations, running targeted campaigns, and achieving sustainable growth. 

Here’s how to make strategic use of business models:

  • Optimize internal processes: Optimize internal processes, reduce inefficiencies, and optimize resource allocation to drive overall productivity
  • Conduct detailed market research: Identify and analyze your target market by conducting thorough market research to understand customer preferences and staying aware of any trends and patterns that correspond to a change in purchasing behavior
  • Perform customer segmentation: Incorporate market segmentation into business strategies by customizing the products, services, and campaigns according to the requirements of different customer groups for higher engagement and conversion rates
  • Adopt a dynamic strategy: Embrace a dynamic strategy management model that focuses on releasing new products, services, or technologies to make businesses adaptable, resilient, relevant, and competitive
  • Emphasize differentiation: Focus on differentiators such as operational efficiency, unique value propositions, customer-centric design, etc., and stand out from the crowd

ClickUp Dashboards

In this regard, ClickUp Dashboards can help you gain a clear view of your business’ performance metrics. Track key performance indicators (KPIs) to make timely adjustments to your business model.

This way, it helps you:

  • Keep track of essential KPIs to assess business performance in real time
  • Use visual insights to adjust strategies based on accurate, up-to-date information
  • Easily compile and share performance data with your team for collaborative decision-making

We simplify all the processes of our departments by integrating business intelligence platforms, mailing tools with automation, and storing KPIs, forms, process documents and dependencies in one app (ClickUp).

Christian GonzalezAdministrative Coordinator, Cámara Nacional de Comercio, Servicios y Turismo de Guadalajara

ClickUp Brain

Use ClickUp Brain to define product requirements for your product and business teams

ClickUp Brain leverages AI to enhance workflows, generate valuable insights, and support better decision-making. It refines your business model by identifying trends and patterns, offering data-driven suggestions, and recommending innovative strategies aligned with your goals. 

This empowers you to make more informed, strategic choices that drive efficiency and growth.

➡️ Also Read: 8 Best Tools for Startups

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Case Studies and Examples

In addition to competitor analysis, you may also look at successful business cases for inspiration on creating a good business model. 

Here are some real-world examples to inspire you:

🛒 Amazon

Amazon is a pioneer in the e-commerce model. It achieved this feat by focusing on customer convenience, personalized experiences, and operational efficiency. 

Its use of advanced logistics and smart warehouse management ensures swift delivery times, while the Prime subscription service offers a streaming service. Amazon’s unwavering commitment to innovation, whether AI-driven recommenders or autonomous delivery, further strengthens its position as a market leader.

💸 Business model: Amazon’s business model is a complex, multifaceted approach that combines e-commerce, cloud computing, digital streaming, and artificial intelligence.

At its core, Amazon operates as an online marketplace, selling products directly to consumers and allowing third-party sellers to use its platform. However, the company has expanded far beyond this, offering cloud computing services through AWS, streaming content through Prime Video, and developing AI technologies like Alexa.

🍿Netflix

Netflix made headway in the subscription business model as it transitioned from DVD rentals to online content streaming. 

It leveraged data analytics to build a powerful content recommender that accurately matched user preferences. It reinforced its market standing with original programs to enter underserved customer segments, especially in regional languages. 

💸 Business model: It uses a subscription-based business model to generate overall revenue through monthly and annual subscriptions with tiered pricing based on numerous features, including the number of screens and streaming quality. 

🤝 Salesforce

Salesforce revolutionized the SaaS model. Its cloud services modernized CRM solutions by eliminating the need for on-premise software installation. 

Its scalable pricing and robust features attract businesses of all sizes. Over the years, Salesforce’s business model has evolved in response to changing customer needs and market dynamics. Initially focused solely on CRM, Salesforce expanded its product portfolio to include a wide range of cloud-based solutions, such as marketing automation, analytics, and customer service.

💸 Business model: Salesforce’s main revenue source is subscriptions to its CRM platform and additional cloud-based solutions. Customers pay a monthly or annual fee for access to Salesforce’s services, which typically include ongoing technical support and regular software updates.

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Transform Your Business Model Into a Success Story With ClickUp

The process of developing the best business model is both dynamic and rewarding. It defines how you deliver value and sets the stage for sustained growth and innovation. 

However, achieving such a bouquet of benefits is only possible when you have the right tools to facilitate the process’s planning, execution, and analysis.

This is where ClickUp comes in. With its powerful task management, interactive Dashboards, and Whiteboards, ClickUp empowers you to map out, refine, and adapt your business model for maximum growth. It helps you visualize your progress, stay aligned with your goals, and bring your team together for maximum impact.

Ready to bring your business from concept to success? Sign up for ClickUp today and start building the business model to shape your future!

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