When starting a business, there are a lot of things on your plate to consider. Often, the product or service itself takes a lot of the attention and rightfully so. However, there is more to building a successful company than simply building a good product.
There are many examples of products that failed to get off the ground, even though the core idea itself was solid. Paypal was not the first or only online payment method. Facebook was not the first social media site.
What causes some businesses to succeed while others fail is often a matter of luck, timing, and developing the proper business model.
What Is a Business Model?
Simply put, your business model is the blueprint of your organization. It is a design for the successful organization and well-being of your company. Beyond the product you are selling, it is a guide for how your business creates and delivers the value of that product to your customer.
In more basic terms, it’s a plan for how you will take your product, deliver it to the customer, and generate revenue. There are several ways to design your business model, and the success or failure of your business may very well depend on the successful execution of your plan. However, keep these core elements in mind when developing yours.
Look To Your Industry
See what others in your industry are doing and how they approach their business. There is always a tendency to be the company that disrupts the industry and re-write the book. As appealing as this is, it can also be dangerous.
There is a reason why so many businesses follow similar paths when it comes to their business model. They work. This is not to say you cannot innovate your own processes, streamline certain areas, or make them your own. However, be wary of straying too far from the beaten path. It’s beaten for a reason and being drastically different isn’t always a good thing.
The Value Proposition
Your value proposition is what makes your product appealing. In clear terms and methods, the value your product brings to the customer should be clear. Remember, all businesses solve problems. The question is what problem does your business solve, and what is the value of that solution.
Your value proposition should clearly demonstrate why your product is something customers should be excited about. It should demonstrate the obvious benefits that come with purchase, along with why your product is better suited for your customers over existing solutions, if any.
In this context, “value” does not mean cheap or inexpensive. Rather, it literally means the value of your product and why customers should be interested.
Define Your Customer
Every business has an ideal customer. Who is yours? Of course, the knee-jerk reaction is “everyone will want this!” but that is rarely the case in practice. Most products see crossover from different customer demographics, however each one also has their target market.
Once you have a working prototype or a minimum viable product, your goal should be to test, talk, and test some more. Define your customer, gather their feedback, improve your offering. Above all, define who your target customer is and what they want.
Once you can accurately answer the question “who is my customer” you will know more about how to reach that customer. Furthermore, when your product comes to market you will know where the most critical feedback is coming from.
Change Will Happen. Let It.
Most companies build, develop, and alter their business model during their life cycle. If you are developing your business model today, odds are it will look different a year or two later. This is normal.
Be open to change and adaption. Your business model should be viewed as a process. As you develop a better understanding of your product, market, and customer; change is to be expected and even necessary.
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