Whether your company is a start-up or several decades old, the business model is the hub around which all activities revolve. The business model is the blueprint that shows company leaders how to create value and build a money-making enterprise. It is the engine that drives revenue and generates profits.
Fail to devise a winning business model and you will not build a business that succeeds over the long-term. Creation of a profitable business model is a multi-disciplinary exercise that encompasses marketing, sales, strategy, operations and finance.
Identify the primary customers (Marketing)
Through external market research and, if available, internal tracking of purchases, identify and confirm the largest customer groups. If your customers are B2B, identify also the departments and job titles of decision-makers and influencers who can impact and green-light sales.
Define the value proposition (Sales)
Explain why you can expect target customers to value and choose to buy your products and services, instead of what competitors now offer. Describe what motivates your target customers to use the products and services that you will provide.
Detail the business processes (Operations)
Describe how and from which location the company will deliver the products and services to customers and the system of payment. Will there be a physical location and will customers visit you there? Must you hire employees and will they be full-time W2 or part-time contractors? Will online sales be a factor and how do you plan to ship products to your customers? Will you have a consulting practice and perform most of the work off-site? Will clients pay by check or credit card at the time of purchase, or will you bill them?
Identify the major fixed and variable operating expenses (Finance)
Before your business is up and running, what must be available? Along with business cards and a website, desktop or laptop, smart phone and tablet, what else will be needed to operate? A business bank account is a must and if you plan to accept credit and debit cards, ask your banker about the merchant approval process.
If you will rent commercial space, finding a competent and trustworthy general contractor to provide estimates of your construction costs for the build-out of your office space will be high on your list. Remember to include the cost of office furniture for your space, as well. Consider also how much product inventory it will make sense to have. Determine how much you must spend before you can commence business operations.
Determine key business partners (Strategy)
Will your business success be greatly helped by getting referrals from a particular source? In other words, if you plan to become a florist or a caterer, it will make good business sense to develop relationships with event planners. Referrals are always crucial to building a customer list, so figure out which types of businesses you can build a mutually beneficial relationship with—what can they do for you and what can you do for them?
Fill the sales pipeline (Marketing & Sales)
Describe how you will create marketing campaigns to build a good brand and drive sales. Determine the traditional marketing strategies and social media platforms that can be expected to resonate with your target customers. Additionally, teaching, networking and the use of content marketing, perhaps presented in a blog or newsletter, will serve you well in the early stages of your business, and beyond.
Fine-tune and innovate (Strategy)
Until you begin to welcome paying customers, you will not really know if your proposed business model adequately meets their needs. Expect a reality check and build innovation, that is, the ability to judiciously pioneer new approaches, into your business model.
Thanks for reading,
Kim
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