At some point, all entrepreneurs and people beginning their own business are going to be asked about their business model. A business model isn’t a part of your business that you can think of on the spot. Your ideal business model will be determined as you develop as a business and identify the answers to the biggest questions about your business.
When you are asked, “What is your business model,” really, multiple questions are being asked:
- Who is your target market/customer?
- What value do you offer?
- How will you reach your customers, and keep them wanting more?
- How will you make revenue?
- What's your cost structure?
- What's your profit margin?
Determining the answers to all these questions will take time, but it’s important that you have the right resources to help you find the correct answers along the way.
Some business models are standard, and have stood against all challenges, while others are experimental. No matter what route you choose to take, you need to be able to have evidence to support that your idea might work. You should also keep in mind that you might need to use many different strategies to arrive at a unique business model that will suit your needs.
Here is a list of contributing factors to creating an effective business model:
Investments into Business
When you begin attracting investors and looking for ways to fund your new business, you need to consider start-up costs, operating capital, personnel costs, and overhead costs. These are just a small part to what you will need to get going. The big question is, will your investments provide a high return so you will not need further investments down the line? You will find money if you have the correct return on investment, and, if you have the right financial leverage to ensure you can get profits.
High-Value Customers
Having people buy into your business is one thing, but finding customers that are high-value is extremely important. You want to identify a target group that is easy to locate, willing to try your product, and will generate enough sales to generate revenue. Be aware of how they are going to pay, so you know where and how money will be coming in. Also, consider who else is out there that needs your product, such as distributors, retailers, etc., not just the everyday consumer.
Deliver a Product With High Margins
Having higher margins means you are offering a product that can be made from an improved process or offering a product that has features that provide higher value than others, meaning you can charge more.
You can gain higher margins by:
- Use a more efficient distribution channel.
- Require less sales support and effort.
- Have an industry-leading manufacturing process.
- Offer more products or other opportunities for revenue without increasing cost.
Maintain Market Position
A good business model will use the resources offered to improve its market position. Companies do this by keeping up and staying above the competition through offering new products, features, or expanding the business into new markets with new customers.
Developing a new business model takes time. The key is to be able to identify the biggest contributing factors that will push your business forward, and knowing how to handle them. One of the ways to do this is by continuing to better understand your market and industry. Having access to market research is important for new start-ups and small businesses. MarketResearch.com’s Profound solution provides users access to thousands of research reports for a subscription price. Users can access sections, charts, and tables of reports without having to purchase entire reports.
To learn more about how Profound can help you develop your business model, sign up for a free trial.
Thanks for reading!
Caitlin Stewart
Marketing Associate
MarketResearch.com
