How to Nail Your Business Model
Post by Edson Senna
90% of new businesses will fail within 5 years of launching. And while those odds don’t seem too promising, this statistic begs the question, “What is the 10% doing differently than the 90%?” Is it that they have more money, more personnel, or a better idea? Sometimes. The simple truth is that many, if not all those startups unlucky enough to find themselves in the 90% should not have even launched in the first place. The main difference between startups that succeed and startups that tank comes down to one word: validation.
As an entrepreneur, your primary objective should be to first identify a problem in the market, and then confirm that your solution is actually worth buying. If you can do that, your next step will be to validate, or nail, your business model. Consider the following questions as your business idea starts to take shape.
What am I offering?
If people are not willing to buy what you’re selling, then you have no business being in business. A common mistake many businesses make involves spending most of their budget on a final draft version of their product/process only to find that the market has no interest in it. Now they’re left with no money, a dud value proposition, and in some cases angry investors.
For new businesses, prototyping and creating a minimum viable product (MVP) is a good way to test your business idea without spending a lot of money. Conduct this process as quickly and cheaply as possible. The faster you can fail and pivot during your business’s infancy the better off you’ll be down the line.
Who am I doing business with?
Simply saying your target audience is the mass market is not enough these days—and it’s a good way to enter that 90%. The market is becoming increasingly diversified, so it’s important to identify the customer segments that will provide you the most business revenue. This will require you to establish lasting relationships with customers.
You’ll wear many hats as an entrepreneur—technician, visionary, manager, janitor, unpaid intern, etc. In addition to being a salesman and marketer, you might also find yourself on the receiving end as a customer. No successful entrepreneur has done everything entirely on her own. Identify your key partnerships—suppliers, manufactures, landlords, legal representation, etc.—and focus on maintaining them. In business, you have to spend money to make money. (But do your best to avoid accumulating too much debt.)
What are my channels?
How do you plan to deliver your value proposition? How will your target audience even find about it? Generating word-of-mouth marketing can be difficult when customers are bombarded with thousands of advertisements each day. You might have the greatest development since sliced bread, but it won’t mean a thing if customers can’t get to it.
These days, establishing an online presence is no longer a luxury—it’s an absolute necessity to your business’s success. Social media is evolving at a rapid pace, so it’s important to identify which channels your target customer segments use the most often (Facebook, Twitter, etc.). Additionally, if you want to set up an online store, work with an ecommerce website hosting service to determine the best options for your online shopping cart and payment methods. If, however, all of your marketing efforts are meant to push customers to your brick-and-mortar location, make sure your physical space is both easy to identify from the outside and user-friendly on the inside.
Starting a business isn’t easy. Starting a successful business can be even more difficult. However, careful planning and validation ahead of time will do more to place you in that coveted 10% category than anything else you can do.
Edson Senna is a business student. He enjoys applying what he has learned by writing about investing, finance, entrepreneurship, and other business-related topics. He also has an interest in researching and developing small business mobile apps