When it comes to starting a business, there is so much research and groundwork involved. But the one thing that entrepreneurs forget is that not every business is successful. And the core concept of any business that makes it to the top is by choosing the right business model that works for you.
In this blog, get a short description of a business model and why it is so important to have one. And detailed insights on what aspects to consider while selecting a business model for your startup.
What is a business model and why do you need one?
A business model is a business framework used to find the niche, products and services to sell, the target audience who would prefer it etc. It has to have a possible growth factor and the strength to withstand the changing customer needs and preferences.
You’ll need a business model for many reasons. These are the few of many.
- A strong business model will help you acquire the funding for your business.
- A mindmap to give out valuable products or services to the target audience.
- To fix the revenue model that could compliment the workable business model.
6 steps to select a business model for your startup:
So, an entrepreneur has to have an overall knowledge of choosing a fitting business model.
These 6 steps can be used to dig in deeper about finding a potential business model that is right for the kind of industry that you are involved in.
1. Based on the product or service that your target audience prefers:
The product or service you decide upon has to be original, and it won’t hurt if you had the first entrant advantage in the market. But you have to understand the fact that when you have the first entrant advantage, it is a pure coin toss.
As described, the output of your business has to be different from others and it has to be in favor of what your target audience needs at that moment. You have to consider the geographic location, the standard of living, and the average expenditures to satisfy the needs of your customers.
2. Based on having a discussion with your industrial experts:
Talk to industry experts who shined and failed. Their performance matters, as their insights will be according to their drive to achieve. You could learn from their success and failures.
Or, you could have an advisory board including your investors. They could pitch in about the products or services and what they would want if they were one of the customers.
3. Based on your revenue strategy for your business:
Any business has to be very clear about its revenue model. Apart from other steps – the revenue model could genuinely help you with figuring out the business model that would significantly suit your products or services.
There are various revenue models that could be tested with your products and services. These are some revenue models that popped right up in my brain.
- Subscription model.
- Limited availability model. (Creating a Fear Of Missing Out- FOMO amongst the target audience)
- Commission model.
And many more.
4. Based on A/B testing with the focus group:
A/B testing is a research methodology to assess the user experience by comparing two different groups.
Entrepreneurs can try A/B testing with their products or services or in this case you could try figuring out the working business model by using this test on your focus group with the same characteristics.
The characteristics to consider could be:
- Willingness to buy.
- Capacity to buy.
- Taste and preferences.
5. Based on the pricing structure, and marketing channels:
The pricing structure for your products could be one of the aspects to look out for when you come to choose a business model for your business.
The marketing channel is the structure based on the distribution of the goods and services. The steps in which the structure is framed could determine the business model prospect.
6. Based on the scalability of the ideas in the future:
There must be a concept of futuristic growth when it comes to any business model. It has to accommodate the growth features that you plan for your business. The scalability could mean increasing the variety of the product and service, geographical expansion, or extending the target audience arena.
The strategic relationships in the business contribute towards the scalability of your business. The developing partners of the organization play a major role in the growth formula. The developing partners include:
- The technicians who give out the right kind of software to run your business.
- The finance department must be able to handle the budgeting and the scale of the expense.
- The decision-makers (aka key managerial personnel and the investors)
These are some of the steps that could help you pinpoint the right business model to carry on with the operation of the business. Choosing the apt business model plays a vital role in the successful venture of any business. With this short guide, hope you pick the best.