Seven Steps to Create the Perfect Business Model
Every successful business must have a purpose. Some companies exist purely for profit, while others are created to fill a particular societal need. When you start your business, or if you plan on starting one, you probably already have an idea of what you want it to become and what problems it should solve. A business model is a documented plan for the business's effort to make a profit and achieve its objectives.
A good business model must identify the product or services the business plans to offer as well as its target market. It must also detail the expected expenses, sources of investment and talent, and how it motivates staff and management.
Here are seven condensed steps to guide you in creating the perfect business model.
1. Define the Problem the Business Will Solve
The most important step in creating a business model is mapping out the business's value to its customers. This involves identifying a problem that the business will solve or a need that customers would be willing to pay to have resolved.
Business processes will revolve around mitigating this problem or overcoming obstacles that may prevent a business from reaching its goals. There are many ways a business can solve a problem. Entrepreneurs are often created when they experience something that is inadequate to meet their own needs and are determined to find a better way.
2. Identify the Target Market and Customer Persona
Who are the people that face the problem you are trying to solve? Can you create sets of personas for the types of customers that need your solution to this problem the most?
You can create one to three personas for the target customers you intend to serve. However, targeting too wide an audience may prevent your business from focusing which is essential early on when resources are limited. It’s usually best to serve one audience well first and expand from that point.
Therefore, as you identify your audience for your business model, create a handful of detailed personas of the customer, including their demographics, common challenges they face, and why they would need your business to solve those challenges.
3. Establish Business Processes
Before you launch your business, you must understand the critical activities and processes that will support your business model.
There are many ways you can go about structuring business processes. The most practical would be to identify the core aspects of the business and the key products or services you are offering. You can then work backward to define all the steps and processes required for product or service delivery.
You will also need to define the key resources the business needs to find the customer, market the product or service, and reach its business goals. For example, essential resources required to sustain a business through its grace period may include capital, website or app, warehouses, licenses, customer leads, etc.
4. Create a Strong Value Proposition
A value proposition is the promise of value a business makes to deliver. This is the primary reason you give a prospect why they should buy from your business. A value proposition is a simple and clear statement that offers three things:
Relevance: It should explain in simplest terms how your product will solve a customer's problem or improve their situation.
Value quantification: The value proposition must be quantifiable. Often, the customer would be able to quantify the value of what you offer based on its price.
Differentiation: There are probably hundreds of other businesses offering whatever product your business provides. Your value proposition should convince the ideal customer why they should buy from you and not others.
When you launch a website, your value proposition should be among the first things to test and refine. It will be a major boost to your business if you nail it.
5. Find Your Key Business Partners
No business is an island; every business will need to partner with other businesses and individuals to run. As you create a business model, you must identify partners your business needs to achieve its goals. Forming relationships with the right businesses, governmental organizations, and customer entities will help your business thrive.
Your business may need to form four types of partnerships:
Forming strategic alliances with non-competitors in the same industry.
Coopetition or strategic partnerships with competitors.
Joint ventures that will develop new businesses or generate new leads.
Two-entity buyer-supplier relationships where the business is either the buyer or the supplier.
You must identify which relationships are critical at various points in the development of business. Most businesses will need one type of relationship more than another at different stages of their growth.
6. Research a Demand Generation Strategy
A good demand generation strategy is critical to building brand awareness and authority and carving out a niche in the market. This is a core element in creating winning marketing campaigns as it is used to make the business' messages more authoritative.
A demand generation strategy is an important tool to build interest in your business, generate leads, and close sales. It is important that it is a part of your business model because it defines how the customers will find the business and their impression of the brand and its products.
In a nutshell, a demand generation strategy is a blueprint of the customer's journey from the point they make first contact with the business to the point they make a purchase.
7. Research, Test and Choose Growth Strategies
Whether you are creating a business model for a new or existing business, it is critical to note that a model is not static; it should be flexible enough to change or evolve with time, challenges, and trends.
As a guideline, consider your business model a document that helps guide the growth of your company. Your business model should incorporate future plans to research new products, test new strategies, and plans to grow.
Conclusion
It may take you a while to create the perfect business model, but it will be worth the time and effort. Focus on building a competitive advantage and research widely for ideas - within and outside your industry. Contact us at properstgy.com should you need input or assistance.