Just as sailors need compasses to find their way while navigating at the sea, entrepreneurs use business models to give their businesses a direction.
Your business model tells a comprehensive story about your business. It describes how exactly your business promises to make money.
Your business model also gives the following details about your business:
- Your intended products and services
- Your capital
- How your products and services will be made available
- Your customers
- Your selling prices
- Your method of delivery
- Your edge over competition
Whether your success will be a success or a failure depends on how well you’ve drawn your business model. So, to be sure of success, you must draw a solid business model.
Here are a few steps on how to draw a business model that guarantees success:
Step 1: Know your customer profile
After deciding on what products or services you want to offer, ask yourself these questions:
- Do people really need these products or services? Are they products or services that are badly needed by my friends and family?
- Which categories of people need these products? Are they needed only by teenagers, students, adults, seniors, vegetarians, or by everybody?
- Where can I locate potential customers?
- What is likely to be the purchase behavior of these customers?
Finding answers to these questions will help you plan well on how to target your customers perfectly.
Step 2: Think of value-added services
Think of great ideas on how you’ll give added value to customers. Are there any tactics by which you can deliver your products or services to customers at cheaper rates and more efficiently than your competitors?
Remember, to beat competition you must improve on what your competitors are offering. You must also deliver your products or services to customers quicker and more conveniently.
Step 3: Set Strategic Prices
Now, it’s time to think about the prices.
Find out how much the average buyer will most likely be willing to pay for your products or services. Current market data will help you get this easily.
Now, do your calculations:
Current market selling price – cost of production (per unit) = Potential profit per unit
Also, decide on which payment methods are appropriate and will work for you.
Step 4: Make your model flexible
Think of how to reform the model you’ve drawn to produce something unique, something that is different from the mundane models in market. Never think that only one business model will be workable in your market. You never know, your new model may be the killer idea that will pale all others into insignificance.
So, never be afraid to brainstorm for new ideas because they can propel you far ahead of competition.
If an innovated model seems inappropriate, leave the original idea as it is. But, never stop thinking of new ideas.
Consider combining two – or more – pre-existing business models into one unique killer. No rule forbids this.
Follow these steps, and you’ll end up with a business model that will keep your business alive and strong for as long as you wish. But remember, nothing is constant. Therefore, for whatever adjustments you make to your model, always keep them susceptible to change.