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How to Build a Solid Business

How to Build a Solid Business

 

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.

Published by Valentine Belonwu

My name is Valentine, founder of this site, an entrepreneur working as a moderator at Bizsugar a small business community news site. Connect with me on Google+ at Valetine Belonwu

77 Comments

  1. sapna · December 27, 2012

    HI Valentine

    Again a great piece.

    I would say the pragmatic approach is really important on this :

    Startups:

    1. Customer profile is the starting point, they study customer details and Customer desperation for some service or the product.

    2. New Start ups set the pricing for services for small and few big customers separately, they usually give the freebies to some biggies.

    3. Set the pricing for other customers and may be charge premium from them(robbing peter to pay paul) and charge for Value added services VAS as well.

    Experienced Business houses

    1. Customer profile is the starting point, Customer details and Customer desperation for service or the product.

    2. Set the pricing for services purely based on desperation, more the desperation, higher the price.

    3. Pricing of the products and services start coming down once competition starts.

    So competition place a critical role in pricing.

    Thanks once again for this great post.

    Sapna

    • admin · December 27, 2012

      Hi Sapna,
      Thank you for adding more tips on how to build a solid business :), you have already said it all,
      Thank you for awesome comment!

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