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A checklist for selecting the right business model for your startup.

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CEO at  MD Logica , as well as a speaker and author covering business, marketing and strategy.

Kelvin Murray 2015

Among the 4.4 million new ventures that were created in 2020, not all will survive due to the fiercely competitive nature of the business world. Therefore, ensuring a business idea that is well-suited and aligned with the current market is paramount for an entrepreneur.

This is where a business model helps.

A sustainable business model with the right messaging, price and delivery channel to connect with the intended audience enables you to unlock the potential value of your business ideas. Moreover, understanding the economic value of technology, product or service before introducing it officially into the market allows you to gauge the revenue you'll be able to generate.

An accurate business model anticipates the revenue precisely and lets you re-model and innovate your company-related plans if the outcome predicted is undesirable.

Why is it necessary to have a business model?

A business model describes how a company strategizes to deliver value to customers within a practical price range. Essentially, in a business model, you determine which services or goods you'll be offering, which markets you are planning to target, as well as the costs that might incur to the business. It helps new and growing enterprises to find experts, motivate employees and managers, and gain investors.

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A solid business model paves the way for the growth and success of a company. It enables you to take an objective look at your corporate idea and realistically assess your chances of achievement.

Factors To Consider Before Choosing A Business Model

The following are some of the factors you need to consider during the process to help you determine the most suitable business model for your new venture:

1. The Customer

It is vital to keep customers as the primary consideration when selecting an appropriate business model. Do your best to add value to the overall customer experience and their purchasing patterns by prioritizing their needs and comprehending how they buy.

Here are some of the questions you need answers to when deciding on your startup's business model:

• Who are your actual customers? Divide them from the rest of the population depending on their psychographics, behavior, geography and demographics

• What are your customers' purchasing patterns and behavior?

• What does your startup aim to target and offer?

• How do your offerings help customers solve their problem?

• What problem does your offering resolve or address?

The answers should help you define the qualities and characteristics of the customer you intend to serve.

2. The Value Proposition

A value proposition is a brand's promise to provide tangible benefits to customers.

And it's hidden in answer to this question: "How is your brand going to solve the potential customer's problem?" For instance, Uber helps people solve taxi booking problems by offering cabs on demand. Likewise, Google keeps making the internet more straightforward by introducing an algorithm that allows people to search for almost anything.

So it is vital to gauge if your business model revolves around capitalizing on the value proposition and helps you figure out how the customer will benefit from your products and services while assisting you in terms of sales.

3. The Market

The next crucial element is to analyze the market you serve. Creating a business model according to a particular need is essential for success in the long-term. First, see if your target audiences are interested and willing to buy your products and services. Furthermore, you may also notice that the initial idea that you started with no longer fits the current scenario during your market analysis or that your product is well-suited for a different niche or kind of market.

So, study your competitors. Take notes of the approaches they take to stay afloat and relevant. Then, contemplate different strategies and techniques you can implement to outshine the competition and entice more customers. And do factor in potential customers and newcomers in your business plan while analyzing the market. They will carve the future path of your business and enable you to understand the competitive landscape.

4. Scalability

Scalability refers to a business's ability to handle and manage market demands to increase profit margin while also growing sales volume (the units sold within a certain period).

Even though it is recommended to implement scalability once your business becomes profitable, your company's vision should be to pursue it since its inception. Otherwise, your startup will bypass possibilities of growth and success if it doesn't consider scalability as one of the essential factors while deciding on a business model.

Costs, both non-monetary and monetary, play a central role in opting for the business model of your new startup. Suppose if your business startup has high operating costs. You can't afford to transfer them all to the end-users for fear of alienating them. As a startup, your business can’t afford to do that. Therefore, it is essential to consider taking a strategic approach to overcome that limitation.

6. Customer Relationships

Any business's growth depends on its clientele. Therefore, it is imperative to concentrate and ponder upon the following questions.

• How can you acquire customers?

• How can you retain customers?

• How can you grow a business with a loyal customer base?

As a startup, you need to form lasting relationships with customers while ensuring transparency to perform smoothly. A customer encounters your product or business and purchases it, but it is your turn to retain them tactfully. Offering after-sales services, discounts, memberships, etc., are some of the ways to do so.

Including these relationships and focusing on them in your business model is paramount and helps you filter potential leads.

Wrapping Up

A business model changes with time, but ensuring it has the right combination of essential elements — such as scalability, repeatability, predictability and eventually profitability — will help maximize your chances of entrepreneurial success.

Strive hard to make your startup a long-term success, lay a firm foundation with a well-executed business model and make your company yield incredible results.

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