Companies that don’t have a business model may experience unnecessary challenges in the start-up process. A winning business model allows your company to fulfill customers’ needs which in turn increases your profits. It should be your company’s core strategy.
Models will include various components that are important for start-up organizations. But how do you create a winning business model that will help your company succeed in an ever-changing market? You’ll find out everything you need to know in this article.
What is a Business Model
A business model is a strategy for businesses to increase profits. It helps business owners establish the products and services plans to sell. Additionally, a company model helps organizations find their target market, identify their problems and how to solve them.
You may mistake a business model with a business plan but these strategies have core differences. A model plans to generate a profit while a business plan shows the expected financial performance. Examples of a business model include:
- Subscriptions: Your company can revenue from subscribers at various intervals. With this business model, your company will know exactly how much revenue it’s going to make.
- Advertising: The goal of advertising models is to generate revenue by selling advertising space. Your company will need to generate enough sales to pay for distribution and production.
- Production: Your company will produce and sell the products or services you offer. Again, your company must generate enough sales to cover basic costs and to make a profit.
- Freemium: With this business model, your company can sell two versions of a product. The first product will be free with limited features. The second product will be a paid version with more features. A freemium company model works best for tech companies selling digital products.
Why Do You Need a Business Model
Without a successful business model, your company will lose out on opportunities for future expansion and proper cash generation. Your organization’s model will help you plan a profitable business. Furthermore, it will help you map out how you’ll create ongoing value for your target market.
Tips to Design a Winning Business Model
Companies are taking business model innovation as a priority in 2022 and you should too! Here are tips to help you create a winning model for your business.
Evaluate the Problems You Want to Solve
By now you should know who your target market is. But do you know their pain points and how you can solve their problems? By knowing what your consumers’ problems are you can start to develop a plan that will promise to help them. It can be an emotional or functional problem depending on the business model you’re creating.
Ideally, you want to focus on three key problems your products and services can solve. For example, if there’s a beach but no shops nearby you can:
- Open a shop on the beach
- Include products beachgoers are looking for
- Sell products at a premium price
When you solve a problem with your products and services you can attract more customers. The more customers you have, the better your profit goals will be.
Establish Your Business Processes
Before you launch your company, establish the activities needed to make your business model a success. Identify the core features your business is offering. You must understand your business process so you can meet the demands of your customers.
For example, if you’re selling makeup and delivering it to your customers the process may be as follows:
- Customer orders makeup
- You send a quote
- The customer pays for the product and delivery
- Let the customer know when the product will be delivered
- You package the product
- Maybe insert additional marketing material or include a complimentary item
- You attach the customers’ details to the package
- Deliver the product to the customer
Depending on the type of organization, you may have more steps in your processes. With proper processes, you’ll boost workflow and increase your revenue.
Record Your Key Business Resources
Once you’ve planned your processes you must now evaluate what resources you need to carry out those processes. Document all the resources you need to successfully sustain the needs of your business. For example, if you’re a printing company you’ll need the following resources on your business model:
- Ink
- Printing machines
- Paper, vinyl or other printing materials
- Packaging materials (if you deliver)
- Vehicles for delivery
You must also budget how much these resources will cost you. The profit you make must improve your ROI (return of investment) on any resources you purchase.
Create a Value Proposition
Your company must be able to stay ahead of competitors in the industry. To be successful, consider if the product you want to sell is innovative or provides a fresh idea for old products. A strong value proposition will show exactly what your organization offers and why it’s better than your competitors.
Essentially, you want to remain valuable to your customers. The only way to achieve that is if your products will continue to be what your consumers want or need. For example, Apple’s value proposition is “The Experience IS the Product.” This suggests that a phone should offer more than a collection of features.
A value proposition gives direction and creates focus therefore it’s important to include it in your business model.
Leave a Section for Innovation
You should always leave room on your business model for more innovation. This is because a company needs to continuously change to grow. No matter what industry you’re in, there will be changes in customer demand and how you market your business. There is always room for improvement.
Deveron Networking’s Strategy for a Winning Business Model
Are you struggling to establish your business model for your start-up company? Daveron Networking wants to help your business succeed. Our team has over 10 years of experience in business consultancy so we have the knowledge to take your business strategies to the next level.
Ready to grow your business? Speak to our growth experts and learn how to expand your customer base, drive revenue growth, and optimize your business operations.
