So you have your big idea that you feel passionate about and you are ready to give it a platform and bring it to the market. In order to do this you need to fully understand what your business does and where it fits in the industry. This is the purpose of a business model.
A business model is a fundamental tool to clarify what your business offers, who your customers are, how your business will be organised, how you will differentiate from your competitors and essentially, how your business is going to make money.
There are many different types of business models that you can use and it is important to do your research and implement the aspects of the models that are relevant to your business. Here are some starter questions for you to begin formulating your business model.
What does your business do?
Maybe you have decided to start a photography business, a dance studio or perhaps a graphic design company. Your answer to this question may simply be ‘I have a photography business’. This is not enough to really understand what your business does. Think about the value that you provide to your customers, narrow down your offering specifically, for example ‘I have a pet photography business’. What makes your business unique? How will you use those unique aspects and advantages to reach your customers?
Who are your customers?
In order to be able to sell your product, service or experience, you need to really know who your customers are and how you are going to reach them. Think about your ideal customers, their age group, spending power, spending habits, and how you are going to connect with them. What would encourage or convince that customer to buy your product? Why would they want to pay for your service? Once these customers engage with your business, how will you maintain their loyalty? As your business develops, you will continue to understand your customers and how you can best serve them but beginning this discovery now will help you to focus your resources on the right types of customers.
Do you understand your industry?
Knee Deep in Creativity focuses on businesses within the creative industry, which combines many different creative disciplines. Perhaps you want to start a publishing business or a pottery business, what do you know about that particular industry? Find out if the industry is growing or declining and if it is seasonal. What are the main businesses or who are the leading individuals within that industry? Does your industry have a presence across the world or do certain countries have stronger industries than others? Think about the types of business within your industry, how are they modelled? What kind of products or services do they offer? Where will your business be positioned?
Know your competitors and define your market
You must know who your competitors are and how your business differentiates from what they offer. How do they reach their customers? Will you have the same customers? Consider if there are any new entrants in the market that you need to be aware of. What are the strengths and weaknesses of your competitors? What or who are their biggest assets? Do they use any new methods or technologies that may give them an advantage?
Although you now understand your industry, your business may operate within a specific market within that industry. It is once again important to understand your market, how big that market is and if are there are any barriers to entry in your own country and internationally. Also consider what your target market is and how can you gain a presence in that market.
How is your business going to be run?
Here you can really think about how your business will be organised. Consider if you plan to run your business alone or if you want to grow your business with a team of people. Are there any skills that you need to source to strengthen your business? Are these skills to be gained by employing people or creating partnerships with other businesses or advisers? Do you need find a physical space for your business or will it be run from your home? There are different legal considerations to be aware of when choosing the best format for your business and it is important to seek legal advice.
Time to talk money
You need to know the purpose of your business, the identity of your customers and how your industry and market operate, to help you to decide on how your business will make a profit. If you are seeking funding for your business, you will need to create a business plan in which you will delve deeper into the financial aspects of your business. A business model is a useful tool to help you to begin to create a clear plan for becoming profitable. Firstly, consider how you are going to price your products, your market analysis will help you to determine this. What pricing model will you adopt? How are you planning on generating revenue? For example, are you selling directly to customers or through a third party? Will you sell face to face or over the internet? Do you have one or many sources of revenue? What are your costs of sale? What will your raw materials cost? Do you need to rent premises? Do you have to hire employees? How are you going to measure the financial growth of your business? Think about the resources that you need and if you need to seek external advice.
I hope that you have seen how a concise and well thought out business model is not only beneficial but essential for you to really create a plan for your business. Please share your comments below and let me know if you have used a business model that has been particularly useful for your business.