First Things First
The business model of your company represents the value you’re delivering (or planning to deliver if you haven’t started your business yet) to customers and how you will make money (profits) from providing your service or product.
When people first conceive a business idea, they typically begin to design a business model based on their hypothesis of who their customer will be and how much they’ll pay for the offering. It’s all just a guess until you get out and do customer discovery with potential customers, but nevertheless, it’s important to outline this information in the beginning. The assumptions made at this point will be inaccurate in many ways, however, it still provides a basis for you to get started. Once you complete customer discovery and competitor research activities, your business model will more than likely change.
Factors in Your Business Model
In addition to determining your ideal customer and how much you think they’ll pay for your service or product, you must also consider these other factors in your business model design:
1.) The unique benefits of your offering to your customer (your value proposition)
2.) Your competitive advantage (What do you/will you have that will assure you remain competitive and sustainable?)
3.) The design of your organization (who do you need on your team and what are their positions? Why would they want to work there? What skills do they need and how will you leverage their skills and talents?)
4.) The specific product or service you will offer and the specifics of what you’ll do in-house and what you’ll outsource to provide your offering as intended
Don’t Skimp on the Work
There are a lot of discussions, research, and deep thought that must go into your business model. Position your business to win. Don’t take shortcuts during the business model design process. Once you’ve defined a starting point, you’ll have something to work from as you conduct customer discovery and market research activities to confirm or deny your hypothesis and assumptions.
As you know, TPM Focus specializes in helping early-stage companies overcome the inertia of getting started and laying a strategic foundation for success. You can start by downloading our free Business Model Canvas or even taking our course that will quickly help you understand where you’re at and where you’re going with your business.