Every entrepreneur imagines their business will be successful and profitable. Whether you’ve already started your business or you’re just starting out, there’s a lot of work to be done to turn your dreams into reality.
Many new entrepreneurs often mistake their business model for their business plan. However, these are two different things. Your business plan is the future objectives of your business and the strategy to achieve them.
Your business model, on the other hand, is the method you use to make money. It is the template for how your business will operate, target market and how the business wants to generate revenue. Understand the difference between a business model and a business plan Important for any entrepreneur.
Choosing the right business model can be critical to your success. Whether you’ve been in business for years, or if you’re just starting out, understanding your business model is important. Here are four questions to ask yourself about your business model.
Who is your target customer?
Your target customer is the person who is most likely to buy your product or service. This is a general idea – it is not set in stone. For example, if you are opening a lingerie store, you might think that your target customers are women. However, men will sometimes buy underwear for their wives or girlfriends. This is where you need to work to identify your ideal customer. Who do you want to target your product towards?
When you think about your target customer, think about the needs you are trying to fulfill. Who will benefit most from your product or service? Who is most likely to buy what you are selling?
- Is my target customer male, female, or everyone?
- How old are they?
- Do they have disposable income, or is money tight?
- Are my target customers comfortable using technology, or are they intimidated by it?
Knowing your customer can guide you to the right business model. For example, if money is tight for your target customer, you may decide to go with one Freemium business model. The word “freemium” is a combination of the words “free” and “premium”. It refers to a business model where customers can use a product or service for free, but have the option to pay for additional features or access. This will allow your customers to try your product for free. Then, they can choose to upgrade to the paid tier after they’ve determined the price.
If you’re wondering which type of business model best aligns with your business, check out our resource 21 different types of business models with examples.
What value do you offer them?
Your customers can become ambassadors for your company, recommending it to their friends and family. How can you ensure that your customers are happy? Making your product cheaper isn’t the only way to deliver better value. Here are some other ways your company can provide value to your customers:
- Our website will be easy to use for customers
- We will respond to customer feedback and act on complaints
- We will create a loyalty program for our existing customers
- We will stop selling any products we would not feel comfortable using ourselves
Are you using any of these strategies to create value in your business? What strategy can you start implementing today?
How are you going to deliver that value?
Customer perception is a great determinant of value. An entrepreneur’s job is to answer the question “How can I create the impression that my business is valuable to customers?” Your customers will judge whether it’s worth paying more for your business or going to a competitor who offers a lower price. How do you differentiate yourself?
If you’re not alone—if you have staff to help sell your product or service—then you need to be committed to selecting and hiring people who are committed to your mission. Training and equipping them to perform at the highest level will help you satisfy your customers.
While it’s true that high-quality marketing and a solid social media strategy are helpful, nothing can replace solid customer relationships on a day-to-day basis. Your employees are the lifeblood of your business. It is critical to your success that you ensure that every employee is engaged and empowered to perform their jobs at a high level. This remains true regardless of the business model you choose.
Have you picked the wrong business model? find out When is it time to change your business model?
Why will the business be profitable?
Knowing who your customer is, what you can offer and how you plan to offer it are all important questions. However, the most basic question to be answered is that why. Why will your business succeed? Why would it make a profit?
There are many businesses that have found success by disrupting markets in long-established industries. A recent interesting example of this is the Fabletics fashion brand. Driven by the celebrity power of one of its founders, Kate Hudson, Fabletics has become a formidable force. It has used a unique membership model to build a growing presence in the fashion industry, along with physical stores and an e-commerce presence. Fabletics has created a body-positive tone; The brand is aware and responsive to the needs of women of all sizes. And, its price point is attractive to its customers.
This all goes back to market demand. What needs are being met? Has an unmet need created an opportunity for you, entrepreneur?
at the end of the day
A business has a lot of moving parts, and a lot to think about. Don’t forget the who, what, how, and why. WHO Your target customer? what What value do you offer them? how Are you going to provide that value? why Will the business be profitable? The answers to these questions will help you choose the business model that will lead you to the highest level of success.
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