No matter how innovative the idea or how unique the product is, without a clear and sustainable business model, startups won’t be able to survive in this world of hostile competition. While starting their entrepreneurial journey, most founders often grapple with questions like “What is the best business model for my company?” or “How do I know if my startup has the right kind of business model?”
Most of the entrepreneurs experiment with their strategies until they are sure of the sustainability. But taking few precautions in building business model will save a lot of time and effort for them.
Choosing The Right Business Model
There are various kinds of business models and it is necessary that one chooses the right kind for their company. On a simple note, they should make a value-based judgment on basis of:
- What is the engageable market share,
- In what time,
- At what cost and
- At what margins as a high-level framework.
So, these would be the four most important questions to answers and have to be in-built into the business model.
While building the business model entrepreneur should start with market research and data analysis to have a better understanding of the Market dynamics. Also, one needs to become a Data geek to draw out conclusions to depend on. These conclusions along with analysis on external environment for the competitive landscape, Economic powers & delusions surrounding the sectors and drivers that will structure the future course of Market will give a fair idea of where in the market combinatorics, the focus should be.
One way of increasing margins is definitely reducing Costs, but it could be done only to an extent. Much viable way to increase profits is having Scalability as part of the strategy. Though implementation of scalability should be taken up only after Margins become intricate to the processes of the company, it should also be a part of Vision of the company from initial days. Without having Scalability as one of the factors while designing the Business Model, the startup will reduce its chances of growing and/or be expanding.
While it is imperative that the entrepreneur has to include factors and metrics to draw out a strategy, it is also important to fore look into implementation part of the journey. While many feel that ultimately everything has to be executed, they do have to understand every execution is just one choice out of many. So, it is advisable to have a strategy which includes implementation as a part of it. But be careful to have more than one choice available and be flexible enough to pivot when needed, without compromising on the goals.
The basic factors on how to design a profitable business model definitely differ on a case to case basis, but the way to have one is much like above.
As an ending note, a business model is something that will evolve, but one needs to ensure that your business model has the right mix of elements like being repeatable, scalable, predictable and ultimately profitable, thereby creating the value for the business. Once you have the right business model in place, replicating it with great focus, actionable steps and achieving the business results is the “Execution”.