When starting a business there are a number of things to take into consideration. You need to firstly know what solution you are going to provide to what problem, or how your product or service will fill a need in the market. You also need to know how to make money. This is where a business model comes into play.
Do you have a business model for your business?
Business models are, at heart, the framework that explains how a business works. A good business model answers the questions: Who is the customer? What does the customer value? How does the business make money? What is the underlying economic logic that explains how you will deliver value to customers at an appropriate cost? This framework becomes the foundation of your business success.
Having a clear business model helps you:
- Understand what your customers want to achieve so you can ensure your messaging addresses those desires. This increases your conversion.
- Save money on marketing. Instead of trying to attract anyone, you spend your budget on getting in front of likely buyers. A business model identifies your best client.
- Feel confident that all of the monthly & daily activities you do (or outsource) lead you to your revenue goals.
- Identify pricing that covers expenses, fuels you and your team and has profit leftover for investing in future growth.
- Create branding that supports your positioning – the positioning that supports your pricing.
As your business grows along with your client base you will gain a better understanding of the type of client your business fits most effectively. Not all clients are the best fit for your business. A customer doesn’t fit your business when you cannot deliver immediate value, nor can you realistically deliver future value in the required timeframe. Doing business with these customers will more than likely create problems. They can take up too much of your or your team’s time, may be more demanding, and request products or services which are outside of your business model and therefore create extra stress and waste money. Then they will tell their friends that your solution doesn’t work. They also may suggest changes, updates, improvements or add-ons to your product. Which, if you listen to them, will create further problems resulting in more time and money wasted and further stress.
Researching your customers regularly should be a part of the core strategy for your business. This way you can stay on top of who your best fit client really is. Customer Success consultant Lincoln Murphy suggests there are no ‘one size fits all’ customers but there are actually 6 types of fit.
- Technical Fit – The technology the customer already has to be using, or acquire, to get value from your product.
- Functional Fit – The features or functions the customer must have from your product to be successful.
- Resource Fit – Does the customer have the time, money or manpower to buy your product, learn to use it, and be successful with it?
- Competence Fit – What does the customer need to learn to be successful with your product, and are they able to learn it?
- Cultural Fit – Does the customer share your core values, without which you wouldn’t work well together?
- Experience Fit – Are you able to provide the appropriate experience they need – the type of help, instruction and support – to be successful with your product?
These are a good start but every business needs to define the best fit customer for themselves. What fit is most important in predicting the success of your ideal customers? How can you use that criteria to segment customers more effectively, to ensure they get exactly what they need to succeed?
Staying on top of customer research and reviewing your business model from time to time will help your business to adapt and grow. A customer who may not be the best fit for your business today could be the right fit in 6 months. Reviewing this information often keeps you up to date so that your business is as productive and also as versatile as possible.
Disclaimer: The advice contained in Balance Books blogs and newsletters is of a general nature only and may not apply to your individual business circumstances. For specific advice relating to your situation, please contact your Accountant or other professional adviser to discuss further.