A business model is an organization’s plan for generating profits and includes the products and services it’s planning to produce and offer and the expenses that will occur as a result. A good business model, however, reveals its plan to provide value, its strategy and how it’s going to be achieved.
Strong business models include their ideal customer, innovative ideas, room for growth, and more. Let’s see some critical elements your business model must have.
What Makes a Good Business Model
1. Your value proposition
Every business exists to provide value to the customers it reaches. You need to describe how exactly you’re going to do that in your value proposition.
It must be unique so that means knowing what your competitors are doing well and finding a way to differentiate yourself.
Add to this your strengths and weaknesses too.
2. Know your target audience
Defining a wide audience won’t work. You need to be specific.
There’s science behind building a buyer’s persona. For a good business model, you need to use market research and real data.
Here are some things to find out about that ideal customer:
- Personal background;
- Industry they work in;
- Job role;
- Career path;
- Marital status;
- Free-time activities;
- Resources they use online and offline;
For most questions, it’s worth digging deeper by asking ‘Why?’ That helps you really get to know your target audience. Which leads to creating the products they will need and offering them in a way that speaks to them.
3. Customer relationships
Business is about people. You can’t just know your ideal clients, you also need to reach out to them through the right channels for that and start a conversation.
Once you grab their attention, you should also keep it so that this can turn into a lasting relationship.
All that is a form of art and a good business model must include a proper plan for customer relationships too.
Although you will adapt to changes in the market and follow the needs of your clients, you must be prepared with your initial offer, your MVP and the readiness to receive feedback and act upon it.
4. Key activities
Every good business model also describes the main activities the company and each department will work on so that the business goals can be achieved in the allocated time.
Don’t forget to think through your potential partnerships in the sector and how you plan to reach these people.
Also, add to your business model current partners, suppliers, advertisers, investors, etc.
If a business owner doesn’t take their partners seriously, that might cost them relationships with customers, reputation, and unnecessary expenses.
Maybe you’re a manufacturer working with raw material or reselling finished products. That means you need suppliers and finding the right one might have cost you a lot of time. If you work with a company on a regular basis, you must protect that relationship if you’re happy with their services.
6. Create demand
Creating demand for your products and services is your responsibility too. That means knowing where your ideal customers spend time in real life and online and reaching them there.
Focus groups, surveys, messages via social media and interviews should happen at any stage of your business so that you can always know what the customer thinks and what more you could be doing for them.
Meanwhile, you must look for ways to create scarcity, solve problems, partner with influencers, educate your audience, and even tease them.
These are all ways to create a demand generation strategy and that must be part of your good business model.
Now that you know what a good business model looks like, go ahead and update your business plan, or maybe even start it from scratch.