If you have a great business idea, selecting a profitable business model is essential to future success. Your business model explains what product or service your company plans to sell and it outline your company’s blueprint for making profit. Business models also identify how you will market your product or service, how much it will cost to run your business, and much more.
A majority of business startups fail in the first four years – in fact, of all the small businesses started in 2011, only 4% made it into the second year – so it’s important that you pick the business model that sets your company up for success.
How to Pick a Business Model
When you are selecting a business model, keep in mind that the best model allows you to fulfill customer and client needs at a reasonable cost, while still aligning with your core company values and objectives.
Here are 3 good questions to ask yourself in the planning stages:
- Value: Have you thought of a unique value proposition that makes your product or service valuable? How are you different from your competitors?
- Target Market: Who will you be marketing your product or service to? Are there enough people in this market to sustain your business and do they have a need for this?
- Costs: How much will your product or service cost to create? Does it have the chance to be profitable? Can it be scalable?
These are questions you should ask yourself in the early stages of writing your business plan. You don’t want to waste your time writing up a plan only to discover later that profitability is not an option.
Once you’ve identified a business model that works for you, you are ready to finish your business plan and can start thinking about how to get a business loan.
About the Author:
Meredith Wood is Editor-in-Chief at Fundera. Specializing in financial advice for small business owners, Meredith is a current and past contributor to Yahoo!, Amex OPEN Forum, Fox Business, SCORE, AllBusiness and more.