The following is a guest post by Innovate UK, the British government’s innovation agency. They are focused on finding British businesses and entrepreneurs who can use new science and technology to drive economic growth.
Follow Innovate UK on Twitter: @innovateuk.
Your business model is critically important to your startup – in its purest form, it’s make or break. The better your model is, the more likely you are to be successful. From generating revenue to scaling up and laying the foundations for longevity, you really need to get this right. Here’s our essential startup advice for defining your business model.
Cover All Areas of Your Business
“A shared vision will strengthen your company and inspire your team. But make sure they have the resources they need to thrive in their roles.” – Richard Bradshaw, Head of Operations at Foodit.
Your business model should be built upon the concept of solving a problem. Ideally, this will explain how you aim to create, deliver and capture value from your USP – while also defining your market.
Be sure to cover all parts of your business, here’s what you need to think about:
- Value proposition
- Target customer segments
- Distribution channels
- Customer relationships
- Value configuration
- Revenue model
- Core capabilities
- Commercial network
- Partner network
“Look for strategic frameworks and guiding templates. They ask you fundamental questions about your business goals and brand vision. Most importantly, they help you get started.” – Asli Sonceley, Co-Founder of Xtensio.
If it’s your first time creating a business plan, using a template can be a worthwhile option. There are many widely used tools online, Business Model Canvas could be a good place to start.
Templates will give you a structured work-through of all aspects of your business. This will help you refine your ideas and present it in a cohesive way.
Don’t overlook the importance of the many online advisory resources that accompany these templates. This is a topic worth researching in depth.
“Offer your product to an impartial group of target users before going to market to spare guesswork and discover common pain points.” – Thomas Smale, Founder of FE International.
Validating your idea is an undeniably important part of creating a business plan. Before you start thinking about launching, get genuine and organic opinions of your proposition, product or service.
Find a collection of your target consumers and test your business in the real world – it’s important you don’t involve friends or family in this. Ultimately, you want to know whether people would actually pay for what you’re offering.
Market research is a great opportunity to iron out any kinks in your plan. Ask lots of questions:
- Would they buy your product or service?
- What’s the biggest issue or obstacle?
- How much would they be willing to pay?
- Is it good enough?
Once you’re happy with your offering, build some future milestones into your plan:
- User base – how many people are going to use your product or service?
- Registrations – how many registered users do you have?
- Installs/downloads/integrations – this is especially important for software companies
- Conversions – what’s your conversion rate?
- Revenue – are you on track with your initial projections?
Continuously Refine Your Model
“Reviewing and adapting your business model is crucial to surviving and thriving as a company.” – David Bennison, Director at HBD Associates Ltd.
Your business model is never complete. It can always be refined or improved upon based on your everyday learnings. Adapt it to meet your market, competition and consumer demands.
Here are a few points that can affect your model:
- Cost pressure
- Price pressure
Your business plan is the foundation for your business – you need this to be as strong as possible. Take the necessary time to get this right. It’s not something to overlook.
If you’re interested in more advice like this, you can subscribe to Innovate UK’s YouTube channel here.
Additionally, you can follow @InnovateUK on Twitter.