Are you struggling to work out how you are going to make money from your business idea? Are you wondering which business model will be best especially when you are cash-strapped?
Remember when choosing a model for your business idea, there are seven factors to consider:
1. Who is your target audience?
You need to have a clear idea of who you are selling to. You need to know their psychographics and demographics so that you create a product or service which satisfies their needs.
2. What are your business processes?
When thinking about this question, you need to consider the core aspects of your offering. If you are manufacturing a product where will you get the raw materials for the product, and what steps do you need to take to turn the raw materials into the final product? If you are selling a product, where will you get the product from and how will you distribute the product to your customers?
3. What business resources do you need?
You need to think about what your business requires to do its daily activities, find customers and reach its goals. Some examples of business resources are a website, customer lists, warehouse, capital, computers, and intellectual property.
4. What is your value proposition?
You need to have a strong value proposition to succeed within the competitive environment of your business. How will your offering stand out from the crowd?
5. Who will be your strategic business partners?
Your business will rely on some partners to succeed. Who will be your suppliers? Who will help you with your marketing? Who will courier your products to your customers? These partners need to be reliable and trustworthy so that your business will prosper.
6. How will you create demand for your offering?
You will need to establish a demand generation strategy. How will you get someone interested in your offering and then convert them into leads and finally close the deal?
7. How will you innovate?
When going through the questions above you will have made a few assumptions. It is only when you have paying customers coming through your door that you will know if your model is effective and what you may need to change. You need to keep in mind that your business model is not a static object but a fluid plan.
Here are three business model to consider for cash-strapped entrepreneurs.
1. Subscription model
In this model, your customer will sign a contract with you to supply them with a product or service on a regular basis. This could be monthly, weekly or daily. The benefit of this model is that you will have a clear idea of how much money you will make because you will know who is subscribed for your service. The drawback is that it may take a lot of time and effort to market your offering to your prospects. You need to make sure you have a product which people want and need. Some examples of subscription models are Beanbox Club and The Daily Dish.
2. Marketplace model
Are you a networker? Do you like to bring people together? Then this is the model for you. In the marketplace model, you are the middleman between the customer and the seller. You need to create a platform where people can advertise these goods and people can buy it. This model’s strength lies in your marketing capabilities. You need to be able to bring the sellers and customers together successfully. Some examples of a marketplace model are HelloPretty or Loot.
3. Affiliate model
In this model, you review different products and then create affiliate links on your posts which people click on to buy the products and you earn a portion from the sale. This model is reliant on your blog or website being popular and people valuing your opinion on products. Here are some affiliate programmes in South Africa: AdMarula, Faithful to nature and Loot.
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