How to test if your business model is viable?

Starting a business or planning to approach investors? What is your business model then? Have no clue what this means? Don’t worry, we have all been there. No, this is not any business jargon intending to confuse your senses, but, a simple answer to your question.

Your business model is the way your business will operate and make money. These are the basic guidelines or you can say, the blueprint of your business and its functionalities. Yes, it’s that easy. However, there are certain challenges one might face during developing a proper business model. With the fast and growing economy, pricing the product, analysing competition and threats in the market, understanding the unique selling point of your product becomes very important.

“Information technology is at the core of how you do your business and how your business model itself evolves.” -Satya Nadella

Times are changing and so should your business model. If you wish to maximise the profits for your business, then your model should adapt and be flexible to your environment, surroundings and these changing times. How? Let’s find out.

Uniqueness

Uniqueness is paramount for the growth and establishment of your startup. What entices your customers? Why would your customers prefer your products/services over any others’? Is there a problem that only you have offered to solve yet? If you can’t answer these questions, you may want to sit back and rethink your ideas and business model for a while.

“What sets you apart can sometimes feel like a burden and it’s not. And a lot of the time, it’s what makes you great.” -Emma Stone

While not entirely mandatory, uniqueness is one sure shot way to skyrocket your startup a hundred rungs up the ladder of success. It gives you an edge over potential rivals that may spring up in the future or those that are already there.

The success of Stoned Santa, a startup by IIM Bangalore’s Shashank Shekhar speaks for itself. Stoned Santa’s (mostly) unprecedented idea of creating and delivering personalized gifts for our loved ones is one of many instances when creativity and distinctiveness gave the startup instant brownie points in the market.

“Skillioma” is also one such example who is disruptive in the edtech market. It’s uniqueness lies in its framework which is first in the world. The idea is that it should give all the resources, knowledge and tools that any individual, young or old needs for the real-world in a blended learning framework, where it expands your brain capacity which is ultimately needed for your success.

Upstart Funds

Now that you’re all set on bringing a unique idea into life, the question arises: How do you go about actually doing it? Starting anything and everything in this cutthroat industry requires capital, be it in the form of employees, public influence, the paraphernalia and logistics or just plain ol’ money.

“Money is a tool. Used properly, it makes something beautiful.” -Bradley Vinson

There could be three main ways to accumulate the capital you need. First, you could go about looking for investors. If your product (or the service you offer) is promising enough, you may not have to look very far.

However, if you’re facing a dearth of investors who are willing to believe in you and your startup, don’t worry: taking a loan is always an option. This doesn’t mean it’s always judicious. With loans come a bunch of other problems: the paperwork and of course, the repayment of your debts. But it’s also not all gloomy if you do consider going down the road. Having a loan to repay might be a good incentive to give your heart and soul into your startup.

If none of these seems like a good plan, you can always consider paying out of your pocket. However, bear in mind that you may have to curtail your budget if the amount you have in hand is a little less than adequate.

Knowing Your Customer

Without customers, there would be no sales. Knowing your target group is a very crucial factor in getting your business up and running. Whom do you advertise to? Which pressure points do you push? Knowing who your customers are can answer these momentous questions.

“Know what your customers want most and what your company does best. Focus on where those two meets.” -Kevin Stirtz

After all, the needs of a businessman won’t be the same as those of a student. Neither will the interests of a stay-at-home mother align with those of an unmarried full-time woman. Having a thorough knowledge of the needs, aspirations and the psychology of your target audience is essential so that you can cater to them in the best way possible.

Not only does this give your startup a flattering reputation, but it also speaks volumes about your reliability, inimitable authenticity and work. Amazon has been doing consistently better than Flipkart because it offers a wide range of services, from video streaming subscriptions to an array of products not available on Flipkart.

First impressions last. If your customer receives an unequivocally positive experience, with no room for any complaints, you can rest assured that they will come back to you again, and again.

Competition

Unless you are entering a market that is as of yet untouched and untrodden, there will be competitors. Competition breeds champions. It makes you strive to deliver your best every time. Because if you don’t, someone else will. Anyone who is expecting loyalty from customers in any industry is either very naïve, or daft, or both. Customers flock to the place they get the best services, unbeatable offers and quality products.

“Competition is always a good thing. It forces us to do our best. A monopoly renders people complacent and satisfied with mediocrity.” -Nancy Pearcy

In such a world of fickle customers, you have to be consistent in your performance, and your performance should never be less than exemplary. So, focus on how you can be better than your nemesis. What can you do for your customers that others don’t? Or what can you do better than your contenders? What should customers prefer you instead of those already established in the industry? Utilize your uniqueness to come up with unrivalled services.

A Chinese restaurant would have to cash in on its ingenious history and foods to compete with the Burger King down the road.

Economic Mood

Gauging and analysing the current economic scenario is indispensable when it comes to starting a business. After all, the economic scenario decided how your customers think and what kind of products they will or will not buy.

“Economics is everywhere and understanding economics can help you make better decisions and lead a happy life.” -Tyler Cowen

For example, it would have been imprudent to start a high-end restaurant during the peak of the COVID pandemic. People were not only getting laid off on a large scale but had also started avoiding eating out entirely.

Get behind the psychology of the customers, and how economic and social crises can influence them.

Timing

Hitting the bullseye on the timing can make or break your business. If the timing wasn’t this important, terms like ‘business season’ wouldn’t exist. Opening firecrackers in March probably wouldn’t do you much good. But the same in October and November (the Deepawali season) could bring in swathes of profit.

“You don’t have to swing hard to hit the home run. If you got the timing, it’ll go.” -Yogi Berra

Open the business when the demands for you would be the highest. This is also when you win hearts by your matchless services and offers. Word of mouth travels faster than light. If customers had a great shopping experience, you can expect a reasonable turn out the next business season too.

Marketing Strategies

Marketing is how you let the customers know who you are and what you do. The importance of good advertising cannot be stressed enough. It wouldn’t be very remunerative if you offer the best salon services in the city if no one knows about it.

“Marketing is enthusiasm that travels to the customer.” -Gregory Ciotti

This is where marketing strategies come handy. From billboards to newspaper advertisements, from online ads to flyers, your presence should be felt in every sphere there is. Prospective buyers should be aware of your name. Find a form of advertising that would most appeal to your target customers, and is easy to consume.

Continuing The Cash Flow

Once your business has developed firm roots and has started flourishing, there will be no scarcity of customer demands coming your way. The biggest challenge for you now becomes to have at hand the required resources and backups to meet these surging demands.

“Coming in business is easier than staying in business.” – Anonymous

This will require voluminous financial planning in advance. If you have a boutique, you don’t want to be in a position where a customer expectantly arrives looking for custom-made dresses only to have you let them down because you’re short on manpower. There should be no paucity of resources, no excuses to not serve a customer. Not only does it cut your profits short, but it also gives you a bad name, hampering your future deals.

Does your business meet most, if not all of the above criteria? If not, you may want to sit back, rethink and make minor corrections to your business model. Setting up a business is no small feat, and a project as magnanimous as that requires loads of time, efforts and research. So don’t be in any hurry whatsoever.

As Chanakya said, the preparations before a battle are more important than what you do on the day of the battle. Go over your business strategies again, and again, explore every scenario and cut out anything that isn’t fruitful. Most businesses can prosper and thrive if the major aspects and concerns are envisioned and accounted for beforehand.