7 steps to build the right business model

Original author: Martin Zwilling
  • Transfer
pricingMost IT entrepreneurs focus on creating an innovative product, but they forget that an elegant solution does not automatically turn into a successful business. A company needs an equally elegant business model, with the right pricing, distribution channels, and customer relationships.

Finding the right business model requires the same diligence as designing the right product, but the approach and skills required are different. Therefore, investors recognize that two co-founders are better than one. While one can focus on product development, the second will focus on finding and developing a business model. Both aspects must be performed in parallel.

The managerial tandem can look at the business from different angles, which in the future will avoid many problems. Founders can conduct independent research of their sector. In the investment community, this kind of work is called proof of business model. It starts by testing the business capabilities of a model, much like a concept or product prototype testing a technical solution.

Using the following steps, you can build the right business model:

Coordination of solution cost in the target segment


Customers often complain about the lack of a comprehensive and intuitive approach, along with the familiarity of previous solutions. You must correctly assess the value of your product. Too expensive a product will not be popular, and too cheap will scare away the buyer. In this situation, it is necessary to calculate their prices in the same order as competitors with similar quality of the goods or services provided.

Product Validation


If you have a preliminary version of the product, you need to expose it to real customers in order to see the reaction. During the test, feedback must be considered. If the reaction is unsatisfactory, no business model will save you from collapse.

Checking sales channels and customer interactions


The easiest way to complete this step is through focus groups. This is not just a product presentation. This step includes all the elements of pricing, marketing, distribution and service. In the process of execution, it is possible to avoid any costs at all.

Consultation with experts and investors


A small advisory board from outsiders with experience in the relevant field can provide the objective feedback needed to create distribution and sales channels. This item in relation to potential investors can be of great benefit, even if their involvement is not planned at the beginning.

Planning and execution of a pilot version or territorial deployment


Assessing traction on limited territorial deployment is an excellent test of the business model. This step will allow you to evaluate costs, quality and pricing at several points or in the same city with minimal threats and maximum speed of recovery and error correction. Take care of the “viral” campaign and stockpiling for later.

Focus on collecting customer reviews


Pay special attention to the first customers, and ask them to publish their reviews in your support. If you cannot get their support, even with your personal efforts, this is an alarming signal that indicates that the business will experience problems.

Participation in national and industry exhibitions


Positive fame, reputation and feedback will finally verify the business model and product prototype. Participation in exposition events can be an excellent source for establishing the necessary connections and preparing for business scaling.

Your business model may be a better sustainable competitive advantage than the product itself. Too many business plans focus on the product and miss other details of the business model.

The application of efforts only to product development, and ignoring the work on a business model characterizes the implementation of one half of the preparation for the real world of business. It's hard to win by doing half the battle, especially if it's the easiest half.

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