Ideal Business Model: Learn How To Make One!

ideal business model

The competitiveness of your startup in the market is based on the strategy that you devise for it. The right business model is a useful tool that helps you gain a sustainable advantage over your competitors.
However, it is important for you to know that several key elements constitute a business model.

And you require same efforts while developing a right business model, as you do while developing a right product.

An ideal business model is primarily focused on satisfying the customers. It aims at offering great value to the customers, delivering great margins, providing possible solutions to the funding problems, and avoiding dissonance or dissatisfaction of the customer.

Decide the Price of Your Commodity

Make sure you do a market research before deciding the price of your product. The price of your product should not be very higher or lower than the products of your competitor.

ideal business model

Your sales will dip, if the product is high priced, while low prices could mean short-term sustainability.

Acquire High-Value Customers

High-value customers help you achieve your business targets. They are the customers who offer you maximum value. They are accessible even with low costs and less marketing expenses.

Offer Ample High-Margins

Outsourced manufacturing or an improved process with low manufacturing costs can help achieve high margins. A product offering enhanced value to the customers also allows you to charge a premium for your product. Moreover, a low-touch model can also help you to cut down the cost of the workforce.

Is Your Product The Best Available Solution?

The perception of majority of the stakeholders about your product is reflected in the prototype phase. You have to ensure that the solution is effective and addresses the problem it is aiming for. A best business model cannot save a lackluster product.

Promise Customer Satisfaction

Retaining a satisfied customer is easy, but acquiring a new customer is costly.  A satisfied customer acts like a brand ambassador.

The costs associated with after-sales customer service are high but worth. Though, they do not bring in any revenue for the company, but are one of the effective ways of ensuring customer satisfaction. These are unavoidable costs which should ideally be limited or assigned to a third party.

Marketing Strategy

Marketing is a crucial aspect while launching a product. It can either make or break your product. Your product cannot do well without a great marketing strategy or distribution channel.

ideal business model

Remember, an efficient distribution channel keeps margin high. And, it is equally important to test all the elements of your channel strategy in detail.

Retain Market Position

Sustainability of your business and its improved market position are important aspects of a good business model. Hence, a good business model should incorporate a long-term product roadmap and include all the growth opportunities and external threats.

For a product to do well, it is important to have huge customer base. With technological revolution, it is important for you to create a model that sustains your product.

Devising a Funding Plan for an Ideal Business Model

Your business funding decides the sustainability of your business. A constant flow of funds is required for the sustainability of a business. Be it a startup or an established business, you have to incur various costs, including operating capital, personnel costs and various other expenses.

The dynamics are however different for startups, since they require more funding for retention and customer acquisition.

In order to avoid external funding in the long run, you should be able to multiply your sales manifold with initial funding rounds.

Implement a Pilot Rollout

From costs to quality to pricing, you can test everything associated with your product with a pilot limited rollout. You can fine-tune channel strategy and pricing, prior to a final launch with the low risk and high-speed way rollout.

Business Model Canvas

Business Model Canvas is a comprehensive template for business model founded by Alexander Osterwalder, the founder of Strategyzer.

It is a useful tool both for new and established businesses. The canvas helps established businesses to create new growth avenues and manage their strategy while new companies use it search for the right business model.

ideal business model
LinkedIn Business Model Canvas

The business model canvas is also helpful for giants like Nestle, P &G, GE, etc to discuss their new and existing businesses in a tangible and structured manner.

A Business Model Canvas constitutes of nine elements:

  1. Value propositions
  2. Channels
  3. Customer relationships
  4. Customer segments
  5. Revenue streams
  6. Cost structure
  7. Key partners
  8. Crucial resources
  9. Key activities

Components For Ideal Business Model Explained

While developing a product, it is important to decide your target customer segments, and the products and services you are offering to them.

After deciding the customer base, you should decide what problems the product will be addressing and what values you are going to deliver to the customer.

You need a channel to reach your targeted audience. Choose cost-effective and integrated channels.

Once you have decided the channels for reaching out the targeted audiences, it is important to meet the expectations of the customers and maintain a relationship with them.

Revenue stream is another aspect you should be considerate about. Study the customers and find out for what value they are willing to pay.

All in all, the resources that you utilize, the activities you engage in, and the partners that help to drive your business, are integral part of a business model canvas.

After sorting out all the resources and activities, identify the most important cost drivers in your business model, and see how much they cost you.

In order to identify the underlying trends and compare yourself with the market competition, you should develop and visualize the mapping of your business model.

A business model is equally as important a product. Hence, make sure you incorporate all the essential nine elements while developing a business model.

A business model helps to identify the standing of your business, so, make your sure you prepare well before launching your product.

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