I myself have struggled with the thought of coming up with an innovative product in which I can build a business around. However, after reading the article 7 Steps for Establishing the Right Business Model by Martin Zwilling, I discovered that creating a business is not all about the discovery of an innovative product. Instead it is equally important to develop a proper business model that focuses on pricing, messaging, and target audiences. In some cases, new businesses focus so much on the product that when it comes time to follow through with the selling of the product, the company ends up failing.
In order to prevent your start-up from failing, realize it too takes time to establish a business plan for your product. There are in fact seven steps which can be taken to formulate a proper business model.
- Determine your product’s value. It is important to strike a balance of price so that you are compensated for your work, but at a price in which is standard with your competition and demographic. Part of this price includes estimating your costs. Generally a 50% gross margin is a standard for the lower bound.
- Make sure your product solves a problem. The best way to determine if your product solves a problem is to have people use the product first hand. This in itself is risky, so it is recommended issuing the product in a test market.
- Build a channel and support system. Most entrepreneurs are familiar with the concept of a pitch, but building your channel involves a little more depth. Full in-depth knowledge of not only your product, but your marketing, pricing, maintenance, and distribution is required to successfully engage your focus group.
- Inquire from industry experts. Going into a business can be intimidating and there can be many times where you are unsure of what to do. The best thing to do in this situation is to ask an expert in you industry. Some industries even offer advisory boards to help and even provide new opportunities.
- Have a soft launch or pilot. Launching your product in a test environment limits the costs and allows for maximum recovery. This gives you the opportunity to test out the product’s costs, quality, and pricing.
- Collect customer references. One of the best ways of marketing is through word of mouth and customer references fall in this line. Customer references are a great way of achieving new clients.
- Attends national trade shows. National trade shows provide you as opportunity to market your product as well as catch up on ideas. It also conveys a sense of credibility towards your business.
Starting a business is not all about the product, and at some points can be the main focus. When thinking of a start-up, it is important to always keep in mind the overall plan or business model. This model should be well thought out or even your beautifully designed product will fail.