How to choose your Business Model?

How to choose your business model

When you create a start-up, anticipating its profitability is the key to success. Here we will know how to choose business model. The business model is used precisely to look to the future with realism, integrating all spending and income variables from a long perspective.

This is why defining the economic model for your future activity is essential. To have a solid base from which to organize your operation and measure your performance, you must agree to confront yourself with reality :

Creating and developing your start-up is an extraordinary adventure. Carrying new professional satisfactions, the journey of the creator of start-ups is above all fraught with challenges, which must be overcome one by one.

How to choose your business model

Why is choosing your economic model important ?

The creation of a start-up is based on intuition, a concept. This is why creativity dominates in the early stages of reflection. But for the project to become a business, the creator must be able to put his ideas into equation to make sure he meets a solvent market. This equation is called the business model, or business model.

So the choose your business model of your start-up describes how the business will create value. That is to say, it allows you to validate the financial balance of your approach. But the economic model is also a universally recognized communication tool. To interest an investor, convince a banker or outline an engaging perspective with partners, it is better to be precise and concrete. It is also the function of the economic model !

And because what matters in the early years is how you are going to consume resources on one side and generate cash flow on the other, your economic model must be put into perspective with a costed business plan. Your business plan (or business plan) will allow you to imagine precisely the profitability of your project, over a period of several years.

Defining Economic Model

Finally, defining your economic model also means comparing yourself to existing competitors. With the choice to adopt the dominant economic model, at the risk of having trouble making room for yourself if you arrive later than the others. Or to try to disrupt the market with a differentiating economic model. For example to offer to rent what others only offer for sale.

How to choose your business model

How to describe his economic model ?

Your business model must be able to be understood by everyone, during a pitch like during a dinner in town. This is why its definition is based on simple and standardized rules.

With a few variants linked to certain very specific projects, your economic model is based on :

  • Your offer of products or services (what I sell)
  • The benefits it brings compared to the existing (why me?)
  • The clientele you target (to whom I sell)
  • The objectives that you set for yourself (become a leader in 3 years, convince 20% of potential customers …)
  • The strategy you adopt to transform prospects into customers (how I sell)
  • The resources that you intend to mobilize for marketing (direct online sales, support on a distribution network, use of a sales force, license transfer, etc.)

The power of the mechanics of the economic model is to oblige you to concretely consider the commercial life of your project. And therefore to be able to precisely relate needs and resources. Or detect bottlenecks, in market access, logistics management or after-sales service.

As always, the best questions are the ones you ask yourself . And choose your business model is there to help you mark your trajectory for the first 3 years.

How to choose your business model
Business Model concept on the gearwheels

What examples of economic models are inspired by ?

In recent years, successful economic models have relied at least as often on the inventiveness of market access as on product or service innovation. This trend corresponds to what is called ” ubisation of the economy ’.

Even if it is up to you to define the safest way to achieve your ends, it is useful to know the most common market access methods :

  • The sale of goods: the company pays for itself on the margin of the goods it manufactures (or distributes). In the case of services, billing may correspond to the concept of time spent. The quality of customer experience (from low cost to premium) determines in this model what is called the positioning of your company.
  • Subscription (for a service) or rental: this model values use to the detriment of possession. Based on a strong digitization of the customer relationship, it eventually makes it possible to market the customer data acquired for the purposes of the transaction.
  • Brokerage: variant of the sale of goods or services, brokerage prevents the company from worrying about any production. The start-up preempts the customer relationship and leaves the producer responsible for delivering and maintaining the product or service.
  • The license: according to the same logic but in a position further upstream of the value chain. The company reserves the innovation and the enrichment of the brand, without investing in distribution, or even in the manufacture, product or service.

This list is not exhaustive. There are many other proven economic models that still remain to be invented. Build yours by keeping the idea of creating value for your client

choose your business model
Business Model Concept. Chart with keywords and icons on white background

In conclusion,

A  business creation is born with inspiration and succeeds through a quantified and methodical confrontation with reality.

The more you doubt and check at startup, the faster you will then meet your success and and learn leadership. Give yourself the weapons to aim just as soon as you first go out on the market. It’s a step ahead of your competitors.

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