Starting a business can be both exciting and daunting. Entrepreneurs often have a great business idea, but not all ideas are viable. A business model concept is the foundation on which a successful business is built. By thoroughly vetting the business model concept, entrepreneurs can identify any potential flaws or gaps in their product, target customer, or value proposition and address them before moving forward with a comprehensive business plan. A good business model should align with the entrepreneur’s interests and abilities while providing value to customers. Therefore, it is essential to vet the business model concept before writing a business plan.
A business model concept describes how a company creates, delivers, and produces value. Think of the model in terms of product/service, customer & value. Vetting this concept is an iterative process that requires refining the product/service offering, identifying the target customer, and determining the offering’s value until all three are perfectly aligned. A great business model means all three are well-aligned and fit the entrepreneur’s interests and abilities.
The vetting process involves an iterative thought process because at the end of each vetting process cycle, a decision is made about proceeding to a business plan. The decision can be made by asking two questions:
- Does the offering solve the target customer’s pain-point and if it does;
- Is the target customer part of a strong market with critical customer mass?
If the answer to either question is a “no”, then the business model concept needs to go through the refinement process again. By taking the time to iteratively vet the business model concept, entrepreneurs can limit their biases and approach the planning process with a clear and objective mindset. This, in turn, can lead to a more successful and profitable outcome, as the product or service is customized to the needs and desires of the target customer and not to the “beliefs” of the entrepreneur.
To answer the first vetting decision question, it’s important to remember that a business model is all about understanding the target customers’ needs and desires. When developing the product/service offering, entrepreneurs must keep in mind that customer value is not a dollar amount but the outcome the customer gets from using the product or service. Customers buy a product or service expecting a particular outcome or aspiration experience. Therefore, entrepreneurs must focus on providing value that aligns with the customer’s needs and desires.
Customer value is measured by how high on Maslow’s hierarchy of needs the prospect places the product or service outcome. Maslow’s hierarchy of needs is a psychological theory that explains the five levels of human needs, starting with the most basic physiological needs like food and shelter to self-actualization needs like creativity and personal growth. The higher the level of need the product or service fulfills, the more value it provides to the customer. Customers are willing to pay a higher price for products or services that meet their higher needs.
Entrepreneurs need to have a deep understanding of their target customer. This means going beyond basic demographics and understanding their pain-points, desires, and preferences. They should conduct thorough market research, including competitor analysis, to gain a comprehensive understanding of the target customer and the market. They can also use tools like surveys, focus groups, and customer feedback to gather insights.
Once entrepreneurs have a good understanding of their target customer, they can start developing and refining their product/service offering. It’s important to keep in mind that the product or service needs to solve a real pain-point for the target customer. Entrepreneurs should focus on developing an offering that is unique and stands out in the market. They might consider developing a minimum viable product (MVP) to test the market and gather feedback before investing significant resources into product development. This means getting feedback on the product/service offering, understanding what the target customer likes and dislikes about it, and making necessary changes. It’s important to note that the offering may need to go through several iterations before it is perfectly aligned with the target customer needs.
When the product/service offering has been refined based on customer feedback, entrepreneurs can start working on their unique selling proposition (USP). The proposition should clearly articulate the offering’s unique selling points and benefits it provides to the target customer. It’s important to keep the it simple and concise, as it should be easily understandable to the target customer.
The second vetting decision question addresses whether a market with critical customer mass exists for the product/service offering. A strong market is one with enough potential customers who are willing to pay for the product or service. It’s not enough to simply identify a target customer and a need that your product or service can fulfill. You need to make sure that there is a critical mass of customers who have this need and are willing to pay for your solution. If the market is too small, or if the competition is too fierce, your business may struggle to gain traction.
That’s why it’s important to conduct thorough market research as part of the vetting process. This can involve analyzing industry reports, surveying potential customers, and even testing your product or service in a small-scale trial to gauge interest and gather feedback. By understanding the competitive landscape and assessing the demand for your offering, you’ll be able to make more informed decisions about whether to move forward with your business concept.
Once you’ve vetted your business model concept and feel confident that there is a viable opportunity, it’s time to start thinking about a business plan. The business plan will provide a roadmap for executing the business model, including how the product or service will be produced and delivered, marketing strategies, and financial projections. However, even at this stage, it’s important to remain open to feedback and continue refining your ideas. A business plan is essentially a roadmap for how you will bring your business to life, but it should also be flexible enough to adapt to new information and changing circumstances.
Final Thoughts: One benefit of vetting your business model concept before diving into a business plan is that it can help you avoid some of the pitfalls of bias. As an entrepreneur, it’s natural to become attached to your ideas and to believe in their potential. However, this can sometimes lead to a lack of objectivity when it comes to assessing the viability of your business model. By taking the time to objectively evaluate your concept and gather feedback from others, you can make more informed decisions and increase your chances of success.
Vetting a business model concept before writing a business plan is a crucial step in the entrepreneurial process. It involves carefully analyzing your product or service, target customer, and value proposition to ensure that there is a viable opportunity. By conducting thorough research and remaining open to feedback, you can avoid the pitfalls of bias and make more informed decisions about how to bring your business to life. And while a business plan is an important tool for mapping out your strategy, it should be flexible enough to adapt to new information and changing circumstances.
With a solid business model concept and a well-crafted plan, you’ll be on your way to building a successful business that meets the needs of your target customers and creates value for your stakeholders.
If you are planning to start a business or are thinking about scaling an existing one, be sure to read the ebook “Real-Time Strategic Business Planning: A Guide to Optimizing Your Business for Maximum Success”. It is an essential book for business owners, managers, and entrepreneurs looking to leverage real-time insight to improve their business operations. Learn how to develop a comprehensive business plan, assess risk and opportunity, and create an actionable roadmap for success.
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