The strongest business models are the ones that provide the most value for their customers. These are the businesses that are leading the way, always looking for innovative ways to streamline operations, cut unnecessary costs and maximise value for customers. They also have the best protection from competitors because their models are the hardest to imitate.
Strengthening your business model requires a deep understanding of how your business operates and how it creates value for its clients and shareholders. It’s all about thinking differently and being open to new ways of doing things. Focus on innovation and make it your goal to maximise benefits for both customers and shareholders. As with any kind of innovation, it’s all about identifying problems and generating solutions, not just innovating for innovation’s sake.
Here are 4 ways to help you build a stronger, more scalable business model which will stand the test of time.
Find your niche
No matter how great your business is, your product or service won’t appeal to everyone.
Who are you trying to help? What problems are you solving and what needs are you meeting? A clear idea of who you’re serving and what they’re looking for will help you define the value you create for customers.
Value creation is the most important element of your business model– it’s why your customers come to you and not your competitors, it’s what motivates them to invest in your brand, and it’s what improves their lives in some unique way. Your brand promise is what differentiates you from the competition, it’s that inimitable thing which only you and you alone can offer. It also happens to be an amazing way to strengthen your business model.
The best business models find their niche and focus on them alone. Everything is tailored to their specific wants and needs, from marketing, to product and service delivery and communication, to the way they collect payments. Designing everything with your niche in mind is a win-win– it maximises the value you create, resulting in happier, more loyal customers, more referrals, and more business. This enables you to build a really solid business model which creates the maximum amount of benefits for its customers and its shareholders.
Great business models have a solid cost structure with minimal overheads and maximum revenues. They also have a resolute focus on keeping costs lean. Evaluate your cost structure by cutting non-essential costs. These are the ones that don’t directly impact your customer or the quality of your product or service. Are you currently wasting any time, money, or resources? What subscriptions do you currently have? Which ones are vital to the business and which ones could be downgraded or eliminated altogether?
The majority of small businesses fail due to cash flow problems. A solid cost structure is one which prevents this problem by generating profits before it incurs costs. With this model, you’ll avoid running into the kinds of cash flow problems which can cripple your business.
Here’s the story of a business we recently came across which might help you think differently about your own cost structure…
An independent fashion retailer currently buys a lot of expensive stock and must wait for it to arrive before they can make a sale. They often experience unnecessary delays and spend more cash than they generate, which creates big gaps in their cash flow. This has a knock on effect on paying bills, paying staff, repaying loans, and it puts the business in a vulnerable position. In the long-term, it also creates barriers to the future growth, viability and scalability of the business.
This got us thinking– how could this business redesign their cost structure to generate revenue before they incur costs? Could they improve logistics by streamlining the movement of products to arrive more quickly and cheaply? Or perhaps they could implement a preorder model so they receive money from customers before they purchase stock from retailers.
Sometimes strengthening your business model means looking at problems from many different angles, exploring lots of possibilities, then choosing the best solution to carry forward.
Streamline the delivery of your work
As a business owner, your time is precious. Ask yourself if you’re responsible for delivering the bulk of the work or if you have a team of people on hand to complete it for you? Delegating as much work as possible benefits the scalability of your business, enabling you to grow more quickly and easily. Whether you’re a sole trader or a limited company, there are many ways to save time and get others to do more of the work for you. Hiring external people to do some of the work for you keeps costs down and increases your profitability.
However you decide to delegate work, make sure you align this with your business goals. Do you want to grow your business by tenfold? Do you want to redesign your business so you can spend more time with family? Whatever your goals are, consider how delegating work could free up more of your own time to pursue your ambitions and the things that matter to you.
Evaluate your pricing model
When used to your advantage, pricing is a valuable tool for innovating your business model. Your pricing model should be based on the value you provide your customers. Do your customers come to you for a good deal, or do they pay more for your product or service because of it’s high quality and the value it creates for them?
You can find your competitive edge by defining what value your customers are paying for. Are your customers paying for cost or value? What would happen if you increased your costs slightly?
Also consider how your customers are currently paying, and if there is a way they would rather pay. The strongest business models maximise recurring revenues and limit one-off sales. Perhaps you could implement a subscription-based model where payment is collected automatically, making it easier for the customer and giving you a more stable and reliable cash flow every month.
Looking for more ways to innovate your pricing model? Check out our blog post on how to price your products and services.
Ready to take your business to the next level?
We can help. Everyday we help our clients build better businesses that help them get to where they want to be. Through clever planning, smart systems and strategy, we can help you streamline your business model and plan for whatever comes your way.