How to Define the Business Model to Validate the Value Proposition of Your Startup
In this article you will read step by step what are the focal points of the birth and the eventual development of a startup.
The Business Plan
The Business Plan was the backbone of a company : it represented the goals of a business and at the same time it provided the trend over the years.
It was based on a time horizon covering 3 to 5 years, since the birth of the company.
Today the time has changed.
The business plan has evolved into the Business Model.
The Business Model (aka Value Proposition)
Today a market can change profoundly its internal equilibrium in less than twenty-four hours, and this leads to a company having to rely rather than on a backbone, on an elastic structure, as a set of organizational and strategic solutions through which an enterprise acquires competitive advantage.
That is to say, to rely on a business model.
A great starting point to analyze and validate your idea of business : if you need half an hour to explain your startup idea to someone, probably your enterprise concept is not even clear even to you, maybe it is necessary that you begin to meet your market, talking with people, define your goals.
You must first understand what you offer to your customers and how you can create value for your market.
The Canvas Model
The most used system for drawing Business Models is the Canvas model.
The model proposes a number of areas from left to right, starting from the analysis of suppliers and key activities, to reach, to the right, the definition of target customers.
In the lower area is the structure that allows you to define, from left to right, the costs directly related to the activities and the flow of revenues.
The central area is the Value Proposition.
In this section you must enter a value that you are determined to create and spread in the market, as well as the value you want to generate for your audience.
The Labor Limae of Your Business Model
As noted by Alex Osterwalder, it is not enough to fill in the Canvas template for a startup and jump into the market, because:
– no business plan survives at the first contact with the customer;
– it is necessary to think before about the business model;
– you need time to imagine alternatives, when even a single aspect of the business model should be questioned by the market;
– at the end, think about it: your idea of a business model is only a set of hypotheses;
– do not create your company until you have verified your business model.
Today it is necessary to study the market, validate your idea, which basically translates into some key actions that follow the preparation of the business model, the true backbone of any Business Plan:
– the moment you have exactly defined a product or service that creates value for the market, be sure to validate it, to figure out if your customers are willing to pay for it and if so, how much (of course the price they decide to pay must be a price that allows you to be safe within your cost threshold):
– you need to interact with your customers or potential users and listen to them, because their feedback is gold;
– be sure to use benchmarks of the market in which you are about to arrive, and try to determine whether your business based on those parameters is able to survive.
The market is Yours: Take it!
After having challenged the idea of your startup, checking any weak points in order to reconstruct them, be sure to reformulates the parts that do not convince you.
Your market and your audience expect just that.
There is an innovative wave that is sweeping the market, catalyzed by the economic crisis. It was created because customers require innovation, which is the best way to solve their problems.
Be ready to find out what are the needs of your potential customers!