business model

4 Reasons Why Choosing the Right Business Model is a Make-or-Break Decision

When launching a startup, most entrepreneurs are focused on fine-tuning their product or service. While this is a critically important element of the process, successful entrepreneurs must first focus on choosing the right business model.

Whether you’re turning a side hustle into a six-figure business or launching what you hope to be a major product line, you must establish a business model that aligns with what you want the future of your company to look like.

From identifying your customer base to determining how you will sell your services or come up with new products, your business model will ultimately define everything you do. The right business model will:

Help determine proper product-market (or service-market) fit

Your business model helps you determine who your customers are and how you will reach them. After all, there are significant differences between B2B brands and a direct-to-consumer retailer. Understanding who you are trying to reach will make it easier to know the best method for selling your products or services — whether that is through direct sales, advertising or a an e-commerce store.

As part of developing a business model, you should be able to determine current gaps in the marketplace where your product or service can make a difference. Identifying and addressing pain points prior to launch will ensure that you aren’t scrambling to find the right fit after you’ve already made a major investment.

“(Before you start) is the time to pitch the entire business model to a group of customers or a specially selected focus group. This is not just a product pitch, but must include all elements of your pricing, marketing, distribution and maintenance. Here again is your chance to make pivots for almost no cost,” Martin Zilling, startup mentor and angel investor, recommends.

Related: How to Validate Your Business Idea in 30 Days (or Less)

Link a variety of outcomes with real, predictable numbers

A quality business model should enable you to generate predictable outcomes, and can be used to extrapolate results (with real numbers) based on known factors like the size of your target market, the number of products you will produce or the number of service providers you have available, your marketing capabilities, and more.

Essentially, by following the plan you outline in your business model, you should be able to predict how much revenue your company will generate in a given month, quarter or year.

The Harvard Business Review describes this as creating a series of “virtuous cycles,” in which the actions your business model directs you to take leads to the accumulation of assets and resources. This positive outcome enables the cycle to start anew through repeatable, continuous growth that further strengthens the business model. 

Paint a picture of what your day-to-day will look like

Your business model should detail what day-to-day activities within your organization will look like. Knowing what you need to do each day will keep you on track and provide a much-needed system of accountability to reach those goals you set.

Of course, part of this entails being willing to outsource certain tasks so you’re able to work on your business, not in it. Not only does this ensure that you’re focused on higher-level work, but it also empowers your team and helps them become more engaged and productive.

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Help you share your founder story

At first glance, business models can seem cold and impersonal. After all, as a rule, they are generally focused on processes and numbers. 

But if you dig a little deeper, you’ll find that there is a story behind your chosen business model. There are specific reasons why you decided on this business model over another, and the strategies you plan to use are unique to your business. Whether it’s a dissatisfaction with the state of your industry, a desire to provide products or services for an underserved market or simply the belief that you can do things better than the competition, you have a founder story to share.

When you look at the reason why you do what you do, you’ll find the engaging stories that can help you further differentiate your brand. This will help you refine your branding further so you can make an even better impression with your target audience.

Key takeaways

Defining your business model may not be the most exciting part of launching your startup, but few things will prove more important in the long run. By laying a strong foundation for how you will determine product-market fit, reach customers and manage day-to-day needs, you are putting your brand in the best possible position to succeed.

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Originally published Feb. 21, 2021.

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