A business model is a combination of FOUR VERY IMPORTANT ELEMENTS and each of these absolutely, positively, must be clearly articulated:
- CVP, (Compelling Value Proposition)
- Precisely defined target market–relying upon your safety margin for your calculations
- Primary, secondary, and tertiary, communications programs through which you will inform #2 about #1
- Vehicle, (method or location), to deliver #1 to #2.
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It all starts with your CVP, (Compelling Value Proposition). Be sure to read our suggestions pertaining to the CVP.
These four elements constitute your “success plan”. You get these right, you LIKELY succeed. Get one of them wrong, and your success LIKELY become tenuous. It’s not enough to think like a baseball park: “build it and they will come”. You must have the right product and service, that is clearly superior to anything out there, and you must have a target market that can support your business. Then you have to communicate. Let’s talk about communications a bit.
In principle, communicating about your business is not a complicated ordeal, for most businesses. As an individual if you are embarrassed about shouting about your business from rooftops…then don’t go into business. If you are embarrassed to attract attention, to make a few mistakes while communicating. Don’t go into business. If you are going to be more concerned with how professional you appear to be rather than how effective your communications is, what I call the “pretty-pro” factor, then don’t go into business. We’ll have much more to say in our post about communications. But let me leave you with this thought. You will have to shout out to attract attention and to inform people about your business. Have a communications plan and implement it.
About the “Vehicle”, our fourth critical element. Yes, it helps to be in the right location, of course, but not if the expense will overpower your budgets. The rule of optimizing is as appropriate to your “vehicle” as it is to your communications program. Maybe the ideal location is extremely expensive or the facilities are twice that required, and so on. It may be ideal, but it may break your bank account. Find your lowest cost vehicle through which to maximize sales to your target market.
Let’s talk about vehicle a bit more to elucidate by examples. If you need a store, the store must be just large enough to accommodate peak customer traffic periods, but not so large as to have a need to build inventory to hide what otherwise would be empty shelves, empty space. If you can choose between store “A” that is spectacular, on prime land, and in prime location, and would really impress your friends and relatives, at a cost of $10,000 /month, requiring a 10-year lease, compared to store “B” that costs $5,000 and requires a 5-yeaer lease but is “nothing special” and is in a non-prime location, then you may better off with location B if it will serve you almost as well as the other location. The money saved in rent can be directed into the life blood of the business.
As a rule of thumb, always seek to optimize your decisions and costs when executing your business model.