If you want to scale your business, your starting place should always be your business model. Why? Because your business model is the foundation for all scalability.
Every business, whether a new player or a seasoned veteran, needs at least one solid change to business model to survive and grow. A business model is a plan for earning a profit — the money left over from sales revenue after paying all expenses.
Business models, also referred to as profit models, can help to ensure that your company always operates during difficult market conditions, and investors are impressed with innovative and reliable business models.
One of the most common reasons that small businesses fail is because there’s no market need for their services or products. This may seem like an obvious pitfall to overcome, and yet according to a CB Insights survey, this problem sinks 42% of small businesses that fail. Why? Because most small business owners don’t want to admit they need to tweak their business model.
How tweaking your business model is the key to success.
Devise Your Plan
To take your business to the market, what (and who) will you need? What will be your channel for delivery? Will you direct market your invention? Will you sell it in retail? Who and what do you need to achieve this, in terms of budget, materials, execution and inside and outside expertise? How will you measure the metrics of each of your efforts to determine how to tweak and evolve your plan as you go? Create a mind map of all of the various spokes in your wheel and then make a list and a timeline of the steps you will take to keep the project from overwhelming you. Of course you will evolve the plan as you go. But without a concrete plan, you don’t have a company. All you have is a general hope and a goal.
Pivot to solve a different customer problem
Another major form of pivoting is known as a “customer problem pivot.” In coming up with your product and finding your target market, you likely had to perform tons of market research and conduct customer interviews to help you figure out what your preferred audience wants. But now that you’re in business, you’re finding out your product doesn’t solve your target market’s problems. In fact, you actually have a better idea of what your market needs, and you can build a solution that better addresses their issues.
This may be a major shift in your business model, but you’ll already have a team in place, plus an in-depth understanding of your customers and how to reach them. Now you can create something people will be willing to buy.
Competitive Advantage
A significant advantage of a tweaking business model is that it can give you a competitive edge over other companies in your industry. Implementing a unique business model can give your company a unique reputation in the marketplace, creating buzz among consumers and encouraging first-time purchases.
Plan For Growth
A company can survive simply by breaking even each month, but it must then rely on debt financing for expansion. Tweaking a business model that consistently brings profit into the organization can help to build a cash reserve that can be used for investment in new real property, equipment or research and development efforts.
Financial Sustainability
The largest advantage of a robust and proven business model is the contribution it makes to organizational sustainability and the ability to weather economic storms or shifting market conditions. A staggering number of businesses close their doors each year solely due to poor financial management. A business model forces an entrepreneur to keep abreast of exactly how much profit is being made each month. It is crucial to take necessary steps to tweak your business model during recession or global pandemic to keep your business intact and running.
Play with your pricing model
Businesses are often hesitant to play with their pricing, worrying that too heavily discounting their product will pigeonhole them and not allow them to raise prices again without backlash. Yet pricing and cost issues is the reason why 18% of failed businesses go out of business.
There is a fine but distinct difference between adjusting your pricing and adjusting your pricing model. How are you currently charging your customers? You might find better success—depending on what your goals are for the current quarter or year—if you switch up how you present your pricing to customers.
Tweak, test, and validate
Making changes to your business in search of growth is never an easy decision. It can be difficult to identify what aspects of your model, strategy, or expenses are holding you back at present. But a good small business is never satisfied with the status quo—tweaking, testing, and validating should always be top-of-mind.
