STARTUPS AND BUSINESS MODELS

(an insightful look: how it works and their benefits)

"A startup is a temporary organization in search of a scalable, repeatable, profitable business model" Steve Blank. 

Just as the name implies a "startup", its just starting out. You are not yet a full business entity, you are still in your formative and developing years, testing and trying out ideas.

Essentially startups are adoptable organizations whose primary goal is to find a business model and not execute one. 

All startups face the risk of not finding customers for their product or service. To mitigate this, Steve Blank introduced the customer development method, a process that help startups to systematically search for a successful business model. It's shown in the figures below;

Fig 1: customer development sequence

Fig 2: steps explained 

But before you begin to  carryout your customer development process, you must first decide on what business model to partake in. 

So what then is a Business Model??

"A business model describes how an organization creates, delivers, and captures value in economic, social, cultural or other contexts" wikipedia. For a business, it describes the specific way in which it conducts itself, spends, and earns money in a way that generates profit.

Simply put, a business model is a representation of how an organization makes (or intends to make) money. its a company's profit making plan. it defines the products and/or services it will sell, it's target market and any expected costs.

So here are some business models you can explore as a startup;

1. PRODUCT: a tangible item of value. to run a successful product-focused business, try to produce the item for as low a cost as possible while maintaining a reasonable level of quality. once this is done, you can ensure to sell as much as you want as high as people are willing to pay for it. 

this is where the majority of people lie, we can just group them as people that provide products that essential for daily living (food, clothing, shelter, transportation e.t.c), and it doesn't necessarily have to be physical product.

2. SERVICE: a service involves offering assistance to someone for a fee. And you make money from this by providing a skill to others that they can't or won't want to do themselves. With that said, all workmen, craftsmen, working professionals, teachers and the list goes on; they all fall under this model. so you use your skill to earn your money, the more lucrative the better.

3. SHARED ASSETS: this is a resource that many people can use. such resources allow the owner to create or purchase the item once and then charge customers for its use. to run a profitable business around this model, you need to balance the tradeoff (charges) of serving as many customers as you can without affecting the overall quality of the experience. 

You can find the fitness centers here that charge membership fees for access to their gyms, also the events planners that give glam and hype to events with their array of equipment. also a fraction of the transportation sector can be inclusive here; car rentals, uber, bolt e.t.c.

4. SUBSCRIPTION: is a type of program in which a user pays a recurring fee for access to certain specified benefits. these benefits often include the recurring provision of products or services.

to have a successful subscription-based offering, build a subscriber base by providing reliable value over time while attracting new customers. some big names that have successfully utilized this model include Multi-Choice (DSTV, GoTV), Netflix, Amazon prime, YouTube, Telegram, online institutions also fall in this category. 

5. LEASE/RENTAL: this involves obtaining an asset and renting it out for an agreed-upon amount of time in exchange for a fee. you can lease virtually anything, but its in your bet interest to rent assets that are durable enough to be returned i  good condition. this ensures you can lease the good multiple times and, perhaps, eventually sell it. 

To ensure maximum profit from this kind of business model, the key is to ensure that the revenue you get from leasing the asset before it looses its value is greater than the purchase price. as far it goes the is a business model common to real estate. 

6. INSURANCE: entails the transfer of risk from a customer to a seller of an insurance policy. in exchange for the insurance company (the seller of the policy) taking on the risk of a specified event occurring, they receive periodic payments (premiums) from the policy holder.

In a sense, insurance is the sale of safety. it provides value by protecting people from unlikely but catastrophic risks.

 

7. RESELLING: is the purchasing of an asset from one seller and the subsequent sale of that assets to an end buyer at a premium price. this is the common practice for wholesales and retailers, in  any type of business. we could comfortably link this with the product model, because you have to be reselling something that is physically tangible. so you make your profits from your markups.

8. AGENCY/PROMOTION: agents create value by marketing an asset, which they don't own to an interested buyer. they then earn a fee for bringing the buyer and seller together. 

Running a successful agency requires good connections, excellent negotiation skills, and a willingness to work with diverse set of individuals. the most common we can relate with here are house agents, which falls under real estate agency. 

So before you start up your startup, you must accept that, that is what it is "a startup" and not a business. the only time it qualifies to be a business is when your formula is repeatable, scalable and profitable and you can only get that by choosing a particular business model to plug yourself in. and when all this is done then you can carry out your "customer development" process. 

This would help you maximize your business strategy and reduce the risk of an eventuality of business forclosure.

THANK YOU FOR READING THUS FAR