Start-up stages and business models

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A small business is an amazing way to serve and leave an impact on the world you live in. - Nicole Snow

Defining the start-up business model & the generic stages of its growth.

Two of the main factors to consider are Business Model and Stages. That will help you define what metrics are key for your business.

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Let's look at each of the business models individually.

eCommerce This business model allows a business to generate profits from selling products ie. physical goods to customers whilst getting a margin in return. Goods can be sourced either by the business or 3rd-party suppliers. Such businesses will most likely face tough competition (unless they offer unique products) and will need to grow smartly and fast to survive.

IoT (Internet of Things) These businesses generate side revenue from the use of their products. Their customers pay them in cash or generate/provide some kind of personal data that can be sold on or used in any other way that drives their revenue. However, there can be drawbacks, ie. security, privacy and overall complexity.

Subscription-based Where product owners get recurring revenue by charging customers typically on a monthly/yearly basis in exchange for access to their content. Subscription-based services are more easily scalable, as the cost of production of another copy of software/content is basically zero.

Note well, subscription-based businesses need to invest much more time and effort into customer retention, as their revenue will depend on the repetitive use of their product.

Ad-based model These businesses generate and provide a percentage of content for free, which may be attractive for many users (click-bait). Instead of charging users for access to their content, they find advertisers who are willing to pay in order to get reach their target audience. The main drawback of this business model is driving and growing audience numbers to interest potential advertisers. Also, it's crucial to produce content that will be interesting for your target audience. Remember, social networks are different. Their users produce/create the content they are interested in which will attract a like-minded audience.

Aggregator Such businesses power gig economies that are growing insanely popular. Usually, this kind of product connects customers directly with service providers, which eliminates the much clunkier third party and results in reduced costs. These type of businesses should grow quickly and try to maintain a balance between services demand and supply. As they could replace old institutions and create new ways to generate cash, they could face legal problems.

Stages

Four main stages in the lifecycle of developing a product.

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Prototype This stage is to validate if there is any potential in your business idea. During this phase, you need to research, research, research, to produce a hypothesis.

MVP Refers to the initial stage of creating the first workable (and saleable) version of your new business concept. It's derived from a concept that comes from 'The Lean Startup' by Eric Reis. This is the stage where one experiments and does a thorough business analysis.

Scaling The growing phase of every product will show how your business model should work when more people start using your product. For some products, this phase never ends.

Established Stability and optimisation phase of your product. You pay attention to your current/past customers and focus on user retention, while potentially still scaling from the previous phase.

Some other factors to consider:

  • Complete a Business Idea soon as possible
  • Access to Knowledge / Expertise
  • Current and future Market / Demand
  • Potential Start-up Costs
  • Access to Capital / Finance
  • Size and location of Competition
  • Ideal Business Location
  • Need for Staff (Permanent, temporary)
  • Use of and maintenance of Technological aspects