Starting a business is a serious undertaking. If you have viewed our previous blogs on testing your idea and making it official, you may know that you have a viable company. You may have all the legal requirements and paperwork that says you are an official, real-life business. However, your work is far from done.
One of the most difficult challenges for entrepreneurs and business owners is how to monetize and generate revenue on a consistent basis.
It can take years to transform your idea into reality, and even longer until you start to generate considerable profit. To get started, ask these questions:
1. What is my traction?
In the early stages of your business, it is especially important to identify and build traction. Most people equate traction to money. Although profit is the end goal, traction comes in different forms.
● Paying customers - Of course, the most ideal form of traction is to have a significant base of paying customers. You’re not just showing the high likelihood of making money, you are actually doing it. When a large number of people are willing to buy your product, then it’s a signal you may be doing something right.
● Letters of Intent (LOI) - It may be too early or you may not be ready to sell your product to the masses, yet. In this case, get LOIs or written endorsements showing that there are a significant number of interested customers willing to pay for your product when it is available.
● Expert backing or experienced executives - If a member of your founding team has already launched successful companies in the past, it can be a major asset to your company value. In the eyes of investors and prospects, it shows that you know what you are doing. However, you still need to show that your service can be monetized.
You need to at least have one proven example of traction. If you have all of these, then it signals that you have serious momentum to become a profitable and sustainable business. Investors, potential customers and press will be more convinced that your company has merit. Without it, you’ll fail to attract the prospects you need.
2. Which revenue model(s) will I use?
A revenue model is a detailed framework that outlines exactly how you will sell your products or services and generate revenue. What can your customers afford or what are they willing to pay? (If they are willing to pay at all.) Here are three of the most common:
All businesses set out to be profitable, but many don’t start out that way. Some use a freemium model, in which they offer a service for free, generally to accrue a large amount of users, get them to pay later on, or add on services at a fee.
You are solely responsible for selling your product. It can be in-person in your store or online on your website, and is common among small, local businesses.
Advertisers pay to appear on your site or app. Usually, you need to have a large base of active users that fit their target audience.
For example, the average Facebook user doesn’t pay to use the social platform, and likely never will. (Even though, spam and fake news continues to claim otherwise.) Why doesn’t Facebook charge users? Perhaps, because it is the largest social network in the world with 1.86 billion active users. The platform brought in over $26 billion U.S. dollars in ad revenue last year. Like other social media networks, they built up a user base that appeals to advertisers.
Your business may use multiple models and have multiple streams of revenue, so it is important to plan and document them.
3. Do I have the right people on my team?
If you need to hire employees, how will you do it? Will they be part-time or full-time? In-house, virtual or a combination of both?
A business is only as good as the people running it. Remember, the people on your team are part of your company value. Investors frequently say that the biggest influence on an investment decision is the team. Budget and growth are key considerations when you decide on hiring.
If an in-house expert or staff member is outside of your budget, outsourcing work is a viable and cost-effective solution. If you scale faster than expected, virtual solutions could be necessary to help you meet the demands of your growing customer base.
4. How will I land my first customers?
The first users and paying customers that you land are often the hardest to attain. There are also the most valuable. If you don’t have any testimonials, purchase history or reviews, people will be skeptical about your product, and its effectiveness.
Even a few clients and customers can increase your brand awareness and credibility. However, it is important that your first customers actually fit with the target audiences that you are going after. It may be easier to get your friends and family to buy your product in the early stages, but if they don’t need it or will never actually use it, their feedback won’t be helpful. You also won’t get unbiased and honest feedback to improve your product.
Identify your target market and reach out to prospective customers that fit. You may also want to target influencers to test your product and increase brand awareness. Some companies will send free samples and products in exchange for reviews. Getting an endorsement from an expert or influencer can quickly build interest and translate to inbound sales.
5. How will I spread the word?
Now that you are an official business, how do you get the word out and bring in more customers? To get traction and grow your business, you need to get people to know that it not only exists, but that it is necessary and valuable to them.
A solid marketing strategy is essential to grow your business. You need to know who your customer are and how to connect with them. You need messages that appeal to your audiences and motivate action, and a design that represents your brand. All of this and more should be answered with a documented marketing plan.
6. How will I remain competitive?
When you have a brilliant idea and products and services that people want, copycats are bound to emerge. Similar companies will try to piggyback on your success, and existing competitors may change up their offerings to entice customers.
Track your campaigns. Listen to customer feedback. Always be on the lookout for ways that you can improve your processes, customer experiences and products. Your competitors won’t be comfortable sitting still, and you shouldn’t either. If you don’t make exceptional service, continual improvement and innovation a priority, your brand will become stale over time, and customers may take their business elsewhere.
At 10twelve, we have launched several of our own businesses, and have helped clients grow their own. There are countless variables to consider from web design and development to SEO and content marketing. Find out how our agency can help you grow your business by contacting us today.