7 steps to build the right business model

Most IT entrepreneurs focus on creating an innovative product, but they forget that an elegant solution does not automatically turn into a successful business. The company needs an equally elegant business model, with the right pricing, distribution channels and customer relations.



Finding the right business model requires the same diligence as designing the right product, but the approach and required skills for this are different. Therefore, investors recognize that two co-founders are better than one. While one may focus on product development, the second will focus on finding and developing a business model. Both aspects must be performed in parallel.



The management tandem can look at the business from different angles, which in the future will help avoid many problems. Founders can make an independent study of their sector. In the investment community, such work is called proof of the business model. It begins with a test of the business capabilities of the model, in much the same way that a concept or prototype of a product tests a technical solution.

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Using the following steps, you can build the right business model:

Reconcile the cost of the solution in the target segment

Clients often complain about the lack of an integrated and intuitive approach, along with the familiarity of previous decisions. You must correctly estimate the value of your product. Too expensive product will not be popular, and too cheap product will scare the buyer. In this situation, it is necessary to calculate their prices in the same order as the competitors with a similar quality of the goods or services provided.

Product validation

If you have a preliminary version of the product, you need to expose it to real customers to see the reaction. In the process of testing must consider feedback. If the reaction is unsatisfactory, no business model will save you from a crash.

Verification of sales channels and customer interaction

The easiest way to do this is with the focus group. This is not just a product presentation. This step includes all elements of pricing, marketing, distribution and service. In the process of execution, it is possible to avoid any costs at all.

Consultation with experts and investors

A small advisory council from outsiders with experience in the relevant field can provide objective feedback necessary for creating distribution and sales channels. This point in relation to potential investors can be of great benefit, even if they are not planned to be activated at the beginning.

Pilot planning and execution or territorial deployment

Evaluation of traction in a limited territorial deployment is an excellent test of the business model. This step will allow you to estimate costs, quality and pricing at several points or in one city with minimal threats and maximum speed of recovery and error correction. Save the "viral" campaign and increase stocks for later.

Focus on collecting customer feedback

Pay particular attention to the first customers, and ask them to publish their feedback in your support. If you cannot get their support, even with your personal efforts, this is a wake-up call indicating that the business will be in trouble.

Participation in national and industry exhibitions

Positive fame, reputation and feedback will ultimately check the business model and product prototype. Participation in exposition events can be an excellent source for building the necessary connections and preparing for business scaling.



Your business model may be a better sustainable competitive advantage than the product itself. Too many business plans are focused on the product and miss other details of the business model.



Making an effort only to develop a product, and ignoring the work on a business model characterizes one half of the preparation for the real world of business. It is difficult to win, doing half the battle, especially if it is the easiest half.