Small Business
Who is your Customer?
Your answer to the first question should be very
definitive and specific, describing exactly who your
customer and why you believe they need your product
or service. 2) How do you plan to make money from this
customer? The answer to the second question will define
your business model i.e. a description of how you intend
to make money by providing this product or service to
your already identified customer. It is best to keep your
language simple, try to avoid complicated business terms
that may result in your idea getting lost and not coming
out clearly.
• The next step is to define your market segment by
describing what it is your targeted customer needs, what
you intend to produce or deliver to meet this need and
why your targeted customers will want to buy into your
solution for their needs, this is also known as your value
proposition.
• Once you have your value proposition, you will need to
figure out your value chain, which simply put is how you
intend to produce or deliver this solution to the needs of
your targeted customers.
• With your value proposition and value chain in place, the
most important step comes next, which is to estimate
your costs and profits as this will determine whether
your business model is viable or not. To estimate your
cost, you will need to define the activities that will be
involved in your value chain and how much investment
will be required to achieve the end product. Using the
result of this and the customer that you have described
in your value proposition, you can now be in a position
to estimate your costs and profits.
• The final step in building a good business model is
in the understanding your product’s positioning and
competitive edge in the market. This can be done by
expanding your value chain to include that of your
potential competitors which will determine your
position in the value chain or “pecking order”. You can
now use this information to describe your competitive
edge over your competitors TB
NOVEMBER 2017 • THINK BUSINESS | 43