When deciding to start a business, there are important considerations in determining if you have a viable business model. The four(4) areas that must be considered are the Problem, Market, Business & Customer. Lets take a brief look at each area and why it is important to address each carefully.
Problem: At the beginning and end of the day you have to be solving a problem for your customer. Why would they seek you out unless they feel like you can help them solve their problem? Identify a problem that is mission critical, present in the customer’s every day life and is mentioned without prompting them. Many times customers don’t openly talk about their problem but they are consistently looking for it to be solved and even creating solutions to try to address and solve their issue. This is important because if their aren’t enough customers who are experiencing a must solve problem, then you most likely don’t have enough people to serve to have a viable business.
Market: Ensure the market is large, growing and focused on an untapped niche. In the case of my business venture, Dealium, customer acquisition is the must solve problem and there is an untapped niche of having a convenient tool that allows customers to communicate referral information and be rewarded for their referrals. Find the external factors that supports the market in the future such as analysts prediction on the growth of the market and industries that currently serve it. Also, come up with a plan on how you are going to win versus current or future competitors. Industry research, anticipated trends and growth opportunities will determine if there is a large enough market for you to serve and be profitable.
Business: Determine if the scale and unit economics can be beneficial to both your business and the customer. If it is unprofitable for for you to offer the solution because of high provision costs or the solution will be too expensive for your customers to use your product or services, then it will not make sense to offer a solution to your potential customers. Profit and contribution margin are important. In the case of Dealium, we offer a easy to use Referral Campaign ROI Calculator to our customers so that they can determine if offering certain customer referral discounts will be profitable. Inputs such as gross profit margin on the item or service being offering, referral reward discount offer, who gets a referral reward (referrer and/or referee, monthly cost to use Dealium as their Referral Marketing Solution Provider and Customer Lifetime Value estimate are all important factors in determining what and if a customer referral campaign will be profitable to the business.
Customer: Validate the problem with the customers first. Get out there and talk to customers to see what they currently use to solve their current problem and do they feel they need a better solution, their budget to solve their problem and how often is it a problem for them they they feel needs solving. It is ideal that the problem is perpetual, such as customer acquisition, compared to a one time problem. Be sure to identify your target segment, understand the true customer needs, and try to sign-up potential customers for trial offers with discounts for being early adopters and innovators. Many individuals will not consider using a product or service until they see others use it first with success. My philosophy with my startup Dealium is that it will not be a success unless my customers have success using it (e.g. acquiring more customers at a lower marketing cost using the Dealium platform).
So to rehash, when starting a new business, it is important to consider the Problem, Marketing, Business and Customers.
As with all of my blog articles, I remind my readers that my company focuses on helping small businesses acquire new customers through referral marketing and customer engagement technology that is integrated with email, sms and social media. Consumers will save time and money searching for reputable local small businesses in their community that offer great customer experiences and referral reward discounts for referring family and friends to our subscriber small businesses.
Be sure to checkout the many past blogs that discuss customer acquisition, its challenges and how to be a problem solver for your current and future customers!
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