K Srikrishna

The Entrepreneur Life

Category: Entrepreneurship (Page 7 of 12)

3 Steps to Find Those First Customers

June 10, 2013 / / 0 Comments

CustomersA question posted in the HeadStart Forum once again reminded me of how easy many of us find it to build the product first before figuring out how best to get customers. Having bootstrapped two startups and mentored several more, here are three tips on bagging the first (new) customer.

Your ex-employer if you’ve worked before you started up on your own, your ex-employer & ex-colleagues are the best place to start. They know you, hopefully don’t dislike you & you know how much money they have. They also likely can give you honest, even if not favorable, feedback on your product or service. Other than your mother, this is likely the most friendly reception you might get from a prospective customer.

Your ex-employer’s customers This is how I got my first break – when my employer turned down a customer who was deemed too small. I approached them with a request to be able to address their requirement and was given the go-ahead. This let me take the PO, a 30% advance and then start my first company, with a customer and cash in hand. Don’t hesitate to ask and don’t be surprised if your ex-employer and their customers are amenable to such an arrangement – as everyone prefers to deal with a known quantity.

Reference customer Visualize who’d be your ideal customer and more importantly the customer for whom your solution would be ideal. Strike a deal – such as a free trial or finite number of units or one [week | month | year] of free product or service – whichever make sense depending on what your offering is – in return for a strong endorsement or further references. So if Amazon India or Procter & Gamble or some other name brand or market/channel leader is prepared to endorse your product or service, it can open the flood gates to more customers. This requires you to be able to articulate your value clearly to your prospective customer and explicitly asking them for a reference.

Of course as with looking for a job or in the Indian context, looking to get married, it’s a good idea to let everyone you know, that you are looking for customers. So trade shows, your website, entrepreneur community forums, family weddings are all fair game to chase customers. While this is more likely to result in business cards and contacts, it will be ripe for the picking once you have that first customer. Happy hunting!

Enhanced by Zemanta

5 Simple Tips for Successful Negotiations

June 5, 2013 / / 6 Comments

Negotiation Cartoons: Positions Vs. InterestsAs an entrepreneur, you’ll find yourself having to negotiate almost as much as you have to sell. From landlords, to suppliers, prospective employees, partners and of course customers – you’ll negotiate often without even recognizing that’s what you are doing. While there are entire books written on the subject of negotiation, a few simple rules have served me well over the years.

Be clear about what you want Simple as it sounds, often we get carried away or worse yet upset and take a position or ask for something, which is really not what we want. Sometimes it’s as simple as that we were not clear going into a negotiation as to what it is we want. So when we actually get what we demanded and find that we are not happy, it’s not a good place to be – especially if you’ve burned bridges or needlessly cheesed off folks you’d have to work with. So don’t go into any negotiations without clarity on what you want – be it bringing on board a new employee, signing a new customer, re-working the terms of a loan or selling your company.

Know you walk-away price Be clear when you would not do a deal – this has to be black and white to yourself and can’t have any ifs or buts. And this need not be just about money, could easily be about the other terms. For instance, if you are selling your company and the buyer is not prepared to give the terms that you want for your team (for instance, employment guarantees or restricted stock) — a situation I’ve faced —you need to know are you prepared to walk away. Being clear about this makes the entire negotiation far less stressful.

Never negotiate against yourself This is by far the most common error all of us commit. We’ve all experienced it. Like when you see a jacket you like at a store – you ask for the price and find it too high. So you walk away – the shopkeeper calls after you – saying he’ll knock of 20% – he’s just negotiated against himself (of course he may have marked it up 40% 🙂 Particularly when negotiating a contract with a prospective customer, the temptation is great to lower our price or improve our terms when the customer feels we are not offering a good deal. Instead, it’s always best to ask the customer to counter your offer – let them quote a price that’s agreeable to them or terms that are more palatable. Now you have something to negotiate about – maybe you get nearer their price, but take something off the table (support, warranty, options) or you can counter with a different price for better payment terms. The important thing is that there’s got to be give and take and until the party puts a stake in the ground, don’t move yours.

Bring something to the table that you can concede All of us like a good deal – especially one that is done in a spirit of give and take. Just as we expect the other guy or gal to make concessions be prepared to make some of your own. This requires you not only to know what you want and what your walk away is, but what is NOT important to you. For instance, if you’re trying to close a large deal and having money up front is not critical for you, be prepared to give that up – the important thing is to ask for a thing or two, that you know you are prepared to concede and be clear which those are and which ones are non-negotiable. If everything is non-negotiable you are not going to get too far. And it makes the whole negotiation less than pleasant.

Save your best for the last Despite much advice against it, some folks and entire cultures conduct negotiations on a piecemeal basis – that is one item at a time. You discuss one point, make concessions and then they make their next demand. Refuse to do this politely. And the best way I’ve found to do this is what I term, saving your best for the last. In essence, establish what’s the critical care about for the other party (and yourself). Ask them, if we close on this item (whichever one it is) is there anything else that’s holding the deal back. If the answer is no, close on the other times. If they answer is yes, get down to negotiating to a close. If they pop something else up after this they are not dealing in good faith. Be prepared to walk.

Related articles
Enhanced by Zemanta

3 Lessons I’ve Learned As a Mentor

April 2, 2013 / / 0 Comments

Mentoring a Demography trainee

Over the last three years, I’ve had the pleasure of working with entrepreneurs addressing a wide variety of markets – from those going after Tier 2 markets in India (music to consumers) to those selling tickets to an urban audience. One selling certificate courses on the internet to others changing how people consume online video or how local advertising is done. Still others running a real world adventure company to one that’s changing how power electronics will make solar energy more practical. Some have a single technical founder, others three or more – most had revenue and some were still figuring out revenue models. And luckily for me all had very motivated, smart and energetic founders.

As an advisor and in some cases as a mentor I’ve worked with these and other companies to help them navigate the shoals of early growth. The truth of the matter is that whether I’ve helped these companies are not, I’ve learned a great deal – besides having a whale of a time working with smart people. Here are three lessons I’ve learned as mentor. As with most lessons they are quite useful in most circumstances.

Do your homework – Most entrepreneurs learn about the markets that they operate in very rapidly, even when they are new to it. Often they dive deep and sometimes they learn just enough to get. So as a mentor before I’m ready to even discuss matters with them, I’ve found that I really need to do my homework, if I’m to engage in an intelligent conversation with them. Also this saves the entrepreneur a whole lot of time, having to educate their mentors first.

Ask questions – the best way to contribute is to ask lots of questions. Not in an interrogatory way nor because asking questions is easy. Asking questions is the best way to unearth assumptions that companies and entrepreneurs have made and often they may not be unaware that they’d made. Asking questions of course is a great way to both learn and identify issues and challenges. Often asking questions about what the entrepreneur wants and their motivations are is more critical than confining the conversation to the business alone.

Listen more – this seems self evident, especially if you are asking questions. However, many mentors having been entrepreneurs and particularly those who were trained as engineers are greatly tempted to jump right into seeking or offering solutions. This is a big mistake, one that I’ve made frequently. Asking questions without listening actively is a great disservice and a lost opportunity to contribute meaningfully. Listening actively is learned behavior which can become second nature with practice. Luckily this is a trait that serves you well whether with your spouse or as in my case, teenaged children.

Do your homework, ask questions and listen more. Seems as simple as that great formula – eat less, exercise more. Much easier said than done. So let’s get started today.

 

Enhanced by Zemanta

Marketing Your Services – Lessons from a Journey to Bhimavaram

March 26, 2013 / / 0 Comments

Vijayawada Junction

Recently I had to travel to Bhimavaram in West Godavari district of Andhra Pradesh. Of course I had to look it up on Google Maps to figure out where it was. It’s about a 120km north northeast of Vijayawada. As my  daughter had to be there at 9am on a Saturday morning and had forgotten to tell me but five days before, I had to scramble to make the arrangements. Now that I’m back in Bangalore I realize somewhat belatedly how everything we needed was handled almost a 100% online.

The Economist in its latest issue talks of Indian technology firms and where they may be headed. While I didn’t agree with everything they asserted, my own experience of making it to Bhimavaram and back resonates very well with their core premise that technology, the web and mobile have already changed Indian businesses irrevocably. Here’s what I found and learned.

Google – of course this is where it began – with Google Maps figuring out where Bhimavaram was and the nearest airport – Vijayawada in this case. Cleartrip was my next stop to check out airline tickets. Once I found Jet Konnect had the best connections checked out their website as well and bought the tickets there directly. Usually when travelling to a new city, I’d call friends, to see if they had any recommendations for hotels. Given I was travelling with my daughter, I checked TripAdvisor for reviews and everyone seemed to suggest the Taj Gateway awas the way to go. So off I went to TajHotels website. Then I had the bright idea to check hotels right next to them – as in centrally located by not as expensive.  I decided to check out Stayzilla who’s ads I’d seen in Bangalore – and they got me a good deal at the Taj Gateway. Then off it was to find a rental car. I called the Taj up and asked them to refer a cab company. Once again I felt the cab rates were quite high and so a quick Google search revealed a service called Saavari.com that fit the bill – they could get you a cab (including rates, ratings, the works) in practically any city – most importantly in Vijayawada in this instance. However, I couldn’t figure out a few things re quoted price online, so I called them on their toll free number. They said they’d get back to me and never did. So in the meantime I kept searching and here’s where Google Local came in real handy. Several cab companies in Vijayawada had excellent reviews ratings on Google and I reached out to one of them over the phone after checking out rates on their website (which I’m finding hard locate just now). So here we were four days before our travel, with flight tickets, hotel bookings, local taxi rental all done over a couple of hours online and on the phone – to a city we’d never been to, whose language we did not speak and with some measure of perceived safety for my teen traveller.

Lessons learned

  • Online reviews matter – the hotel we ended up staying in had good reviews on TripAdvisor. The cab we used had good reviews on Google local. These were instances of a local supplier beating out a larger national “professional” supplier. Social and community word-of-mouth is getting better, even it’s not from someone personally known to us.
  • Websites matter – Even after locating the cab company via a review, the fact that their website had clear rates, reviews and contact info is what tipped us over. Good websites matter – Savaari.com and Stayzilla I had to look up in my mail trial as I couldn’t recall their names – and in the formers’ case I couldn’t figure out the pricing and latter’s case I had to resort to the phone to resolve issues.
  • Customer service matters – Saavari.com said they’d get back to me and they never did. They had a beautiful website – clean and while my use case was not a clear fit to their standard offerings, phone calls were not returned. Similarly Stayzilla called me back to say that the Taj Gateway room was no longer available – that they’d put me in an another hotel on the same street. To give full credit to them, they constantly followed up but were caught scrambling. The place they finally got me I passed on due to poor reviews on Trip Adivsor. Jet Konnect won over ClearTrip as it was easier to cancel or make changes with them.

This was the first time that I travelled to a new city – let alone a Tier 2/3 town – without seeking direct personal inputs from friends or family and did so at short notice and had a uniformly pleasant experience – despite not speaking a word of Telugu in this instance and carrying minimal cash. Whether web and broadband penetration is where we’d like it to be or not, for businesses the web and mobile have changed how they do business forever.

Enhanced by Zemanta

Keeping yourself & others honest – Lessons from my dad

March 11, 2013 / / 0 Comments

English: 1926 Promissory Note from the Imperia...Growing up, I recall my father gifting things to folks – in what I deemed – a reckless manner. There was time when someone admired my father’s wristwatch and he took it off and insisted that they take it. My sister and I argued with him, not just on that occasion but on several others that he was being taken advantage of. Of course his response was that there’s as much pleasure, maybe even more, in giving as there is in taking. My sister’s immediate offer of making him ecstatic by happily taking any and all gifts that he planned to give in the future, I don’t think was taken seriously.

Yet once I hit my teens, I became aware that whenever my father lent people money – particularly to a steady stream of strangers, often referred by relatives – for a family exigency or to buy a motorcycle or to go abroad to study, he always insisted that they sign a promissory note or pro-note as was called. This was usually a letter on plain paper, stating the amounts borrowed and the borrower’s intent to return the sums upon demand or by a certain date. The borrower signed it across a revenue stamp pasted on the paper, making it a legal contract. This was in marked contrast with how he handled grants at the small non-profit he ran, which usually gave money directly to elementary, middle or high schools for kids who needed financial help to pay their fees or for books. These grants were just that and the beneficiaries, usually economically disadvantaged kids, were not expected to pay the money back.

So I asked my dad, why he took pro notes from these other folks who borrowed money from him. His response was that if he didn’t treat the money as a loan, that he expected the borrower to return, it diminished the value perceived by the borrower. While most borrowers intended to return the money, it didn’t hurt that there was a legal reason for them to pay off the loan. As my dad put it, “If they return the money, it allows me to lend it to more people who could use a helping hand.”

Ronald Reagan is credited with popularizing the term “Trust but verify” (or as the Russian proverb went “doveryai, no proveryai”). This was my dad’s own method to keep himself and others honest.

Enhanced by Zemanta

5 Reasons Why You Need a Founders’ Agreement

November 15, 2012 / / 5 Comments

About Cervantes

Just this last year, two founders in two different startups that I’ve invested in quit. Back in 2000, when one of the co-founders of my first startup quit (on religious grounds) we were quite taken aback and ill-prepared to handle it. However that parting was amicable and all the founders involved — there were five of us — are still on talking terms. Despite this first-hand experience, I did not foresee founders in either of these startups leaving. To make matters difficult interesting one of the founders left in a rather acrimonious manner, which proved quite a bit of challenge not just financially but emotionally. Sure, eventually things get to a new normal and while neither of these startups is still completely out of the woods, they’ve survived, evolved and even grown. Ever since this happened, I’ve been informally talking to folks, both boot-strapped as well as those with angel funding, about founders’ agreement. And usually I’m greeted with a blank stare, when I pose the question, do you have a founders’ agreement? Occasionally to keep things interesting I ask them “Do you know what an inter se agreement is? Do you have one?

Here are five reasons why you need a founders agreement

  1.  Self knowledge As I found in my second startup, even when you start a business with people you’ve worked with for a long time, your stated and unstated expectations can be very different. As each founder may be in a different stage of their lives – be it with parents, spouses or girlfriends, kids or even personal aspirations. Many times, we don’t know what we don’t know or or thing we’re making implicit assumptions about. A founders’ agreement helps flush these out – especially when your other partners state their own concerns, desires or expectations. This could be from the profound – of what happens if a founder dies to the mundane of how equity will be evaluated if a founder wants to cash out.
  2. Relationships As my father used to say, businesses can fail and often do fail. Most young people enter into business with friends as co-founders and even in the case where a founder was not a friend before, the heat of a startup certainly will meld the relationships into one of friendship, if you are lucky. So when things begin to go south, the inter se agreement acts as an impartial or at least a mutually agreed manner to resolve differences. Founders can leave not just for professional reasons, but because their spouses want to go overseas, or they are going through a divorce or loss of a parent or child – all events that are traumatic enough without having to deal with a business relationship coming apart.
  3. Values A founders’ agreement in many ways makes you confront your own stated values for your business and yourself. With multiple founders, the creation and negotiation of a founders’ agreement is fraught with unearthing people’s deepest fears and concerns. The disagreements and discussions in creating an inter se agreement at a time when the founders are in a good relationships at the beginning of the journey, are some of the surest ways of unearthing and cementing core values. So how you handle a senior employees restricted stock or options in the event of an exit or their early departure may tell more about your co-founders values than any amount of values workshops.
  4. Reality check Whether you are a first time entrepreneur or working on your fourth startup, there is an inherent level of reality-distortion or self denial that’s needed to even get started let alone keep going. As one of my co-founders asked me two years into our latest startup “Have you retired or are you serious about this business?” An inter se agreement is a great way to remind and re-iterate to yourself that you are a realbusiness and not a fun (technology) project and that you have obligations to yourself and others
  5. Success As Miguel Cervantes put it so eloquently (in Spanish) the secret to success is preparation. (He actually said “The man who is prepared has his battle half fought.” When you embark on a startup the only certainty is that everything is going to change. Knowing, or at least discussing what such change, especially in the founding team would mean for the company and other founders is a good way to make sure that you, at the very least don’t fail but improve the chances of success of your enterprise. Being prepared and the sanity of knowing your values, relationships and aspirations are all likely to be preserved will enhance the chances of your success.

Sure, all of us have run businesses, scaled them, sold them and in some cases buried them without inter se agreements. However if you can do it with greater peace of mind, sort of riding your Harley with a good helmet, why not!

Enhanced by Zemanta

3 reasons you need a co-founder or partner for your business

August 20, 2012 / / 0 Comments
Rock climbing (B&W)

Rock climbing (B&W) (Photo credit: Wikipedia)

Not too long ago I begun interacting with the young founder of a web 2.0 firm. He’d done an impressive number of things – identified a key market need based on his own work experience, built a prototype, gotten paying customers, hired—initially part-time—subsequently full time coder and even raised a small investment from an accelerator. After our first interaction, which was mostly spent learning what he’d done already, what had worked and what hadn’t, we begun discussing business models and his intent to raise angel money.

Somewhere in the discussion I raised the question of “Do you intend to find to find yourself a partner or two?” You’d have thought I had slapped him, in the way he reacted. Once he got over the initial shock of my question, he was genuinely puzzled. While he never came outright and said it, I could see that he continued to be befuddled by my seemingly dumb question. “Why would I need a partner?” – the unasked question hung over the rest of our meeting. It set me thinking as well and here are three reasons – better decisions, stronger company and emotional support –  and  that I believe having a partner (or two or three) can help your startup.

Two heads are better than one Your business and you will do better, if you have another set of eyes, ears and all the grey matter that hopefully lies between them, available to you. While perseverance is one of the most critical things for business success, it always helps to have someone tell you that you are being pig-headed or this is the time to let go of a customer or an employee. Do you sign up to a particular deal, should you build that product or abandon it, should you borrow or raise some more money – all these decisions are easier and most likely better when made with another set of inputs, that a co-founder can provide. Advisors, consultants and mentors can play this role some of the time and can be useful in not being so close to the decisions, but they rarely have to live with the consequences of these decisions the way a co-founder or partner would have to.

Successful businesses require teams Having co-founders, finding and persuading someone else, to embark on the insane journey that building a business can be, is the first step in making your business successful. It is not just investors who look for a team – one with complementary skills, but potential employees and prospective customers all care about the fact that your company is more than just you. Sure there have been single founder companies that have been successful, but why make it more difficult than it needs to be to build your business. Yes, teams and successful ones can be built with employees, but they will never be the same as having a co-founder or partner who has a same stake in the outcome.

Entrepreneurship is lonely business Entrepreneurship is hard enough without having to slog through it on your own. Sure if you are lucky, family, friends even advisors or mentors can help make it a little less lonely. However, none of them can give you the time that a good co-founder or partner can give you. Even if your co-founder is very different from you, they’ll be able to better understand and empathize than anyone else about the challenges you face, the frustrations you feel and help smooth out the highs and lows that are inevitable in any startup.

Good design is in the details

January 3, 2012 / / 6 Comments
Cover of "The Design of Everyday Things"

A couple of weeks ago, I wrote about the work of Donald Norman and his seminal book “The Design of Everyday Things” (the title itself was in true design fashion improved from the original “The Psychology of Everyday Things” or POET.)  I was also bemoaning that people seem to be far more familiar with Jonathan Ive, the much heralded (and recently knighted) designer of many things Apple, than with Don Norman and his now business partner Jakob Nielsen, who’ve been evangelizing human-centered design longer than most.

Of course reading The Design of Everyday Things has once again made me sensitive to good and bad design decisions that surround us and I wanted to share a couple of instances of poor design (or poor affordances, as Don terms them). Just the other day I swung by an ATM machine, tucked in next to a Food World store. And here’s what the greeted me at the door.

Push or Pull A sign that said PUSH but a handle that said pull. This is one of the first examples Don cites for cognitive dissonance – a fancy term for when what the sign says (push) doesn’t gel with what your brain says you should do (pull). Alas Don wrote his book more than 20 years ago and we are still grappling with this one.

Another favorite one of his is figuring out which switch (on a bank of switches) controls what light or electrical equipment in a room. Just this last weekend we sneaked away to Yercaud (an largely unspoilt hill station near Salem, Tamil Nadu). The hotel we stayed in was relatively new and the first thing that greeted me, as I tried to turn on the lights was this bank of switches.

The housekeeping staff, had to put a small sticker with a sign that read Fan. Given that there are only five switches, sure we can run through them quickly – however you’d have an irate spouse in the middle of the light if you turned a light on rather than the fan 🙁 In this particular bank of switches, you can see the set up is a pair of switches (neither of which controls the fan) and the regulator in one block while three other switches in another block (one of which controls the fan). Ideally pairing the regulator and the switch into a single standalone block would have worked or having them at the very least on the same block would have provided a clear affordance.

The good news is that good design shows up in most unexpected places. The office provided me with a Tata Photon 3G broadband USB dongle. Most of us who’ve used any sort of USB dongles, whether memory sticks, Bluetooth, WiFi or broadband, have experienced the bother of losing the caps that come with them. Invariably once I’m done using the stick and remove it from the computer, I am constantly searching for the cap and usually end up just doing without it. The Tata Photon previous generation dongles suffered from this same short coming as I saw with my colleagues. However the latest dongle that I was provided, had a most ingenious solution – a wrist band that was strung through the cap – so not only was carrying the darn thing easier, but the cap even when removed stayed attached (and conveniently) out of the way, so that when it was time to stow away the stick, I don’t have to begin searching for the cap. Good design, like god is in the details.

Enhanced by Zemanta

Finding a customer – Where do you start?

November 27, 2011 / / 3 Comments

customer noticeOnce again, a question posed at Quora, “How can a straight out of college entrepreneur find clients for IT service based start up?” triggered these thoughts. As I have been recently looking at college startups, the entire issue of finding that first customer has been hovering in the background. When I cast my mind back to what worked for me at Impulsesoft, SiRF, Synopsys and Zebu, here’s what I came up with.

Referrals If you have [a] customer[s], start with them and ask for references. Any time an existing customer refers you, either to someone else within their company or others outside, it makes closing that deal a whole lot easier. Even when someone declines your services, you should ask them if they can refer you to others who may be able to use your services

Leads If you are a raw startup without a single client, then I’d start by making a list of every working adult you know – and reach out to them – with a one pager (if in print) or a single email, briefly explaining your offering in plain English, and asking them to introduce you to potential customers. As Esther Dyson, angel investor & writer suggests, ideally in your email, you’d write a brief email, that your recipient can forward after only having to add the name to the Dear […] at the beginning and put their name at the bottom. Don’t forget to add every person you went to school, college or rock show with to this list.

Cold calling Despite claims that the world has changed and sales (& marketing) are not what they were, for a raw startup cold calling is a good way to both get a sense of what’s out there, what issues you will face when you try to sell (even with referrals) and refine your own pitching – of what problem you address and how what you offer is the right thing for folks. Best thing to do with cold calling is to have a fixed time each day (or n days a week), when you’d send emails or make phone calls to reach prospects. Cold calling is one of the hardest things to do and has low conversion rates, yet will serve you well in the years ahead. Check out The Complete Idiot’s Guide to Cold Calling by Keith Rosen

Networking/speaking/free services Offering advice, giving talks and a free hand out, such as a tip sheet at industry forums, to business groups or other networking forums is a great way to build leads. For instance if you offer services in network security, you’d talk about “Top 5 Security Risks to your Business” and provide a free checklist that people could use to audit their network security. This can of course be done on online forums as well such as LinkedIn answers or your own blog.

In bound marketing In many ways this is like networking & free advice but done with content on your own website as a means to deliver value that would drive traffic to your website. In other words bring customers to your site, particularly self-selected prospects, ones looking for a solution. Companies such as http://hubspot.com/ do a great job of both educating you about inbound marketing and providing tools to make it happen.

Enhanced by Zemanta

When do I need a business model?

September 20, 2011 / / 5 Comments
Business Model Concept

Image by Alex Osterwalder via Flickr

When this question was first posed to me, my immediate response would have been “At the very beginning.” However, upon a little reflection I realized that the answer needs to be a little more nuanced and is not nearly as self-evident as I reckoned. I’d still say  you should have a likely business model in mind, reasonably early in your startup’s life.

Of course, given the treacherous nature of the English language, it’s probably worth defining what a business model is.

Wikipedia defines it as

A business model describes the rationale of how an organization creates, delivers, and captures value

and in plain English, according to the fine folks at Walden University,

The term “business model” refers both to the way in which a business creates a product or service and sells it for a profit, and to any document that outlines the process. …The business model of a lemonade stand seems straightforward: make lemonade and sell it to passersby for profit.

Given all the talk of lean startups, I’ve met a number of folks who talk of figuring out their business model even as they roll out their product. Yet a number of sane heads seem to be be reminding us rightly, that a feature ain’t a product ain’t a business. To me fundamentally a business model is figuring out who is going to pay (& hopefully how much) for the service/product we offer. It could be the users, it could be their parents (in the case of children), their companies (for corporate/SMB), advertisers (for free consumer services) or the government – someone, somewhere is going to write a check or whip out a credit card or cash for your product or service.

Once you have a business model you can then figure out how much money you will actually make – your revenues. Done right, you hopefully know what is it going to cost you to deliver it and how long before you can get it to operational breakeven (making more than you spend on a quarterly/monthly/weekly basis.) Of course if the numbers don’t add up in your revenue model, you return to your business model to tweak your assumptions, targets etc., till you can iterate to something that looks like a practical (or at least realistic) business model.

“There’s not a single business model… There are really
a lot of opportunities and a lot of options and
we just have to discover all of them.” Tim O’Reilly

Back to the question of when do you need this? I’d still say start with something as simple as “We’ll provide P for Q, which {Q,R} will pay for in the form of S.

A couple of examples might help illustrate this.

We’ll

“enable consumers to discover relevant videos easily and we’ll make money through advertising” or
“answer academic questions over SMS for high-schoolers.  Parents will pay for the service through subscription.”
“help solar installations achieve higher ROI. OEMs will license our technology or purchase our blackbox.“

This is more a statement of intent than a full fledged business model. Before you go spend a lot of time, figure out whether the world (or at least your target customer group) actually has the problem you reckon you’re solving for them and is willing to pay for it. Once the market need and your product/service fit to that need is established you can return to working up a real business model, that will allow you to build a real business.

Related articles
Enhanced by Zemanta
« Older posts Newer posts »

© 2024 K Srikrishna

Theme by Anders Noren — Up ↑