In business it's easy to get distracted when it's comes to what you should be focusing on. Yes, social media engagement is an important element of your marketing strategy and having great products and well laid out services are key to making sales but there are 5 foundational things you need to have in place in order to establish a model that will help your business become successful.
Let's discuss them below.
There are 5 foundational things every business owner needs in place for a solid business model
1. A clear understanding of your operating model
Having a clear operating model basically helps you understand and lay out HOW exactly you intend to deliver value in terms of your products and services and also the type of experience you plan to provide your ideal customer.
For instance, if you have a luxury brand, a few important questions you'd want to ask yourself to help you define your operating model would include: Are you products packaged in a way that aligns with the luxury experience you want your customers to have? What about your website, is it in line with your brand? Also, what systems and / or people do you have in place to help deliver the end to end on the luxury experience you are offering?
Your operating model will help ensure you are delivering on brand and on what you promise your customers. In addition, once your operating model is fine tuned and running, it will allow you to scale your business because you'll have well established processes in place on how to run your business and for your team to follow.
"If you want to build a successful business, you are going to need more than just a good looking social media feed."
2. Your plan to generate revenue
One of your major goals as a business owner is to turn a profit but you can't turn a profit if you don't have a solid revenue stream (means of earning income). Creating a plan to generate revenue means outlining the products and services you plan to sell and exactly how you will communicate those products and services to potential customers. It also means fine tuning your revenue stream as you learn what's working best (or what isn't).
Once you have a solid revenue stream in place, it becomes to much easier to forecast your business earnings and profitability.
3. The amount of profit each sale will earn you
This means, after you subtract the cost of your good or services and any additional overhead from the price you are charging, how much do you have left over? Becoming profitable is great but ideally you want to have a clear understanding how exactly how much profit you are generating on each product or service you offer.
You can then perform assessments to determine how to maximize your profitability by either getting your costs down or competitively increasing your prices or doing a combination of both things.
4. Your cash flow needs
Also called your working capital, this is basically how much you need to keep your business running day to day e.g. to cover your expenses such as the cost of internet hosting fees or utilities, the cost of inventory, the cost of contractors or employees who help to run your business etc. These costs would need to be laid out as part of your operating expenses and will give you a baseline of how much you'll need at a minimum each month to keep your business going.
It's also a good idea to lay out exactly how you will fund your business now and in the future and what you'll need to have in place to obtain the necessary funding.
5. A solid business budget
Having a solid business budget is essential to the financial success of your business. Your business budget basically allows you to manage your business finances properly and stay on top of your expenses.
The biggest things you want to track are your income and your operating expenses and then determine each month whether your expenses exceed your income based on your actuals and why. Not only will your budget help you track the overall health of your business finances, it can also give you pretty good insights around your profits and losses.
Need help creating one? Read my blog post HERE.
As a small business owner, do you currently have these 5 foundational pieces in place?
Bola Onada Sokunbi