OUGD502 - Taking Care of Business - Business Models

When setting up a business it is important to choose the right business model, choosing the wrong one could end up with the business losing money and not succeeding in the long term. In our group of 5 we set out to each research a particular business model. This way we could all gather separate information and see which one would suit us as a group best. 

People often throw around the term business model when discussing start-up businesses. But just what is a business model? Which ones work best and why? How do you know if your start up has the right one?

A business model explains which consumer pain your start-up chooses to relieve, why your solution works better than competing ones and how big a wedge a company can drive between what customers are willing to pay and the costs.

The business model is at the core of any successful startup, because no matter how cool an idea is or how unique something may seem, a startup must have a viable way of making money that is worthy enough for future investment and to sustain itself.

It is quite difficult to define, invent or apply a business model for our startup, because it is not like we are actually selling any products as such other than our creativity. For a set up of our nature, we will obviously need to market ourselves effectively to attract clients. We would initially need to take on a number and variety of briefs to sustain ourselves and the once we have established ourselves locally and nationally, we would be able to slow down and dedicate more time to individual briefs. 

I read an interesting article outlining a number of reasons behind the failure of a number of startup businesses. The reasons were fairly obvious and are good to bear in mind for future development. 

Reason 1: Market Problems -A major reason why companies fail, is that they run into the problem of their being little or no market for the product that they have built.

Reason 2: Business Model failure - Many startups assume that because they will build an interesting web site, product, or service, that customers will beat a path to their door. That may happen with the first few customers, but after that, it rapidly becomes an expensive task to attract and win customers, and in many cases the cost of acquiring the customer (CAC) is actually higher than the lifetime value of that customer (LTV).

Reason 3: Poor mamagement of the business in the starting weeks/months

Reason 4: Running out of cash 

Reason 5: Product/services problems