Perfecting a business model

Too many companies grow too quickly and before their business model is perfected and ready. You only need to look to examples like Pizza Express and the Body Shop, who both spent a long time perfecting their business models before rolling out second branches and expanding, to realise that a long testing period of the business model lays the foundation for long-lasting success. This guide talks you through:

  • Why it pays to grow slow
  • How you know when your business model works?
  • Ask the customer

What it pays to grow slow

It may take longer, but thoroughly testing and perfecting the model on a smaller scale before growing gives you the opportunity to really get to know your customers and deliver what they want. Once you know that, it's a lot less risky to market to new customers or to push more sales on existing ones - helping you save money and reputation. You have time to explore different sales channels and choose the best ones, and to make sure that you're making as much profit as possible without compromising service or quality. You can then simply scale up the model at far lower risk. Testing thoroughly also helps you spot early on the problems that may seem small now, but would be dangerously magnified if you grew too quickly, before recognising their full implications over a longer period of time.

  • Reduces risk when you expand
  • Help you find best sales channels and how to make most profit
  • Helps you spot problems whose implications may only show after a long period of time

How do you know when your business model works?

There are no universal, definitive measures to test how well a business model is working, but there are a few indicators to look out for. If your business model is working you will be meeting or exceeding your original targets for sales, profit and turnover. Things will be going to plan. You'll typically be making enough profit to survive comfortably, and enough to survive nasty surprises. You'll have been making a consistent amount of profit for at least several months - although upwards of a year is a safer period of time to test your business model over if you can. Customers will be happy with your service and you'll usually be getting repeat custom. Increased demand for your business may also be occurring already.

  • Meeting or exceeding targets
  • Making sufficient profit consistently over long period of time
  • Customers are happy
  • Demand may be increasing naturally

Ask the customer

Most importantly, you need to make sure that your business is providing your customers with exactly what they want in exactly the way they want it. If you're client facing or have staff that are, ask customers what they think of the business. Incentivise feedback through surveys or online questioning by offering discounts and prize draws. Find out what they like, what they don't, what needs improvement and how often they use your business. Then use the information to refine your business model until the majority of customers are happy and returning often.

  • Ask the customer - make sure they're happy
  • Incentivise feedback and use the results to refine your model

Smarta Business Builder

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