Defining your business is the first, very basic step to setting up your business model or business plan. It can seem very overwhelming if you’ve never done it before so let’s start with simply gathering our thoughts and defining our business.
When someone asks, “What’s your business model?” they really want you to answer the question: “How do you plan to make money?”
Of course, this question then leads to other questions such as:
- Who is your customer?
- What problem do you solve for your customers?
- How will you reach, get, and keep customers?
- How will you stand out in your market?
- How will you make money?
- What are your costs?
To start answering some of these questions and defining your business you will need to figure out where the money will come from. Who will pay? How much? How often? And what portion of every sale will make its way to your bottom line so that you have a profit?
To break even, you need enough money coming in to cover all your costs. But to make a profit, you need to price your goods and services to cover your costs plus a little for your bottom line. You can’t define your business without it!
Timing and Planning
How you plan to make money is one part of defining your business, but just as important is WHENyou expect the money to come in . This timing will have a great deal to do with how much money you need saved to live on until the money starts coming in, how soon you can upgrade equipment or when you can hire an accountant to help with the taxes.
How will you be paid?
Defining your business will also take into account how your customers will pay you. Will you accept credit cards or PayPal? Will you have 30 day invoices open? Will you be renting or leasing props or other equipment?
Each of those options has financial consequences that affect your business. As you set up your business and define how your customers will pay you consider how each of the options will affect your cash flow.
Defining your business, whether you are providing a service or selling goods is an important first step to setting up a business model or a business plan.
Can you answer the questions outlined above? Do you need to get more information or gather your financial records?
By: Vicki O’Dell, The Creative Goddess