How to define your business
Part of starting your own business is defining your brand and what it stands for. Having a clear vision for your business will help you determine which opportunities are worth taking and passing on for the long-term benefit of your business.
What is your business model?
What does this question actually mean? When people ask you this, they really want to know, how do you plan to make money? It’s important to have a clear and concise answer to this question. Regardless of your answer, it will likely trigger a slew of follow-up questions from the person asking things like:
How do you reach customers?
How do you get customers to convert?
What is your ROI?
If you want to know how to be better equipped to answer these questions, keep reading or check out our full guide on running a successful business as an entrepreneur.
How does your business make money?
Let’s start with answering the primary question, how will your business make money? Figure out what your profit margins are, what type of person will purchase your product, and at what average cadence you can expect them to come back. Don’t forget to account for other expenses required to run your business like payroll, rent overhead, marketing costs and more.
In addition to outlining how you make money, it’s important to be aware of when the money will come in. If you work in the food industry, customer payments are immediate, they pay for the latte and you make it. If your company offers a service, like graphic design, for example, you may be set-up to complete the work first, and then be paid after delivery and invoice, which could even be up to 60-90 days after sending the invoice. When establishing the payment portion of your business model you’ll need to understand how it affects your bottom line and build in flexibility to account for delays. If a check doesn’t come in one month from a client, can you still meet payroll?
What is your niche?
When defining your business, knowing your niche is important. Ask yourself these three questions to get a better idea of how to differentiate yourself.
- Where do I have the most experience in the field?
- How can I elevate what has already been done?
- Who values my services and what is my target market?
Walk-through the exercise of putting pen to paper and answering these questions for your business. You may identify a tactic or offering you are taking a completely different approach which can act as a great marketing tool to reach your customer. If you’re seeing a need in the market to do something differently, likely, others are too. Your business idea doesn’t have to be the first innovation of its kind to be successful.
Now that you’ve answered the question of how your company makes money and knowing what your business niche is, let’s go back to the first question, What is your business model? You can summarize the responses from the questions above to create a statement like the following:
My company, (name) strives to (action your business offers) by (key differentiator).
When you put everything together, it can sound like this: “My company, The Coffee Shop, strives to bring joy through coffee by offering colorful latte art designs.”
That is just one example of how you can define your business in one sentence, the more complex the business, the more you may need to elaborate, especially on the financial side. In the statement above, the financials are implied as many of us understand how the coffee shop model works. Let us know how you define your business in the comments below. If you’re looking for more entrepreneurial resources for running a successful company, check out our IOOGO Startup Guide, The Startup: An Entrepreneur’s Guide to Launching, Establishing, & Running a Successful Business.