In Part 1 of “The Street Smarts for a Scalable Business Model” we talked about thinking big and getting creative as preliminary steps for building scalable business models. Today we will get more in-depth and talk about ways to assess the feasibility of a scalable business model and go about phase one of validating the initial vision.

Undoubtedly, any great idea is the by-product of some incredible intuition by an entrepreneur. It becomes quite obvious, however, that although there are many great ideas out there, very few of them actually get implemented successfully. Simply put, the majority of businesses fail and very few businesses that set out to reach big targets actually hit them (0.5% on average). In my mind, there should be greater emphasis on the business model rather than the idea itself, in order to ensure that there are strategies in place to help the initial idea gain traction.

So let’s assume that you have gone through the imagination and creativity stages to come up with an idea that has big bang potential and a preliminary strategy to match it.
Now it is time to conduct a feasibility study and begin validating the initial vision. The actual time spent conducing a feasibility study is not of paramount importance. What is important, however, is ensuring that key questions are understood before moving forward on any opportunity. For example:

How many potential customers exist in the marketplace could more effectively get the job done using your product or service?

In order to answer this question, an entrepreneur needs to know two important things:

1) What customers in this market need to get the job done
2) How the experience created by their product or service addresses this need

There needs to be some fundamental understanding of the customer and what they need to get the job done, not an attempt to simply place something in front of them that they say they want. Beyond that, it is important to have a grasp on how many people there are doing this particular job and what products or services they use to get the job done currently. For some, it may be very simple to get answers to these questions, while for others it may take months of research. But for all, it is essential to know the marketplace on a fundamental level.

Once this core understanding is obtained, the opportunity needs to be reexamined in a strategic context. If building an understanding of the market helps us validate that the opportunity has big bang potential, then we need to ensure that the required strategies are feasible to execute. Creative brainstorming is good to get the wheels turning for any idea, but a business model needs to be rationalized in more concrete terms. This includes looking at costs, cashflow and resources required to execute a given strategy. For example, a certain strategy may be necessary to reach customers in a specific market, but the costs to acquire a customer using this strategy would put a squeeze on margins and dampen the whole business model.

Overall, it is important to examine the marketplace and ensure that the strategy to reach that market remains feasible. To build a scalable business model requires a focus on not just creating value, but finding ways to deliver and capture that value. This places an equal emphasis between market opportunity and strategic planning, so that no idea is taken to market without at least some idea as to how things will play out. Obviously things will change greatly as soon as market entry occurs, but the entrepreneur needs to have thought the business out and envisioned the basic structure of the business before any sort of operations begin.

Conveniently, we can help with each and every step of feasibility analysis for your business model. Stay tuned for Part 3, as we talk about validating customers in ways that proves the business is scalable.

Part 3: Customer Validation

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