Simply put, the business model is how you’re going to make money. Think about how you can monetize your business idea. How much will people be willing to pay for your product or service? Survey the market if you’re not sure. Look at your competitors’ websites and even in their stores. Determine whether you will charge more or less for your product or service compared with theirs, and provide justification for this decision. Before anything, consider these five questions first:
The next four considerations are key because you have to assess how much it will cost to keep your business running. Think about numerically what profit margins would mean to you, how much it will cost to produce your product or run your service, what your overhead will entail and how much rent you’ll be paying per month:
Making a profit is how your business is going to stay in business. You have to make sure that your revenue will be greater than your expenses – in other words, you’ll need to generate a profit at some point. Most businesses take some time to become profitable. Now’s the time to research and run some basic numbers. Determine how much will you be paying for estimated expenses: producing your product or service; paying rent, consultants, or employees; and other overhead? How many sales will you need to make to cover your costs of operating (otherwise referred to as your break-even sales)? For example, if you’re selling a pet product for $10 and your monthly costs are $1,000, then you’ll need to sell 100 pet products to cover your costs to break even. Any sales above 100 pet products could mean profit in your pocket.
Determine whether you’ll produce your product or outsource, or if you’ll find a strategic partner to do it for you. For example, if you’re selling the $10 pet product and you form a relationship with a manufacturer to produce it for you for $1, this means that you’ve outsourced production and are paying $1 or 10% of the $10 sales price.
Some businesses require less capital to get going – for example, a consulting service business. Other businesses require more capital to get going – for example a bakery or restaurant. The average start-up cost for a business in this country is about $70,000. Determine key items that you’ll need to invest in to get your business idea going.
Keeping costs low in the beginning is really critical, so think about whether you can run the business out of your home and operate it virtually. There are many low-cost technology solutions and a ton of free tools online if you only look. If you’re operating a retail location or have special zoning requirements in your community, you may need to secure a lease for a business location. Make sure that the business location is appropriate for attracting customers and will maximize your opportunities for building the business. Consider these costs when you estimate your start-up costs; they can be significant.
Still think Facebook isn’t that useful for your small business? Think again. New data recently released by Facebook shows local businesses are thriving on the social network. AllFacebook reports that Facebook’s director of small business Dan Levy says there are more than 2 billion connections on Facebook between users and local businesses. Seven in 10 monthly active Facebook users in the U.S. and Canada are connected to local businesses on the site. Overall, local businesses’ Facebook pages receive an average of 645 million views and 13 million comments every week.
If you’re not already on Facebook or if you want to grow your Facebook presence, there’s strength in numbers. One tip Facebook offers for small local businesses is to start a Facebook group with other small businesses in your community. You can use the group to plan group events and promotions, and even create a business page for the group to let community fans know about your upcoming activities. This can be a smart way for novice Facebook business users to learn from more established ones.
Another idea: Why not learn from the big brands how to be your best on Facebook? A new study on which global brands generated the most mentions on social media last year, PQ Media/uberVU Top 100 Brands in Social Media Worldwide 2013 report, found that overall, restaurants, beverages and consumer technology were the categories that generated the most user comments, mentions and conversations.
Among restaurants, the three top brands on social media were Starbucks with 2.4 million mentions, followed by Burger King and McDonald’s with 2.3 million each. Among technology companies, Apple and Google led with 2.5 million mentions each, followed by Samsung with 1.7 million.
Now sure, it’s easy to say that these big brands get so many mentions on social media because they’ve already got huge followings thanks to branding, advertising and history. But there are plenty of companies with the same level of passion that don’t inspire the same level of passion on social media.
If you want to improve your social media outreach, try following these big guys on social media. Watch what they do, what kinds of offers they make, what they post and how they engage with their fans and followers. Then figure out what you could borrow from their tactics to use in your own arsenal of social media tools. (If these particular brands don’t float your boat, get more details on the study here—you can likely find other companies in industries that are more relevant to you.)
If you need help figuring it all out, a SCORE mentor can guide you. If you don’t already have a mentor, visit the SCORE website to get matched with one and get free business help 24/7.