In this age of rapid advancements, where every start up is becoming lean, and not every business is competent enough to stand the wrath of ever changing industry and customer requisites, the formula to survive is clear: test everything and anything in order to make it work for your business.
Even if we assume that you have a well laid out plan for your business model. You have taken into consideration everything that entails a successful business venture, for instance your target audience, the medium you will use to reach out to them, how you are going to maintain your relationship with them, key performance indicators, value propositions, P&L statement, key partners and every other miscellaneous stuff.
From the impression of it, it looks like it is going to exceed expectations; however one question that you should ask yourself: what is your business model’s economic viability?
People do make assumptions about their business model, however they fail to vision whether it is going to function well when put to use. You might have developed a prototype of your offering, it is now time to curate one for your venture.
You need something that manifests your financial results as a by-product. The pre-requisite? An operating virtual business model! But why?
It is said that a good operating model will make it tad easier for you to predict the financial viability of your operating assumptions. However the question that arises, how can you develop a “good” operating model? The key is to think in non-financial terms.
We have listed some examples of a non-financial terms:
- Resources required to deliver a product to the end customer.
- If you plan to do your business online, considering the amount of impressions that you need to acquire a customer will come in handy.
- If running an e-commerce company, an estimate of the number of suppliers and resellers you wish to acquire over time will help.
- The number of times your sales representative has to make a call to acquire a customer.
- Total number of customers you predict to acquire in a given period of time.
- And the list continues.
Although, non-financial factors will vary from business to business, however we believe we have been able to establish the basics. The whole idea of having a virtual operating model is to forecast how your physical business will perform when it will be up and running. Keep one thing in mind, by doing this, you are not predicting the financials! They are a result of your business operations. Get your business straight, your finances will automatically fall in place.
The best part of having an operating model is that it gives you the freedom to try different metrics and assumptions. And your financial returns will indicate what you need to do more, to reach the desired level of success.
Since you can adjust operational levels in the model to test different sets of assumptions, the financial results will tell you what operational levels you need to reach to achieve success.
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