Startups and new businesses are emerging everywhere, disrupting existing markets and creating new ones. However, 95% of startups fail. So, what sets that successful 5% apart from the rest? Successful business models are desirable, feasible and viable. Feasible business models have the operational capacity to deliver their value proposition, the innovation or feature that makes your idea attractive and different in the market, to customers. This article will set out issues you should consider when creating a feasible startup business model.

Key Questions

Consider the logistics of delivering your value proposition to consumers. You must have a clear idea of the activities and resources you require to make your product or deliver your service. When assessing the feasibility of your business model, consider the following:

  • what actions do you need to take to provide your value proposition to your customers?
  • what resources do you need to deliver your value proposition to your customers?
  • does your team have the required skills to deliver your value proposition?
  • what is the cost of acquiring each customer, and how much do they spend on the first transaction?
  • how much profit can you make?
  • are there any regulatory requirements you must consider? and
  • who will you need to hire?

Key Team Members

The strengths and weaknesses of your core team are vital in determining whether you have a feasible startup. Does your team have the necessary experience to create and deliver your value proposition? Investors look for well-rounded teams that are passionate and determined. Interdisciplinary teams that cover a range of skills are especially ideal.

There may be skills and areas of expertise that you require to launch your product or service that are not covered by your core team. For example, you may need the expertise of an engineer or the skills of a software developer. In this case, you may want to hire a contractor or employ an employee.

To protect your business, it is vital that you cover the ownership of intellectual property, non-disclosure and non-compete clauses in your employment contract. Employee Share Schemes can also be a useful tool as they align the interests of your employees with the interests of your startup.

Key Documents

To avoid disputes, it is prudent to put together a shareholders agreement that outlines the rights and responsibilities of each founder. Establish the business operations, directors and individual shareholdings of the startup in your agreement. As your startup grows and you begin to attract investment, you will need further documents to establish its ownership structure.

Additionally, you should also put business terms and conditions in place to protect yourself and your customers.

Key Partnerships

Furthermore, strategic partnerships with other businesses will be an asset to your business model. They can help you and other businesses grow through mutual support. However, it is risky to rely on them for your business’ existence entirely. So, if you are considering a strategic partnership, put a memorandum of understanding or contract in place that outlines the goals and premises of the partnership.

Key Activities

To ensure you have a feasible startup, you must know what you have to do to deliver your value proposition to customers. You should therefore map out how you plan on doing this from start to finish. Include everything from reaching your customers to making a sale and delivering the product or service. From there, you can determine the logistics and critical activities involved. Consider whether you have the ability and resources to undergo those actions.

You may need licences or permits to deliver your value proposition. For example, if you are operating in the food industry, you will require a food business licence. If you are opening a bar, you will require approval for development from your council and a liquor licence. As a result, consider your key activities and research any licences you may need.

Key Resources

Defining the resources you need to deliver your value proposition is critical to the success of your business model. Resources include tangible and intangible assets. Therefore, you should clearly define what tangible resources, such as supplies and inventory, you require to run your startup.

If you are selling a product, you will need to consider your supply chain and what is involved in producing and distributing your product. Having supplier agreements in place will help ensure you can deliver quality products on time.  

Key Takeaways

For a business model to be successful, it must be feasible and viable. A feasible startup can deliver its value proposition to its customers in a realistic way. It is essential to map out how you will achieve your value proposition from start to finish and define the key activities and resources involved. If you need assistance launching your startup, get in touch with LegalVision’s startup lawyers on 1300 544 755 or fill out the form on this page.

Eugenia Munoz
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