Author: Aradhya Aggarwal
Exploring business models, market research, customer needs, cash flow and execution.
Starting a business, purely begins with a good understanding of what actually it is. A business is an organisation that provides goods and services to fulfil people’s needs and wants whatever they desire for. To start an efficient business the producer should understand about this vast topic, which can make him stand out in the market. Many entrepreneurs think that if the business model is different and innovate, automatically it will attract customers. But to some extend this not so true as a product should be reliable and long lasting for the market to believe. However, having an great understanding about the market and a great idea is the first step towards a successful startup. The term business contains of various other aspects such as needs of customers, suitable business model, cash flow and various plans. This is why some start with innovative ideas fails, as they fail to understand about the market needs and wants.
One of the most common and integral reason of having a weak business model, the businesses explains how a company creates value for its customers and how will it make money, the most common way of business defining. Many start-ups have an interesting product, but they might not generate enough to revenue to cover its costs, the idea may not be sustainable. For instance, WeWork is a globally flexible company, who offered a new approach towards the office space by providing flexible and spacious workspaces at minimum space possible. The idea was great, and it even attracted many customers and investors as well, but due to the company’s rapid expansion and high costs created a major financial load. Which led them to bankruptcy for a long period of time. This is an example of having a product which people likes a lot is not enough for a business, there are other aspects as well, which is financial stability and sustainable way of operating it.
Another major reason is insufficient market research. Usually the entrepreneurs becomes really attached to their products and assume that if they liked the product to this very extend then the customers will surely like it when this would come into the market. However due to this thinking, they keep the needs and wants of the market aside and doesn’t inquire much about the market. Whereas, the businesses main objective is to understand the market size, demand, competitors and customers willingness to pay for the same product. Juicero is an perfect example for this, as this is an start-up that developed an expensive machine designed to produce fresh juice from specially prepared packets. The technology was innovative and the company received significant amount of investment, but a major question raised by the customers was that is the machine really required as the packets could be squeezed by hand itself. Hence, further this became a major drawback, and led to the failure of the product. This demonstrates that the market investigation is an imperial part.
Understanding customer needs is also different from identifying the market. A product can be technologically very advance but it would still strive to fail if it doesn’t matches the customer needs, as that is the most essential aspect to stand out in the market. For example, if a start-up could create an extremely advanced productivity application with hundreds of features, but if students find it confusing and are not be able to use then they would like to prefer a basic calendar product of that not matter how expensive, how new the product is. The additional technology does not necessarily create value. So the successful entrepreneur needs to listen to the customers first and then work upon the product and the market. Sometimes the best business decision is not to protect the original idea but to improve it according to customer feedback.
The most vital part of starting a business is the cash flow. Hence, that is also the reason of failure of most of the start-ups in the market. Cash flow basically refers to the movement of money in and out of a business. A company can make sales and even make profit but still experience cash flow problem as when they are not able to generate enough to pay the expenses. Start-ups often have significant costs, including employee salaries, rent, marketing, technology, manufacturing and inventory. If a business expands too early then these cost can increase before the income becomes stable. Therefore, entrepreneurs need to forecast their cash flow and make sure they have enough finance to continue operating during difficult periods as well, so that they won’t face any difficulties which can make them think of failure. Investment can help a company grow, but continuously relying on new funding without developing a sustainable business can create serious problems.
Overall, start-ups can fail despite them having a great idea for the product as the idea alone is not capable for a business to stand there are various other branches that are needed to be looked upon. Market research is needed to understand the customer demand, price they are willing to pay and about the cash flow. These are usually essentials components that are required to be fulfilled in order to make a good business. A business is considered to be strong when it is able to bear the cost of production and is also able to make sustainable profits. But that is only possible when there is good cash-flow management. In my opinion, the most integral lesson is that entrepreneurship is not just having a great idea and executing upon it. It is also about understand about the market needs and wants, understanding customers, managing resources and continuously adapting when something does not work as thought. A great idea must provide a starting point, but a successful execution is what turns that same idea into a real business.
