Relevant data shows that a significant number of new businesses will fail within their first few years. Entrepreneurs need to be willing to take risks, but you can’t afford the cost and wasted time of having one business venture after another fail.
When I first started my company, there were many struggles — everything from building the software to marketing. However, staying nimble and open to new ideas helped make the transitions and growth go a little smoother.
I’ve seen multiple articles on the top reasons why most new business ventures fail, and I’ve found that they often fall into some iteration of these categories: 1.) not in touch with customers; 2.) insufficient market differentiation; 3.) value proposition not properly communicated; 4.) failure of leadership; and 5.) failure to find the right business model.
A successful business is not created by just offering a product or a service, then pushing hard to get customers who may need what the business offers. There needs to be focused research and planning to find an opening in the market that will be satisfied by product rather than creating the product or offering the service first.
Think of the market as a giant puzzle. As an entrepreneur, you aren’t just looking to create a business. You’re looking to fill an empty space where your business becomes a crucial part of the puzzle. That means your business should be designed to fill a specific need that the market is not meeting.
Testing The Waters
You can only work with what you have. If you’re a sculptor, you’re going to be producing sculptures. If you’re a plumber, you’re going to be providing plumbing services. Your business needs to focus on one specific space and become an expert in that field.
The idea is to offer your value-added service in a way that is novel, promote it with messaging that appeals to an audience that is not having their needs met and deliver in a competitive fashion.
This is about filling in that missing puzzle piece. The problem is, you won’t know exactly how that piece looks when you’re just starting out. Offer your product or service in a way that requires the smallest possible investment.
Giving out free samples and offering deep discounts on your trial offerings is a good way to find out who wants your product or service and why. Survey your consumers — possibly in exchange for the free sample or discount — and ask questions about what features they would like to see, or why your product is or is not useful to them.
You’re not looking for a big result here — just enough of a response to start the next phase of planning. You will take those few responses as a metric for your target audience. Spend time getting to know the people who responded. Find out who they are, how much they tend to want to spend and why they sought out your product.
In the testing phase, be prepared to pour the majority of your resources into your outreach efforts. Once you understand your core audience, you will have a base to design your advertising efforts around.
Conducting Monetization Trials
Keeping in mind the data you learned, as well as the top reasons new businesses fail, you can gain some important insights on how to stay on track during the monetization process. Monetization is the goal of your business model, but it is not the business model itself.
Your business model could be thought of as the nuts and bolts of your monetization method. Monetization refers to making money through your business and/or assets.
Below, I outline a few methods for drawing revenue.
- Subscriptions: Under this model, users pay on a scheduled basis for regular content, services or products. If a business is not constantly bringing in new subscribers, the revenue dries up and the business cannot recover its losses.
- Display Advertising: A popular monetization method, displaying ads makes your content free to use and view, but it can reduce the quality of the user experience. Ads that become a part of the background and annoy users will make your business feel like thousands of other low-quality content generators.
- E-commerce: Operating as an online store is a good way to move products if your inventory is broad and has visual appeal. However, this model needs to be based on your research to ensure that there is consistent demand for the product.
- Affiliate Marketing: Forming alliances with third parties can also be a good strategy. Just remember that giving references is easy, but your customers need to be consistently interested in what affiliates are selling for it to become a real source of revenue.
- Lead Generation: Using your site to obtain user data can be lucrative. Remember to stay in touch with potential customers after generating leads and properly assess their needs from there.
How To Monetize?
This is a very important question. One or a combination of these methods may work based on your business model. Ask if you have a website that will constantly get enough traffic to make things like ads or affiliate marketing worthwhile. As well, keep in mind how much time you will need to spend reaching out to new and existing customers if that is part of your monetization strategy.
These monetization strategies can be inexpensive to try and require little commitment in the early experimental stages. They give you a lot of leeway to experiment, so try out a few different models to see what starts bringing revenue in for your business.
Just remember that the key is to keep investments light while you’re in the exploration phase — and then to strike hard when you spot the opportunity.