Why Nigerian Businesses Fail: Unprofitable Business Model
This is the fifth installment in our ongoing series, Why Nigerian Businesses Fail. Read the preceding parts here.
Many entrepreneurs start their business fueled by the optimism that the picture they have in their head will translate into success in real life. But while there's nothing wrong with positive thinking, you cannot run a business on pure hope and expect it to survive. For a business to last in Nigeria (and elsewhere), it must run on a model that makes money sustainably.
The first step to developing a sustainable business model is research. Don't start a business without first researching the market you are stepping into. Starting a business is a risk, going in blind doubles the risk.
Find out how established businesses operate in your target market. What are they doing right and what are they getting wrong? Speak to their customers. These insights will help you develop a business model that avoids their mistakes and provides customers with better offers.
Next, use the results of your research to make informed assumptions and financial projections, develop your marketing strategy and define how your business will create value for itself and for your customers. These are the things that make up your business model.
Lay out your offers, pricing, revenue projections and marketing strategy clearly. Be sure that they make sense to you.
Now, let a few potential customers look at your business model. Take their feedback on the product or service you're offering, its pricing and how you intend to market it.
If you are already running a business, survey your current customers as well as potential customers. Ask them about the quality of your product or service, how they feel about the pricing, what they would do to improve it and how effective your marketing strategy is.
Finally, be flexible enough to make changes to your business model as you get new information from customers and as your target market evolves. Businesses that don't adapt to change will fail eventually. Also, keep an eye on your competitors. Be quick to notice their lapses so you can fill those gaps and win over new customers.
The bottom line:
Hope and optimism are not viable business models. Develop a workable model based on research, informed projections and proper planning, and be ready to change it as your target market evolves.
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