Startup Dilemmas: Business Models
This is a guest post from Ashraf Mansoor who is the founder of Twffaha.com, a job site intended for women in the Middle East.
Not A Luxury
Everyday we run into hundreds of web applications, be it clones for already successful businesses (Mixx to Digg) or original creative ideas. The potential of growth on the web is overwhelming, that’s why a lot of entrepreneurs seek to involve in creating startups, with the hope of being the next Google.
However, most startups fail to develop there ideas into cash generating machines. The reason is because of the lack of a solid, rational, business model. Startups and entrepreneurs get consumed by there ideas and hopes that they overlook the economical feasibility of their projects.
Startups should be profitable in order to guarantee it does not cease to exist. Even a VC backed startup will be under fire if it failed to turn a profit and award the VCs with a feasible rate of return on their original investment ( anyone?)
Plan Early
As an entrepreneur it is your job to plan a solid business model at the early stage of your project. Building an application and hoping to come up with a business model later is not a smart move to make. YouTube has been a great success, and revolutionized the way we think about the web, but in reality YouTube failed to cash on there huge traffic (#3 in the US according to Alexa) because of the absence of a business model initially, leaving Google to experiment with different business models that all but failed to reduce the search giant hefty bill of costs.
Size Does Not Matter
Once you have an idea that you believe can help you to generate money, study the business model. Services like 37Signals have done their homework early, and came up with a subscription based model that helped them to be profitable from day one. The fact that 37Signals is very small when compared to YouTube is insignificant, as long as they turn a profit and a very good one too.
Final Thoughts
1. Do not leave it till the end.
2. Do not depend on being acquired. The chances of you being acquired is slim, plus giants will look to acquire startups they know are profitable.
3. Conduct a market research to ensure that your figures are realistic.
4. Do not hesitate to change your business model, in case you found a more lucrative model - be flexible.
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