MODULE IN ABM 12

ENTREPRENEURSHIP
Second Quarter
Week 2

MOST ESSENTIAL LEARNING COMPETENCY

Demonstrate understanding of the 4Ms of operations (Manpower, Method, Machine, Materials) in
relation to the business opportunity: Week 2 TLE_ICTAN11/12EM-Ia-2 558
OBJECTIVES
∙ Develop the business model
∙ Validate the service description of the product with potential customers to determine its market acceptability
WHAT’S IN
Developing a Business Model

Great business models depend on developing three "green lights," or qualities that help the business succeed:
finding high-value customers, offering significant value to customers, and delivering significant margins. Great
business models also avoid three " red lights" that can derail a business: difficulties in satisfying customers,
trouble maintaining market position, and problems generating funding for growth. Examine your own business
to see if you meet the criteria for success and, more importantly, to correct any weaknesses you might have.

Green Lights

1. Acquire high-value customers.

High-value customers doesn't mean rich customers, but customers who meet the following requirements: a. Are easy to
locate, b. Allow you to charge a profitable price, c. Are willing to try your product after minimal marketing expenses, and d.
Can generate enough business to meet your sales and profit objectives

2. Offer significant value to customers.

There are a number of ways you can create significant value and competitive advantage, including the following: Unique
advantages in features and benefits

Better distribution through retail or distribution

More complete customer solutions through alliances with other companies
Lower pricing due to manufacturing efficiencies or pricing options
Faster delivery, broader product line or more customization options

3. Deliver products or services with high margins.

You can achieve high margins with other tactics, including the following:
Use a more efficient distribution channel.
Require less sales support and sales effort.
Have an industry-leading lean manufacturing process.
Offer more auxiliary products or other opportunities for revenue without increasing cost.
Red Lights

4.Provide for customer satisfaction.

Consider whether it will be difficult--and therefore expensive--to satisfy customers once they buy. Some of the aspects of a
business that create high customer satisfaction costs include:

High warranty costs

Extensive technical support
Extensive installation requirement
Extensive customer service
Interface problems with other equipment
Customer satisfaction costs, which occur after the sale, are red flags because the costs are typically high and don't produce
revenue or profits

5. Maintain market position.. The red flags that indicate it will be difficult to maintain market position include: Two
or three major customers buy most of your product.

Major potential competitors control the distribution network.

Technology changes rapidly and requires high-risk product development.
There are alternative technologies being developed to meet the same need.
You have well-funded potential competitors who could quickly move into your market.
Long term, your ability to hold market position is determined by the characteristics of the overall market.

6.Fund the business.

Startup costs, operating capital, personnel costs and overhead costs are just a small percentage of the funding
requirements for any business. Red flags for a business model regarding investments include:
ROI is less than 25 percent in the first three years.
Incremental production of products or services requires substantial additional investments.
Fewer than 50 percent of the investment required will be used in revenue producing areas, such as sales and production.
Investments have to be made prior to sales commitments.

Industry as a whole has a poor ROI or poor profitability.

Money is available for the right plan and the right model. You'll find money available if your ROI is right and if
you have financial leverage, which means your initial investment will allow you to double or triple sales
without requiring any more funding.

5 Ways To Validate Your Product or Service

There are so many ways to validate your product or service. Here are a few to make sure that what you are
creating is both what you will really love, what fits in your zone of genius, and is also something that your
customers will love, pay for and refer to again and again.
Validate the service description of the product with potential customers to determine its market
1. Surveys
You can create a survey using Type form, Survey Monkey or Google Forms, and send it out to groups, to
your friends, and to all people who are your ideal clients. Gather their responses about how they like to have
some products delivered, about their needs and their pains so you will know exactly how to serve them.
You can check in with them on what it is they’re struggling with right now so you can brainstorm some
product ideas. You can also interview a number of your ideal clients; you can do this either by Skype, Zoom
or a conference line to jump on for a call.
Or, you can use something simple and easy like Voxer and set up some individual chats with people who fit
your ideal client criteria and chat with them about their pain points.
Doing this really gets some good insight into what your customers really need, and also how they talk about
those needs; you can really get some insight into the language and the emotions behind what they want to
ensure you create something spectacular for them.

2. Beta Test
Other ways to validate your product include creating a test version of something and running it past a small
group or audience to get their feedback.
A test version of the product can either be paid, or free, and is a great way to get testimonials and feedback
while you create. This way, the pressure is off to create a fantastic product until you have tested that it works
in the way that you hoped it would. You can also use the feedback from your first round to improve and build
on your ideas to make them even better. A test or beta round is also invaluable for you, as you might
discover that you don’t enjoy this product or service the way you thought you would, so it’s a great chance to
move on and stay in tune with what you love!

3. Early Bird Offer

Another way you can validate your product is to offer to your subscriber list, survey attendees, or people who
have expressed some interest in your product, access for an early bird price to see if people actually buy.
If people part with money for your product and you can get some sales for the idea, then you have an
indication that this is an idea that will sell.
Combine it with social media reach by sharing on Facebook, Twitter, and Pinterest, and let people know
about your brand-new ideas coming to life.

4. Be Yourself
It is so tempting to follow models and ideas of what other small businesses have created – and that can be a
great starting point to help brainstorm some ideas – but we all bring a different set of skills, experiences, and
benefits to our work. So, make sure that you are really working in your own unique zone of genius which will
sustain you for the long term.
5. Stay Passionate
Once you begin to check what people need, what their pain points are, and how you can serve them, you
can stay inspired by making sure you are using your own unique combination of skills and the passion that
makes this product unique to you. Make sure your product or service has been validated by people who fit
your ideal client criteria, that people have tested the product for you and/or parted with money to prove to
you that this is what they want.
What happens if no one seems interested?
If your audience doesn’t want your amazing idea? Take a look at the execution; it might be they love the
concept, but the delivery needs to be different. Or, that the idea is sound but the offer isn’t clear. If you are
super passionate about your idea and truly believe it has a place in your business, test it with a few variants
of concepts and play around with some methods of delivery and adding value.