The ten basic elements of a strong business model

1. Value proposition. What is the need you fill or problem you solve? The value proposition must clearly define the target customer, the customer’s problem and pain, your unique solution, and the net benefit of this solution from the customer’s perspective.

2. Target market. Who are you selling to? A target market is the group of customers that the startup plans to attract through marketing and sales their product or service. This segment should have specific demographics, and the means to buy your product.

3. Sales/Marketing. How will you reach your customers? Word-of-mouth and viral marketing are popular terms these days, but are rarely adequate to initiate a new business. Be specific on sales channels and marketing initiatives.

4. Production. How do you produce your product or service? Common choices include manufacturing in-house, outsourcing, off-the-shelf parts. The key issues here are time to market and cost.

5. Distribution. How do you distribute your product or service? Some products and services can be sold and distributed online, others require multi-level distributors, partners, or value-added resellers. Decide whether the product is local or international.

6. Revenue model. How do you make your money? The goal here is to explain to yourself and to investors how your pricing and revenue stream will cover all costs and still leave a good return.

7. Cost structure. What are your costs? New entrepreneurs tend to focus only on product direct costs, and underestimate marketing and sales costs, overhead costs, and support costs. Test your projections against actual published reports from similar companies.

8. Competition. How many competitors do you have? No competitors probably either means there is no market or you have not done enough research. More than ten competitors indicates a saturated market. Think broadly here, like planes versus trains. Customers always have alternatives.

9. Unique selling proposition. How will you differentiate your product or service? Investors look for a sustainable competitive advantage. What is protecting you from copycats? Do you have a patented technology?

10. Market size, growth, and share. How big is your market in dollars, is it growing or shrinking, and what percent can you capture? Venture capitalists look for a market with double-digit growth, greater than a billion dollars, and a double-digit penetration plan.