The common enemy of companies is usually taxes and costs. At first, we can hardly intervene, but on the second, we can really do a lot.
Have you ever found yourself assessing that you have too many costs for your project or company?
This block of your business system represents and defines all the costs that a company will have to incur to put a particular business model into practice.
90% of new businesses fail in the first three years because they fail to understand their costs or what it takes to create the goods and services (and therefore value) they have promised. At least three other components contribute to discovering what the costs are you have to bear when fully operational (and not on paper like the numbers made senseless in a business plan).
First, you need to evaluate the costs related to creating value, then distributing the value proposition and finally, how you intend to create income streams by focusing on long-term relationships with customers.
All three of these steps represent a financial investment in your business.
With the “ Startup Success system,” we are able to solve all these problems with extreme simplicity, avoiding that the key activities are inflated by unnecessary costs but which take away wealth from the startup.
Here are the key questions to ask
When doing a thorough business model analysis, it is imperative to ask yourself the following questions:
- What key activities represent a significant expense to the business?
- Are the above activities combined with the value proposition to customers?
- By exploring the different business model options, do expenses and costs remain fixed or become variable?
The costs that determine the enterprises
- Cost-driven companies
- Value-driven companies
A business that focuses everything on costs involves a lean and fast type of organization by offering cheap proposals in terms of price, a high degree of automation and the outsourcing of expensive functions. It is important to lower internal costs and expenses rather than monitor what the competition is doing.
But beware, companies that only think about keeping costs low and offering low-cost products risk price wars by subsequently experiencing the “tragedy” for the entire life of the company.
The low-cost business model is one of the most effective but must be developed with the utmost attention.
Also, I want to clarify that “low cost” is not synonymous with poor products or services; on the contrary, we intend to offer the highest quality at the lowest price.
The rapid rise of “low cost” airlines clearly demonstrates that they are meeting an unmet need that these companies have fully met for budget-conscious travellers. To reduce costs, for example, the airports are those of secondary cities while the aircraft is optimized to move as many passengers as possible at the expense of baggage.
Guided by values
Not all companies drive their businesses on a cost basis. Some, on the other hand, are completely focused on the value they are providing to their customers, therefore, taking the approach geared towards maximum service, support and warranty.
This strategy is characterized by a complete focus on creating and delivering a high and exclusive value proposition that is highly customized to the preferences of the customer segment.