{"id":7402,"date":"2021-06-29T08:00:00","date_gmt":"2021-06-29T00:00:00","guid":{"rendered":"https:\/\/dollarsandsense.sg\/business\/?p=7402"},"modified":"2021-06-28T19:42:54","modified_gmt":"2021-06-28T11:42:54","slug":"small-business-model-of-the-future","status":"publish","type":"post","link":"https:\/\/dollarsandsense.sg\/business\/small-business-model-of-the-future\/","title":{"rendered":"What Does The Small Business Model Of The Future Look Like?"},"content":{"rendered":"\n

According to Investopedia, 90% of startups eventually fail<\/a>. 21.5% fail in their first<\/em> year. <\/p>\n\n\n\n

These statistics aren\u2019t meant to scare \u2013 they\u2019re just facts and they\u2019ve remained quite consistent over the years. Rather, this just points to a bleak case for starting your own business \u2014 especially during these pandemic-stricken times. <\/p>\n\n\n\n

With SMEs comprising 99% of enterprises in Singapore, it is all the more important for small business owners to figure out what the future of your small business looks like.<\/p>\n\n\n\n

Let\u2019s first tackle the elephant in the room \u2014 the business model.<\/p>\n\n\n\n

Read Also: 4 Bad Reasons For Wanting To Be An Entrepreneur And Start Your Own Company<\/a><\/em><\/strong><\/p>\n\n\n\n

What Is A Business Model?<\/strong><\/h3>\n\n\n\n

Simply put, the term a \u2018business model\u2019 refers to how your company plans to make a profit. Business models are important for startups and small businesses because they lay the foundation of how your business will operate in a highly competitive industry. Realistically, almost all industries are highly competitive \u2013 so you should plan for it. <\/p>\n\n\n\n

Here are 2 simple diagrams to illustrate how a business model can be visualised.<\/p>\n\n\n\n

#1 Porter\u2019s Five Forces: A Quick And Easy Tool For Industry Analysis (And Entry Points)<\/strong><\/h4>\n\n\n\n
\"\"
Source:\u00a0Business\u00a0To You<\/a><\/figcaption><\/figure><\/div>\n\n\n\n

Porter\u2019s Five Forces examines the competitors in your industry in detail. It also allows you to predict how your customers or competitors might behave if they see an upstart like you enter the industry. <\/p>\n\n\n\n

Threat Of New Entrants<\/strong><\/h5>\n\n\n\n

This describes the possibility and ease of new competitors coming in. Take the e-commerce industry\u2014 anyone can set up a Lazada or Shopee account and become a seller. <\/p>\n\n\n\n

By bringing down the barriers to entry, platform businesses allow greater accessibility for small business owners to start their business in a low-cost fashion. As a result the market quickly becomes frothy and extremely competitive. This can lead to price wars, especially in the e-commerce industry, where competitors bid down each other\u2019s products and everyone bleeds.<\/p>\n\n\n\n

Read Also: Step-By-Step Guide To Start Your E-commerce Business On Shopee (In Under An Hour)<\/a><\/em><\/strong><\/p>\n\n\n\n

Bargaining Power Of Suppliers<\/strong><\/h5>\n\n\n\n

Your suppliers \u2014 the businesses that supply you with the raw material or manpower to perform a task that is related to the building of your products or services \u2014 can hold significant sway over how much profit your business makes. <\/p>\n\n\n\n

If your supplier is the only one in the world who can make the raw materials that you need to develop your final product, then they can charge you a sky-high fee and that can eat into your margins. If the raw materials you require is readily available, then you have a better bargaining chip.<\/p>\n\n\n\n

Bargaining Power Of Buyers<\/strong><\/h5>\n\n\n\n

Your customers can also determine how much profit you can make. If you have a huge customer that makes up 70% of your total revenue, then losing that customer might mean your business failing. That customer might also use this to depress prices when negotiating with you. That might frustrate you to no end.<\/p>\n\n\n\n

Threat Of Substitute Products<\/strong><\/h5>\n\n\n\n

For every product you type into an e-commerce website, you will likely be fed with tons of undifferentiated products that do virtually the same thing. This is an issue that only e-commerce sellers face, but even companies in well-esteemed industries like law and accounting. With tech companies looking to disrupt these slow-moving fields, this threat should not be taken lightly.<\/p>\n\n\n\n

#2 Business Model Canvas: A Tool To Quickly Draft Your Business Model<\/strong><\/h4>\n\n\n\n
\"Business
Source:\u00a0Strategyzer<\/a><\/figcaption><\/figure><\/div>\n\n\n\n

The BMC, or Business Model Canvas, allows you to map out your business model faster than a traditional business plan would. This aims to give you a big-picture view of how your business functions as a whole. <\/p>\n\n\n\n

This exercise can be done before you start a business, but you can carry out this exercise from time to time to review your progress and see if you\u2019ve stuck to your plan. Or whether you need to strategise a new plan.<\/p>\n\n\n\n

How Can Small Businesses Compete?<\/strong><\/h3>\n\n\n\n

It is not a secret that big businesses have an advantage. Amazon has been accused of unfair business tactics<\/a>to crush small businesses based on its sheer size alone. One such example as stated by the Wall Street Journal was Amazon cloning and selling of one of its seller\u2019s bestselling products \u2014 Pirate Trading camera tripods \u2014 and using a series of price wars and suspension of accounts to force small business owner Dalen Thomas out of business within a few years.<\/p>\n\n\n\n

Big businesses get bigger due to economies of scale, brand loyalty and ability to shape government policy \u2014 these are advantages that small business owners have little of.<\/p>\n\n\n\n

In such a fast-changing and cutthroat environment, how can small businesses stay ahead?<\/p>\n\n\n\n

#1 Have A Digital-First Business Model<\/strong><\/h4>\n\n\n\n

Having a website is no longer a plus, but a necessity \u2014 building the right website or mobile app with the right user experience can determine whether your business looks like another Wix website template or is able to take users through an interactive experience online. <\/p>\n\n\n\n

Read Also: Shopify VS Wix \u2013 Which Platform Should You Choose to Build Your E-Commerce Website<\/a><\/em><\/strong><\/p>\n\n\n\n

This digital-first mindset needs to be adopted by all stakeholders involved and business activities. Tailoring the right digital channels and user acquisition strategy will determine whether your business can attract the right customers in today\u2019s fast-paced environment. <\/p>\n\n\n\n

Finding the right partner or team to work with you to digitise your business will also be key in determining if you can easily make the transition  \u2014 this is important if you are looking to pivot from your brick-and-mortar business into a hybrid or fully digital one. <\/p>\n\n\n\n

#2 Decentralised \u2018SWAT\u2019 Teams Of Versatile Specialists<\/strong><\/h4>\n\n\n\n

In order to build a business fast, you will need small, competent teams of specialists who are combined in ways that amplify their productivity multi-fold \u2014 think \u201chustler\u201d, \u201chipster\u201d and \u201chacker\u201d archetypes \u2014 teamed up for specific missions to deliver a part of a product or service. <\/p>\n\n\n\n

With remote work now the norm, companies have to empower their employees to grow; putting trust into the fact that even though you may not see them, they are still doing their work diligently. <\/p>\n\n\n\n

These teams will not need much hand-holding or supervision on your part as they possess the skillsets in combination to resolve the problem at hand. Top-down, static business models driven by workers in siloes will be quickly overrun by small agile teams working in tandem to achieve an organisation\u2019s desired goals.<\/p>\n\n\n\n

As the prevalent powers that be (Amazon) continue to consolidate power, the hope that small business owners have is to form effective partnerships with allies in different industries. Networking needs to take on a new form \u2014 cross-industry problem-solving.<\/p>\n\n\n\n

Read Also: Who Are Intrapreneurs & How Businesses Can Promote Entrepreneurship In Their Company?<\/a><\/em><\/strong><\/p>\n\n\n\n

#3 Content Is Queen In The New Attention-Driven Economy<\/strong><\/h4>\n\n\n\n

The contemporary business adage \u201ccash is king\u201d still stands \u2014 companies need solid financials to weather the storms that come with the uncertainty and volatility that the next decade will likely bring. However, if cash is king, content is queen \u2014 educational or entertaining content that will help move the conversation forward about whichever niche you\u2019re in.<\/p>\n\n\n\n

Great content attracts attention, and with enough recurring attention, you can drive engagement with your brand that builds credibility. It\u2019s an uphill task though, as content creation requires in-depth knowledge of your field and a willingness to start from 0. <\/p>\n\n\n\n

Break down key information about your industry and share what you already know to niche audiences who want to learn about the content you provide and start small. You don\u2019t have to reach everyone and crave widespread attention. You just need to connect with your customers and potential customers. In his TED talk, actor Joseph Gordon-Levitt talked about how craving attention makes you less creative<\/a>. <\/p>\n\n\n\n

By focusing primarily on creating and giving value, you are not bound by the chains of vanity metrics; by focusing on your mission, it will be easier to deliver great value and grow your audience.<\/p>\n\n\n\n

Today, it is easier than it has ever been to start a business, but it is also much easier to be outmanoeuvred by monopolistic or oligopolistic big tech companies. Small business owners need a game plan to fight the statistical disadvantage and survive the cutthroat competition that will only intensify in the next decade. This survival starts with changing your business model to suit the demands of the 2020s. <\/p>\n\n\n\n

Read Also: <\/em><\/strong>Instagram For Business: How to Use It and 7 Benefits You May Be Missing Out<\/em><\/strong><\/a><\/em><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"90% of startups fail. 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