1.11 Evaluating Your Business Model

In this mini-course, you are taking one or more ideas through a funnel to see if you have a true business opportunity. You have evaluated various needs, your own experience, available resources, and potential customers. Now it’s time to see if you have a sound business model that can make money and survive in the long run. To do this, you need to seriously evaluate your sources of revenue, pricing, costs of goods sold, gross margin, operating costs, and profit margin—essentially the elements of an income statement.

The best businesses have multiple sources of revenue, competitive pricing, a 50 percent gross margin or better, and a 10 to 20 percent profit margin. If your numbers aren’t attractive, it will be difficult to survive. Keep working ideas through the questions in this mini-course until you have a true business opportunity with a high probability for success. This should be a concept you could build on and put into action in the real world. For now, answer the following questions about one or more of the product or service ideas you are exploring.