When you’re looking at starting a business, the one thing that you need to be very careful of is who has control of whether you succeed or fail. One of the most common (and most fatal) flaws in a startup business model is when they don’t control the value that they provide – and as such aren’t in control of their futures. This is surprisingly common!
TEST: Any business that cannot provide it’s primary value to only one customer runs this risk.
You’re guilty of this where you are dependent on someone else providing information, a service, a deal, opportunity or product. Any time that you cannot control the value that you are selling to your customer. This (seemingly obviously) poses a difficulty when trying to find a way to make money.
Examples are things like market places, matching services, advertising or referral services. All of these business models have a chicken and egg problem that you have to address first to get off the ground. They all rely on momentum and for you to be a certain size before you’ll make money.
What you have to do in these cases is either find a way to tweak the functionality of your offering so that the core of your value-add is in your control or, if you can afford to, remove the payment barrier until you have the scale. Find another value offering to gain you momentum and then shift at a later date back towards your original idea once you have the size you need.
If you look at any of the most successful tech companies you’ll notice that they started offering a very specific value-add right from the start. Some faked it till they made it; some did other things (like search, or student directories) before moving to a revenue stream with scale.
When you’re starting out, if you can’t ensure that you are the deciding factor on whether the customer gets real value, you’re in for a world of hurt trying to get out of the blocks.