Total Business Insider

Great business models depend on developing three “green lights,” or qualities that help the business succeed: finding high-value customers, offering significant value to customers, and delivering significant margins. Great business models also avoid three “red lights” that can derail a business: difficulties in satisfying customers, trouble maintaining market position, and problems generating funding for growth. The list below outlines key factors in determining whether your model meets each green light and avoids the red lights. Examine your own business to see if you meet the criteria for success and, more importantly, to correct any weaknesses you might have.

Green Lights
1. Acquire high-value customers.
High-value customers doesn’t mean rich customers, but customers who meet the following requirements:

• Are easy to locate
• Allow you to charge a profitable price
• Are willing to try your product after minimal marketing expenses
• Can generate enough business to meet your sales and profit objectives

Customers don’t necessarily need to be the end users of your product or service. They could be retailers, distributors, catalogs or whomever you sell your product or service to. If your end users or distributors don’t fit this profile, you can still meet this requirement by attracting high-value customers through partnerships or alliances with companies in the market.

2. Offer significant value to customers.
There are a number of ways you can create significant value and competitive advantage, including the following:

• Unique advantages in features and benefits
• Better distribution through retail or distribution
• More complete customer solutions through alliances with other companies
• Lower pricing due to manufacturing efficiencies or pricing options
• Faster delivery, broader product line or more customization options

The rise of the internet, outsourcing and, most of all, the increased willingness of companies to partner in creative ways to serve customers has resulted in every industry creating innovation in business strategy. This gives you opportunities, but also makes it imperative that you stay on the creative edge to fend off competition.

3. Deliver products or services with high margins.
Better manufacturing costs due to overseas manufacturing is typically not the clear way to higher margins, as competitors will typically match your costs in the end. Higher margins come from having a product that can be made from an improved process or by having features that provide significant value and allow you to charge more. You can achieve high margins with other tactics, including the following:

• Use a more efficient distribution channel.
• Require less sales support and sales effort.
• Have an industry-leading lean manufacturing process.
• Offer more auxiliary products or other opportunities for revenue without increasing cost.