So you’ve decided to start a small business in South Africa, but you’re unsure as to how to make money from your idea? Are you having trouble deciding on which business model to choose due to being strapped for cash? 

In this article, we explore three business model ideas for cash-strapped entrepreneurs, but before we jump into those, let’s take a look at seven factors to consider when selecting your business model.

1. The target audience. 

First and foremost, you need to have a clear idea of who you are selling to. As a business owner, you need to define your target audience’s demographic and psychographics to develop a product or service which satisfies their needs. 

2. Your business processes. 

The next factor to consider is the core aspect of your product or service. Perhaps you’re in manufacturing a product, where will you obtain the raw materials for the product? What steps are required to turn the raw materials into your final product? Maybe you’re selling a product or a range of products, where are you planning to obtain the product from? How do you plan on distributing the products? Is your product digital? How will you price your digital product? etc

3. Resources. 

As an entrepreneur, you will need to define what your business requires to complete day-to-day operations, how you’ll find customers and how you’ll reach your business goals. Business resources include a business website, client lists, warehouses, capital, equipment and intellectual property - and more. 

4. The value proposition. 

Perhaps the most important factor on this list is a strong value proposition. In a world where most sectors are saturated with competitors, a robust and clear value proposition will help your business offering stand out from the crowd. 

5. Strategic business partners. 

Your small business will require some partners to succeed. Who are your suppliers? Who will assist with your marketing efforts? Which company will fulfil orders and who will courier your products to your customers? Ensure that all your business partners are reliable and trustworthy in order for your business to thrive. 

6. Creating demand. 

How will you generate interest in your brand’s offering? How do you plan on generating leads and converting them into sales? It would be best if you created a robust demand generation strategy. 

7. Innovation.

When addressing the factors mentioned above, you’ve probably made some assumptions. However, only when paying customers are pouring through doors (or checking out on your website) will you truly be able to determine if your business model is effective and if anything needs to change. Also, remember that a business model is something that should be fluid and not static. Let’s explore three business models for cash-strapped entrepreneurs. 

1. The subscription model. 

A subscription model is a business model where customers sign a contract with your business to supply them with a product or service regularly. These contracts could be monthly, weekly or even daily, depending on the sector. An excellent benefit of this model is that it gives you a clear idea of how much profit you’ll make as you’ll know how many people have subscribed for your service. The only drawback here is that this model requires time and effort to market your offering to your potential customers effectively. Ensure that your product is something which your target audience wants and ultimately needs. A great example of a subscription model is uCook. 

2. The marketplace model. 

Are you someone who has a passion for bringing people and communities together? Do you thrive on networking? Perhaps the marketplace model is a perfect fit. With marketplace models, you’re essentially the middleman between customers and sellers. As the owner of a marketplace business model, you need to create a platform where individuals or businesses can advertise their goods and services to consumers. The strength in this business model comes from your marketing expertise; basically, you need to be able to bring the customers and sellers together. A great example of a marketplace model is Loot. 

3. The affiliate model.

With an affiliate model, your job is to review various products and services and create affiliate links on your posts which link people to landing pages where they can purchase products and services. For every product sold, you’ll earn a portion of the profit. The affiliate model relies on having a blog or website, which is popular and visited by people who value your opinion. Successful affiliate programmes in South Africa, include Loot and Faithful to Nature.