Three ways to get your business model running like a well oiled profits machine.
by Chia-Li Chien | Published July 8, 2010
When I recently received a phone call from a client asking, “what’s going on in the stock market?” I had to wonder if they ever actually listened to what I said in the past. In the fall of 2009, I told every one of my clients to keep their investments in CASH, because by summer of 2010, the commercial real estate bubble would burst and the stock market would not do well. Unfortunately, no one took me seriously, because the stock market has been on the increase and a subject of hype during the first six months of 2010.
However, the European financial crisis, coupled with a slowing down of consumer and business spending, has created a very tight and expensive credit condition. Many small businesses (less than 500 employees) were cautioned about their spending and had to do more with less without the access to capital available in previous times.
In June, I served as moderator for “2010 Charlotte Chamber Summits: Access to Capital for Small Businesses and Entrepreneurs.” (You can listen to the audio recording here.) From the audience’s questions, it became clear that there are many businesses looking for financing. However, it also soon became evident that the 340 entrepreneurs in attendance have little or no information about the tools available and where to get them.
In 2009, I published an article “Need Money? Think Private Capital Markets” and shared with the readers at womenentreprenuers.com and foxbusiness.com about six types of private capital for small businesses. It’s a complex process, and was not fully addressed at the recent workshop at the Charlotte Chamber Summits.
One thing I kept repeating at the workshops I moderated was “Revisit your business model, and, if need be, innovate your business model and products or services.” Why is that? Not only do we now have to do more with less, but we also have to grow using newer technologies, better customer relationship building, etc.
Let’s take a look at what a business model is and what it can do to help you grow. You can see the complete article about “Create a Company Wealth Map” for more details. But for the purpose of this article, we’ll only focus on the business model.
First, let’s understand the terminology:
- A business model is the vehicle that gets you there. The “there” is your company wealth map.
- A company wealth map describes the current state or position of a business, its current market value, the owner’s value goal, and the strategies, tactics and business model required to meet the goal.
- The goal is your desire to become financially independent.
- Being financially independent means different things to different people. It is a stage in which you no longer need to be engaged in gainful activities such as business, a job, etc. You can generate income without actually working.
Many business owners have plenty of passion when they start their business. However, passion alone can't generate dollars. A business model should align well with:
- Passion/purpose. This is your business purpose and personal passion. Ideally you want to match this with a something you can sell or do for a customer. For example, when Ann-Marie Fleming faced a challenge with her dog, she was unable to find the products or tools to help her aged pet. She felt so passionate about the animal that she created dogquality.com. Not only did it address her problem, but also helped many other people gain more quality time with their much-loved canine companions.
- Talents or core competency. These are your business’s key resources or key processes. Review your business core competency to stay focused and make better business decisions about what and where to expand.
- Economic drivers. You can’t have a business without making a profit. The economic drivers are your profit formula. Surprisingly, many businesses do not realize any profits from what they do. Just talk to any CPA firm and they’ll agree. Why? Because they’ve failed to start the business with a profit in mind and without the economic drivers needed to diversify the overall revenue stream.
Use the above terms and write down how they apply and what they mean to your business. Work on your answers for a couple of days to clarify your business model. Remember, maintain your flexibility and be sure everything makes sense, remaining totally aligned.
The three things I list above take time to formulate. You may not get all the answers the first day, but continue to work until you see a clear picture. Ideally, work with an advisor, mentor or coach to guide you. Without a clear business model, you may not know where you’re taking your business, and end up wasting unnecessary energy, resources and time.
To receive a complimentary copy of a sample business model worksheet, just tweet this message to me
@ChiaLiChien: “I want to have my sample copy of your Business Model Worksheet.” #womanzworld
This article appears at WomanzWorld.com