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Create your business model!

by Chia-Li Chien | Feb. 13, 2013

iPod 2001 by FastCompanyDuring 2001, Apple's revenue was on a steady decline and the company was struggling. That year, they opened the very first Apple store for the purpose of positioning the newly developed and released iPod.

By 2002, there were about twenty-five Apple Stores producing $100 MM in total revenue.

By 2004, iTunes had hit $50MM in sales revenue. The company would have found it tricky to plan around and deal with such an unexpected revenue stream if it had not captured it in their 2001 Business Model.

In helping business owners build value in their business, one of my team’s goals is to help entrepreneurs stay focused and true to their business passion and purpose. We often find ourselves talking to business owners who want to “grow,” but don’t really even know what that means to their company—much less how to make it happen!

Make it grow

There are really only two ways for $3MM to $200MM businesses to grow—


1)    They can expand their existing market/expand their existing market share.
2)    They can create/innovate a new product or service.

Obviously, Apple was able to grow into the first way by accomplishing the second. But without creating and following a business model for the product launch, they may have lost their way. After all, a business model is actually a map.

All the reasons why not

So it’s always a puzzle to me why a business owner doesn’t take the time to create a business model so that they can see where they are and see where they are going. Objections I hear are—

 

  • We don’t have the time to stop to do this.
  • I can’t get my key management team to work together on this.
  • Why create a model when I’ll probably change directions before the ink is dry?
  • I don’t see how a business model can help me build value in my business.
  • I have no idea where to start or how to create a business model that is unique as well as beneficial to my business.


Hmmm. Does this sound like the voice in your own head? Let me help you understand more about the importance of spending time to go through our Business Model Canvas.

All the reasons why

First and foremost, taking the time to create a business model will create a point of focus for you and your key management team. Just like any entrepreneur, you probably have a hundred ideas a day. You are creative and energetic. You are convinced each of them is the idea that will make you wealthy. It’s exciting and fun to explore each and every possibility. But is it really necessary—at the expense of your business success?


Building a business model shows you the place to focus, the products and services that will work, the audience that will buy them, and the end result that will grow your company. What could be more fun and exciting than that?!

 

Creating a business model will give you a fresh perspective and clear direction.

 

And very importantly, it can clearly indicate your target audience—you know—the companies or consumers who will buy this great product or service your company offers. The people who buy what you are selling are as integral to your success as what you are selling! Don’t lose that focus!

 

By targeting one type of customer in your business model, your company could start to move in a very different direction. And this type of targeting will help your key management team know where your company needs to go—and be on board on how to get it there!


But maybe you’re still shaking your head. How can you be expected to drop everything and spend two or three weeks with your key team huddled in a room, trying to figure all this out? Well, what if I told you that with the Business Model Canvas we’ve created, in only a 2-3 day Strategy Session, you can have the same type of plan created by Apple as they launched the first iPod in 2001?


The Business Model Canvas (created from ideas from the three books listed at the end of this article as well as from extensive client experience and feedback) is usually completed by companies at the end of their fiscal year or when they know they must expand their market share or create a new product line (grow).


The key management team participates in strategizing, group exercises and identifying solutions. About 25% of the Strategy Session time is spent creating and understanding the business model, while the remaining 75% of time is usually spent brainstorming and planning how the business model can be applied as a solution to the question, how do we grow?


With a focused Business Model, Apple not only successfully launched the iPod, but also was able to rise to the top in a struggling industry (music), going from a competitive challenger to a market leader within three years.


The same Business Model template used by Apple is available to you. Just contact us about setting up a Business Strategy Session. But do this not because you want to be another Apple. Do it because you deserve to build the business value that will reward you for all the years of hard work when you are ready to cash out—and move on to something else fun and exciting!

Reference

 

About Chia-Li Chien

Chia-Li Chien

Chia-Li Chien, CFP®, CRPC, PMP; Chia-Li “like JOLLY,” Succession Strategist of Value Growth Institute, dedicated to helping private business owners increase their company equity value. She is the award-winning author of the books Show Me The Money and Work toward Reward and a faculty of the American Management Association. Her blog and newsletter was named a Top Small Business Resource by the New York Times You’re the Boss blog. Contact her at jolly@chialichien.com or (704) 268-9378 .

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