Now's the Time for Reinvention
Your business model is like your sales projections: It needs to be looked at every year.
By: Chia-Li Chien | Published 11/08/2009
You've survived the tough economy. You enjoy a good salary and lifestyle. You have a great team, and you've seen steady growth over the years. You know where your business is heading, and it's working beautifully. Now what?
I love watching Madonna because she's constantly reinventing her business. Michael Jackson did the same. There are only seven notes in music, and only a few basic ballet and jazz moves. But along with Madonna, Michael Jackson mixed the combinations and spun them so differently. The brand names they've created and the loyalty both receive from their followers are super strong. They've never been afraid to try new combinations, and they've always adapted quickly based on the response from their followers. You, too, have followers; you call them clients or customers.
If you've been in business for a while, you're on the top of the mountain you've created. You're standing there looking into the future through the economic fog. Either you see a clear path to help you get to the next mountain you're creating, or you don't.
Recently, I had the opportunity to meet with the principal of a management evaluation software firm, and it was easy to see that her business model is not clear.
What's a business model? It's what your business
does, what resources you have to do that and how you make money from doing so.
Do you revisit your business model each year the way you do your sales projections? You need to do so because things change along the way. You have to make changes as well, just the way Madonna reinvents herself regularly.
So many of the business owners I talk to are stuck. The way to get unstuck is to revisit your business model.
My criteria for crafting a business model are:
- What you are passionate about or your purpose (what your business does)
- What you are best in the world at (what resources you have)
- The economic engine (how do you make money from the above?)
Let's take a look at the business model of the management evaluation software firm. We'll call the owner Julie.
- Julie is passionate about helping businesses assess their operational effectiveness.
- Julie is best in the world at creating a testing lab that allows business owners to take a "blood test" of their business and connect with specialized "physicians" (advisors such as consulting firms, CPAs, attorneys, etc.) in each tested area to provide recommendations.
- Julie's economic engine is the testing fee and advertising fee.
If you look closely at Julie's business model, you can see that Julie's economic engine can't sustain her business. Unless she has a huge volume, a small testing fee can't sustain her. To help Julie make this model effective, let's revisit my last column, "Are You Leveraging Pull Marketing Yet?" Julie needs to identify her market makers--companies that already have meaningful relationships with the clients Julie's looking for. One possible revenue source would be referral fees from the specialized physicians. The other possible "best" is to focus on selling the tool to the specialized physicians, who will be her market makers. Remember, she is best at creating software as a testing lab.
Communicate with your advisors about your business model. They can help you come up with ways to move your business forward. Most important, this will help you create the underlying value of your business. If you can see clearly how your business's economic engine works, so will your buyer. Make your business more like Madonna's.
Chia-Li Chien, CFP®, CRPC, PMP; helps women entrepreneurs to convert their business into meaningful personal wealth. She is the author of Show Me The Money and columnist for WomenEntrepreneur.com & Fox Business online. She is available for consulting, speaking engagements and workshops. She can be reached at www.chialichien.com or firstname.lastname@example.org.
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