Several events have happened recently that have had me thinking deeply about business models. Let’s start with a widely observed phenomenon that company founders are overwhelmingly product-focused commonly referred to as at least some of Founders Syndrome. Yes, you Ms. company founder are far more likely to be passionate and caring about your product or service than you are about all the foundational aspects of your business that support your product such as accounting and marketing, etc. In most founders’ minds, my experience has been the best product wins. Yes about accounting and finance is a thing and an important one.
In reality, a mediocre product with fantastic implementation almost always beats a fantastic product with a mediocre implementation.
Now let’s examine four different examples that have been on my mind.
One way to think about your business model is to think revenue model. How does your organization make money? This is something 99% of organizations need to do (unless you are the well-endowed foundation that is trying to give away your money, yet even you invest your endowment so maybe it is 100% of organizations).
I had a client some number of years ago who was struggling. I tried to get her to decide whether she was selling wholesale or retail. The response I don’t care I just want to sell my stuff and make the world a better place. The stuff was terrific, the clarity was not. The message to a housewife buying housewares versus the message to a building contractor buying building materials for resale is very different. Your social enterprise will not succeed without clarity on how you make money, Yet this is a frighteningly common occurrence.
Being a small independent not-for-profit is hard. So much demand on your very limited resources. Then the not-for-profit world discovered “memberships” and it worked. People liked it. I am a member of XYZ. Here is an inherent problem with business models when they work everyone copies it. Remember when having an eCommerce website made you unique? In my opinion, memberships have stopped working for the non-profit community because so many folks are now offering them it has diluted their value. Few can afford to be a “member” of every group that interests them. Membership connotes having the benefits of membership (the expectations will differ, yet unmet expectations matter) which when not received people feel disappointed. Why not call it what is a donation.
I don’t know the exact secret sauce for every nonprofit, yet donations professionally
asked for and innovative earned income are significant portions of the sauce. I myself am a big fan of social enterprise
for-profit values-aligned businesses owned by the non-profit and if you are doing it right the employees share in the ownership.
Next, I am a business plan reviewer and mentor for the Mentor Capital Network An absolutely terrific resource for emerging social enterprises run by my friend Ian Fisk who is building an amazing ecosystem of support.
On a recent call where a founder was describing her opportunity. I had already read and reviewed her business plan. She is smart, talented, and passionate about her product. Are you sensing a theme here? My thoughts are she doesn’t have the experience to raise the millions of dollars to follow that industry’s traditional business model. All is not lost. I think by rethinking her business and revenue model her business might never be as big and vast as she may have dreamed yet there is a real opportunity to do something she loves, live her values and grow into a comfortable middle-class income.
Finally, there is a 30 yr old company I know well. Changes in their marketplace outside their control have them slowly evolving from a straight wholesale model to a growing and very important direct-to-consumer model. They are doing the right thing. Their challenge is they resisted changing for a number of years. Instead of leading the change in their industry, they are now following. Opportunity lost?
A big deal when we shift our business model there needs to be a shift in company culture. If you were a sales-driven culture and are now shifting to a marketing/internet model the skills required to shift and this requires a cultural shift and a shift in approaches to leadership.
Here is a relevant quote from today’s Elephant Journal’s email referencing the great resignation.
If your business is not able to pay fair wages, maybe your business model sucks?
Let’s say I want to open a restaurant and notice that I can’t pay waiters properly because I am not making enough money. How fair is it to tell my customers that they have to bail me out with tips? Why is it the responsibility of my clients to subsidize my unhealthy business model?
Let’s take this to a bigger level. Imagine running a multi-million dollar company with thousands of workers that are not able to pay workers a salary that is high enough to cover their living costs? What does that say about the business model itself?
This quote makes it clear your values of being a B Corps offering a regenerative and triple bottom line impact have a very direct impact on your business model of choice. Your margins may be different, your customers will be different. You need to be different.
If you are financially emancipated may be your business or revenue model matters less. For the rest of us how we do business, how we derive our revenue profitable is a vitally important question.
The thing about our need to reinvent the economy for humanity’s sake requires new methods and models. New methods and models by their nature are prone to failure. One of the best ways we can help one another out as well as the future of humanity is to be kind to failures. We can all learn from them. Be grateful that someone poured their heart and soul into something they valued and didn’t make it. Their work is as vital as the winners we already celebrate for different reasons.
So, if I have succeeded, you are now thinking far more deeply about how your organization derives revenue. Owning a business can be the loneliest job in the world. Getting a deep understanding is hard if not almost impossible to do by yourself. Doing a business model canvas (search it) can be a big help. Yet some deeply experienced outside eyes can be invaluable.