Business Models
A business model refers to the logic (trade secrets) of the firm, the way it operates and how it creates value for its stakeholders. Strategy refers to the choice of business model through which the firm will compete in the marketplace. Tactics refers to the residual choices open to a firm by virtue of the business model that it employs.
Related
Review Checklist
Checklist for reviewing core capabilities against business model requirements.
- Focus on one channel and one product until you reach $1 million in annual revenue. This allows you to refine your offering and master your marketing approach.
- Focus on solving the hardest problems that you don't know how to solve yet. These often have the biggest impact on your business growth.
- Build trust by offering your product or service for free. This helps you gather testimonials, refine your offering, and build a customer base.
- Raise your prices regularly. Higher prices often lead to more revenue, even with fewer customers. Aim for at least 3-6% annual increases to keep up with inflation.
- Unify your sales and advertising departments under one leader. This eliminates interdepartmental conflicts and aligns customer acquisition efforts.
- Arm your salespeople with content that addresses common customer concerns. Create an Excel sheet with links to relevant content for easy access.
- Implement the "look back window" strategy by extending billing cycles. Longer billing periods (e.g., annual instead of monthly) can reduce churn and increase customer lifetime value.
- Talk to your customers regularly to solve business problems. Customer feedback is crucial for improving your product, marketing, and overall business strategy.
- Use the CLOSER framework for sales calls: Clarify, Label, Overview, Sell the vacation, Explain concerns, Reinforce the decision.
- Prioritize getting proof over making promises in your marketing. Collect and showcase customer testimonials, especially those that highlight the customer's initial pain point.
- When hiring, ensure new team members raise the average bar of performance. Look for candidates who teach you something during the interview process.
- Advertise more aggressively. Most businesses underestimate how much advertising is needed for people to remember their brand and offerings.
- Look for "ecosystem" opportunities - ways to create additional revenue streams from existing resources or by-products.
- Structure your business around three key functional leaders:
- Customer acquisition leader
- Product/Delivery leader
- Internal operations leader
- Use the "5 reasons" framework when addressing performance issues with team members:
- they didn't know
- didn't know how
- didn't know when
- weren't motivated
- were blocked
Operations
- Compare alternative production processes to optimise long-term production planning.
- Improve quality of outputs at lower cost to benefit from economies of scale.
- Research the integration of tech by major industry players.
- Leverage technology to improve decision-making.
Threats
- Analyze all relevant technologies that may be at different stages of evolution and how these could impact the company
- Understanding new technologies that can impact your business in advance is essential
- Interview competitors and understand their different strategies
- Investigate and analyze competitors' strategies to understand any competitive advantage
- Get details on new products, productivity insights, and resource utilization of competitors
Predictions
- What roles require human input? What capabilities to they need?
- Understand the history of technology trends in the industry
- Research the technology roadmaps of leading industry players
Roadmap
- Are we on track?
- What is the hardest problem to solve?
- What is the most valuable problem to solve?
- What is preventing progress?
- What are we missing?
Profitability
Constantly review and refine operations to leverage best tools, that improve processes, that enable your people to make better decisions.
- Pricing Power
- Increase Value per Sale
- Cross-sell and Upsell
- Improve Customer Retention
- Expand your Customer Base
- Reduce Costs
- Add Products or Services
- Increase Sales Frequency
- Improve Sales Processes
- Diversify Revenue Streams
- Collaboration
Positioning
Engineer positive feedback loops that deliver value to customers just as they realise they need it.
- Optimize your sales process: Identify and eliminate bottlenecks in your sales funnel to improve conversion rates.
- Provide excellent customer service: Building strong relationships with customers encourages repeat business and positive word-of-mouth promotion.
- Track and analyze your data: Use data analytics to understand customer behavior, identify trends, and optimize your marketing and sales strategies.
- Stay informed about industry trends: Keep up with the latest developments in your industry to identify new opportunities for growth and innovation.
Pricing Power
Increase prices: This is a straightforward way to increase revenue per sale. However, it's important to ensure that the price increase is reasonable and justifiable to customers. Review checklist:
- Threat of AI Agents
- Bargaining power of buyers
- Bargaining power of suppliers
- Threat of new substitutes
- Competitive rivalry
Increase Value per Sale
- Premium Products/Services: Offer higher-tier options with additional features, benefits, or personalized service. This can be through tiered pricing models, exclusive bundles, or VIP memberships.
- Value-Added Services: Offer additional services that enhance the core product or address specific customer needs. This could include installation, maintenance, customization, or consulting.
- Dynamic Pricing: Implement dynamic pricing strategies to adjust prices based on factors like demand, market conditions, or individual customer data. This can maximize revenue while maintaining competitive pricing.
- Package Deals: Create attractive bundle deals that combine multiple products or services at a discounted price. This can entice customers to spend more and increase the average order value.
- Loss Leaders: Use strategically priced products as loss leaders to attract customers and encourage them to purchase additional items with higher profit margins.
- Personalized Pricing: Offer custom pricing based on individual customer needs or negotiation. This can be particularly effective for high-value products or services.
Cross-sell and Upsell
- Upselling: Train your sales team to suggest complementary products or upgrades during the sales process. This can be based on the customer's initial purchase or needs.
- Cross-selling: Promote related products or services that customers might be interested in based on their existing purchases. This can be done through targeted marketing campaigns or product recommendations.
Improve Customer Retention
Repeat customers are more profitable than new customers. Improving customer retention can be achieved through excellent customer service, loyalty programs, and personalized marketing.
Expand your Customer Base
Increasing the number of customers can increase revenue. This can be achieved through targeted marketing campaigns, referral programs, and expanding into new markets.
Reduce Costs
Reducing costs can increase profit margins. This can be achieved through process improvements, automation, and outsourcing.
Add Products or Services
Offering new products or services can attract new customers and increase revenue.
Increase Sales Frequency
Encouraging customers to make purchases more frequently can increase revenue. This can be achieved through targeted marketing campaigns, loyalty programs, and personalized marketing.
- Customer Relationship Management (CRM): Implement a CRM system to track customer interactions, preferences, and purchase history. This allows for targeted marketing campaigns, personalized offers, and improved customer service, leading to increased loyalty and repeat business.
- Loyalty Programs: Reward repeat customers with points, discounts, or exclusive benefits to incentivize them to purchase more frequently.
- Email Marketing: Engage with your customers through targeted email campaigns promoting new products, special offers, and exclusive content. Personalize your emails to increase engagement and conversion rates.
- Social Media Marketing: Utilize social media platforms to connect with your target audience, build brand awareness, and drive traffic to your website or store. Run targeted ads, offer exclusive deals, and engage in meaningful conversations to cultivate customer loyalty.
- Content Marketing: Create valuable and informative content (blog posts, articles, videos) that educate and engage your audience. This builds trust, establishes your expertise, and attracts potential customers.
- Referrals and Word-of-Mouth Marketing: Encourage happy customers to recommend your business to friends and family. Offer referral incentives to further incentivize this organic marketing.
- Retargeting Campaigns: Use cookies and ad tracking technology to target website visitors with ads for products or services they showed interest in. This can remind them of your offerings and increase the likelihood of conversion.
- Limited-Time Offers and Promotions: Create a sense of urgency and excitement with limited-time deals, discounts, or flash sales. This can motivate customers to purchase more quickly and frequently.
- Subscription Boxes: Offer subscription boxes that deliver curated products or services to customers on a regular basis. This creates a recurring revenue stream and encourages ongoing engagement.
- Partnerships and Collaborations: Partner with other businesses that share your target audience to cross-promote each other's products or services. This can expand your reach and attract new customers.
Improve Sales Processes
Improving sales processes can increase efficiency and reduce the time it takes to close a sale. This can be achieved through training, automation, and process improvements.
Diversification
Diversifying revenue streams can reduce risk and increase revenue. This can be achieved through offering complementary products or services, expanding into new markets, and exploring new business models.
Subscriptions
Create recurring revenue streams through subscriptions for ongoing access to products, services, or exclusive content. This can be a great option for businesses with predictable costs and ongoing value delivery.
Value Added
Use historical data to gain indepth understanding to provide customized solutions that offer greater value.
Audience needs trust and capability to understand a more complex value proposition.
Collaboration
Collaborating with other businesses can increase exposure and revenue. This can be achieved through partnerships, joint marketing campaigns, and cross-promotion.
Startup Plan
High level plan:
- Build a Team
- Validate Assumptions
- Evaluate Business model
- Identify Market Segments
- Identify Customer Profiles
- Model Customer Acquisition Flow
- Validate flow with trial customers
Countries
The Team
People want to work with great people.
| Responsibility | Team (Names) |
|---|---|
| Innovation Lead | |
| Sales & Marketing | |
| Compliance | |
| Legal/Regulatory | |
| Product Engineering | |
| Platform Engineering | |
| Protocol Engineering | |
| AI Engineering |
Primary goals:
- Fast insights Discovery
- Build things customers/market need (Test before build)
- Have the right business model to sustain and grow. Product-market-fit
- Use networks to speed up acquiring customers and revenue generation
- Innovation and user experience embedded the entire time
Market Analysis
| Market Reality | Discovery |
|---|---|
| Total addressable market | |
| Consumer behavior | |
| What does 1% market share look like |
Target Customers
Evaluate businesses within agreed Market Opportunities
| Criteria | Discovery |
|---|---|
| Do they have existing investment | |
| Business problem that can be solved | |
| How equipped are they to solve this problem | |
| Is solving this opportunity beneficial to long term growth | |
| Establishing evaluation criteria | |
| Assist in like-for-like comparison across businesses | |
| Identify scalable/replicable opportunities |
JTBD Stories
Gather JTBD stories from People that suffer the pain of problem, have the ability to recognise solution and have the energy to champion implementing a solution.
| Domain Experts | Discovery |
|---|---|
| Subject Matter Expert / Super User | |
| Technologists, implementing existing solutions | |
| Regulatory, Compliance officer etc | |
| Senior researchers and publishers | |
| Sales & marketing | |
| Business directors |
Product Deliverables
What are customers willing to pay for?
- why they are using the solution
- why the solution exists
- what features are invaluable
- what features are missing
Engagement Strategy
Engage with businesses that meet the business opportunities criteria
- Identify core problem/opportunity and their level of commitment to a solution
- Evaluate commercial benefit to both customer business and this business
- Scope out range of opportunties and capabilities the business needs
Legal and Regulatory
Identify any legal, regulatory requirements or considerations
- Country and city specific
- Non-legal but association/network considerations
Business Model Types
Select the best business models to solve core problems to take prime opportunities.
| Name | AI | BC | Crypto |
|---|---|---|---|
| Franchise | |||
| Multi-sided platform | |||
| Cash machine | |||
| Freemium | |||
| Subscription | |||
| Peer-to-peer | |||
| One-for-one | |||
| Hidden revenue | |||
| Razor and blade | |||
| Reverse Razor and Blade | |||
| Direct sales | |||
| Affiliate marketing | |||
| Consulting | |||
| Agency-based | |||
| User-generated content | |||
| Online educational | |||
| Instant news | |||
| Multi-brand | |||
| E-Commerce | |||
| Distribution based | |||
| Drop-shipping | |||
| Enterprise | |||
| Social enterprise | |||
| Direct-to-consumers | |||
| Vertically integrated supply chain | |||
| Combination of chains and franchise | |||
| Data licensing | |||
| Attention merchant | |||
| Discount with high-quality | |||
| Pyramid Scheme | |||
| Nickel and Dime | |||
| Aggregator | |||
| API licensing | |||
| Crowd Source | |||
| High Touch | |||
| Low Touch | |||
| Flex Pricing | |||
| Auction-Baseds | |||
| Reverse Auction | |||
| Brokerage | |||
| Bundling | |||
| Disintermediation Model | |||
| Fractionalization | |||
| Pay as Go (Utility) | |||
| Product as a service | |||
| Standardization | |||
| User Base Communities | |||
| Leasing |