Many small business owners have never even considered their business model, and so they don’t know if it’s helping or hurting them. They don’t even know what’s really going on underneath their business, and sometimes business is a whole lot harder than it needs to be, because they never took the time to establish a good business model.
So, how do you establish a business model? Here are 3 steps…
1) Get Clear on What You Are Building
Firstly, you need to get clear on what you’re building. Be clear on the end in mind as this will shape the business model that you will need. What is the business that you are building? How clear are you on what your business looks like in the end? What is the revenue? How much profit do you want to make? How many staff? Where are your locations? And so on. You need to get super clear on what you are building.
2) Know What is Making You Money in Your Business Model
The second thing that you need to know is what is making you money? Which of your products and services are actually making you money? This is important because some of your products and services are helping you win the game of business. Some are causing you a lot of pain and hurt. This is something you need to discover.
Work out what has got a high gross profit margin for you. Not just percentage wise, but also per hour of your time that you’re taking to deliver that product or service to your customers. Like a pool company that we worked. When he did this exercise on a particular service that he sold, discovered that he was making just $50 gross profit out of this service every time. This was okay except that most of his business came through a referral network and he would pay a $50 spotter fee. So, pretty much, every time he got one of those jobs, he was giving away his gross profit, which meant there was nothing left to actually service the business. And it wasn’t until he discovered this that he was actually able to change it.
3) Market What Makes You Money
Finally, the third thing is once you are clear on what is making you money, then true marketing can begin. If you are marketing and not knowing what’s really making you money, then you could be getting a whole lot more of those jobs. And all those sales could be hurting your business instead of the ones that help you win your game of business. When you know what’s making money, you simply need to market more of that, so you get more of that type of work. This will lead to a quicker trajectory to winning your game of business.
So, just to recap.
- Get clear on what you’re building.
- Know what’s making you money,
- Market what’s making you money, so that you win your game of business.
This is about getting your business model together. A good business model is more about what you sell that makes you win the game of business than anything else. When you do this you are going to get super clear on your business. You are going to get clear on your direction. You are going to get confidence in what you are doing and how you are doing it, and business will become a whole lot easier.