Richard Cullen Mar 2021

How often to you stop to think about your Business Model?

Maybe like most business owners you have become so busy working IN the business that there is no time to think about whether the business is optimised to survive a crisis or a recession. There is no time to assess if there is a more efficient way to operate or even how to increase profits. All you have time for is to react to the crisis, it’s survival first. No time to think of profit.

However, Profit is not made at the end of the year or after the accountant finalises the accounts. Profit is made every day and every week and is hard won. If you are aiming for 10% profit, then all it takes is to make mistakes 10% of the time and there will be no profit. Profit is essential for a business to survive long term so that there is money left to re-invest. It takes profit to invest in keeping the business up to date, to invest in your team and education, to invest in new technology and ultimately it takes money to grow. If a business isn’t growing, it’s dying.

Remember that Profit is an indicator of how much the marketplace loves what you do, how much it values what you do, how much it values you more than the competition. Without Profit it’s easy to become irrelevant, to fall behind, to lurch from one crisis to the next.

A crisis is exactly the right time to re-examine the business model. The best businesses grow during a crisis, they make the most of the time when everyone else is stuck in survival mode and struggling. They get the best deals because they have profits squirreled away. Remember also that not all businesses are in a crisis at the same time, but all businesses will have a crisis period at some stage, it’s the natural order of business cycles.

So, what should be considered in your business model? 

  • How much does it cost to acquire customers?
  • What is the lifetime value of a customer?
  • How do you turn time into money and into profit?
  • How does your average employee make the business money and how much? (Note if the business cannot make money on an average employee then long-term success will be a challenge).
  • What mix of marketing strategies have you tested and measured?
  • What are the average sales per month per sales person?
  • How much administration and management does your team require and how can this be minimised?
  • Will your business be relevant in 5 to 10 years? What is changing in the marketplace that could allow others to do what you do in a more efficient way?
  • What is the fundamental problem that you solve for your customers and what makes you unique at solving this problem?
  • How big is the market for your product or service? Is there room to grow?
  • When was the last time you updated your SWOT analysis document – Strengths, Weaknesses, Opportunities and Threats?

Start answering these questions once a year, get them in writing and out of your head so they become real and can be critiqued or challenged. Update your Business Plan and it will give you a fighting chance to remain relevant, thrive in a crisis and be financially successful.