Creating the Ideal Business Model www. bizmodelsecrets.com

Food for thought Have you ever seen a talented entrepreneur struggle? Have you ever seen a so-so entrepreneur become wildly successful? How do you explain why some talented people have to work too hard for success and other less talented people seem to print money? It’s simple……………..

Have you ever seen a talented entrepreneur struggle?

Have you ever seen a so-so entrepreneur become wildly successful?

How do you explain why some talented people have to work too hard for success and other less talented people seem to print money?

It’s simple……………..

The Pareto Trap

The Pareto Trap What is the Pareto Trap The Pareto Rule or 80/20 rule states that 80% of the benefits come from only 20% of the activity Every day in business we use the Pareto Rule to accelerate our success However, when it comes to the foundation of business success, most business owners have it BACKWARDS Only 20% of your business’ success can be attributed to: Your talent as a CEO/Leadership Every business book you have ever read Teamwork/Teambuilding/Management Salesmanship Marketing/Branding And MORE………………………….

What is the Pareto Trap

The Pareto Rule or 80/20 rule states that 80% of the benefits come from only 20% of the activity

Every day in business we use the Pareto Rule to accelerate our success

However, when it comes to the foundation of business success, most business owners have it BACKWARDS

Only 20% of your business’ success can be attributed to:

Your talent as a CEO/Leadership

Every business book you have ever read

Teamwork/Teambuilding/Management

Salesmanship

Marketing/Branding

And MORE………………………….

Premise: The Pareto Trap 80% of your business’ success can be attributed to: Your industry (SIC) Your business model What is a business model? The proprietary methodology used to acquire, retain, and service clients.

80% of your business’ success can be attributed to:

Your industry (SIC)

Your business model

What is a business model?

The proprietary methodology used to acquire, retain, and service clients.

O.K.- Prove it! Examples of companies in the same business with far different results: McDonalds/Hardees USPS/UPS GM/Toyota Dell/Gateway Nucor/U.S. Steel Wal-Mart vs. Big Lots Blockbuster vs. Netflix

Examples of companies in the same business with far different results:

McDonalds/Hardees

USPS/UPS

GM/Toyota

Dell/Gateway

Nucor/U.S. Steel

Wal-Mart vs. Big Lots

Blockbuster vs. Netflix

Bottom Line Your business model needs to be constantly analyzed, improved, and tweaked What is a business model change? Structural changes to how you attract, retain and service clients Anything else is just tweaking your existing model More bad news ALL business models if unaltered eventually fail!

Your business model needs to be constantly analyzed, improved, and tweaked

What is a business model change?

Structural changes to how you attract, retain and service clients

Anything else is just tweaking your existing model

More bad news

ALL business models if unaltered eventually fail!

Analyzing Your Existing Model

How to analyze your business model There are 8 components to a great business model

How to analyze your business model Traditional methods: Subjective Gut Bankers or VCs New method: Objective www.bizmodelsecrets.com Free business model assessment bizmodelsecrets.com

Traditional methods: Subjective

Gut

Bankers or VCs

New method: Objective

www.bizmodelsecrets.com

Free business model assessment

Business Model Scoring

Analyzing Your Score Point system with weighting How to interpret score? Lowest score = 0 Highest score = 1040 Desired score > 700 Excellent business model > 850

Point system with weighting

How to interpret score?

Lowest score = 0

Highest score = 1040

Desired score > 700

Excellent business model > 850

Model Adjustments

Improvement Opportunity Example Gasoline, Cigarettes, and Soda © Typical corner gas station costs $4MM in land, building, and equipment Spent for the privilege of selling a gallon of gas for a $0.15 profit Why would anyone be in the gas business? Typical cigarette inventory turns every 2 days @ $0.75/pack profit Bottled water = 60% margin Soda = 70+% margin That’s why! The gasoline is the customer acquisition vehicle

Gasoline, Cigarettes, and Soda ©

Typical corner gas station costs $4MM in land, building, and equipment

Spent for the privilege of selling a gallon of gas for a $0.15 profit

Why would anyone be in the gas business?

Typical cigarette inventory turns every 2 days @ $0.75/pack profit

Bottled water = 60% margin

Soda = 70+% margin

That’s why!

The gasoline is the customer acquisition vehicle

Improvement Opportunity Example Gasoline, Cigarettes, and Soda © How do businesses under-leverage the gasoline, cigarettes and soda model? I have to make money on my gasoline No you don’t. Typically, gasoline prices are the receptivity point for customer attraction. If your price is too high, your ability to attract customers is destroyed I only have gasoline I am the only gas station around but I underprice my gasoline Back when I was the only station on this corner, I used to make money on gasoline. However, now there are stations on every corner. Cant we go back to the good old days when I made money selling gas. My convenience store sells low margin items Gasoline attracts the customer and is the only item we can afford to sell at low margin. Organizational resources cannot be wasted on low margin add-ons

Gasoline, Cigarettes, and Soda ©

How do businesses under-leverage the gasoline, cigarettes and soda model?

I have to make money on my gasoline

No you don’t. Typically, gasoline prices are the receptivity point for customer attraction. If your price is too high, your ability to attract customers is destroyed

I only have gasoline

I am the only gas station around but I underprice my gasoline

Back when I was the only station on this corner, I used to make money on gasoline. However, now there are stations on every corner. Cant we go back to the good old days when I made money selling gas.

My convenience store sells low margin items

Gasoline attracts the customer and is the only item we can afford to sell at low margin. Organizational resources cannot be wasted on low margin add-ons

Solutions/Options

Business Model Improvement The most important activity for a business owner is to constantly improve the business model There are 88 definable methodologies to improve your business model…..pick one www.bizmodelsecrets.com . . bizmodelsecrets.com

The most important activity for a business owner is to constantly improve the business model

There are 88 definable methodologies to improve your business model…..pick one

www.bizmodelsecrets.com

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