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1
Low Cost Business Model
How to create no-frills low cost business model and kill the competition
2
Successful companies after achieving the product-market fit manage
to start growing almost exponentially
 Well executed...
3
One of such business hack was the low
cost business model that required total
change of approach to specific industry
4
Low cost model has been quite successful in many
industries
Airlines
Furniture
Buses
Retail
Hotels
Fitness Clubs
5
In this presentation you will learn how low
cost business model works and how to
apply it to your business
6
Click to check my course
What I will show you in this presentation is a part of extensive on-line
course where you can f...
7
Low Cost Model-
introduction
8
In low cost model you have important pillars that fuel the
model
Simplified product and
services
1 type of assets
Better...
9
Low Cost Business Model -
examples
10
IKEA
11
IKEA has been very successful in implementing low cost
model in furniture
Model „big box” built outside the city
center...
12
Raynair
13
Raynair is an example of a great execution of the low cost
model in airlines
B2C Services
Acquisition
Activation
Retent...
14
They have used 1 type of aircrafts and increased their capacity
B2C Services
Acquisition
Activation
Retention
Revenue
R...
15
They do only point-to-point and use cheap airports
B2C Services
Acquisition
Activation
Retention
Revenue
Referral
Point...
16
Raynair is also master of operational excellence
B2C Services
Acquisition
Activation
Retention
Revenue
Referral
Shortes...
17
Raynair has been also very creative on the revenue side
B2C Services
Acquisition
Activation
Retention
Revenue
Referral
...
18
Biedronka
19
Biedronka keeps it simple on the operational side
Retail
Acquisition
Activation
Retention
Revenue
Referral
Narrow range...
20
They went deep into product management
Retail
Acquisition
Activation
Retention
Revenue
Referral
Gradual move from disco...
21
Fitness clubs
22
There are plenty of examples of successful low cost fitness clubs
B2C Services
Acquisition
Activation
Retention
Revenue...
23
Hotels
24
There are plenty of examples of successful low cost hotels
B2C Services
Acquisition
Activation
Retention
Revenue
Referr...
25
Math behind the Low Cost
Business Model
26
What drives the profitability
of low cost model?
27
Just let’s have a quick look at the pillars of low cost model
Simplified product and
services
1 type of assets
Better a...
28
Low Cost Models are great at optimizing the Profit to Assets Ratio
Better and longer
usage of assets
1 type of assets
O...
29
Compound effect
30
There are 2 types of compounding effect. The first one is related to
time
Time related
 Even if the growth is small ap...
31
Even if the start is modest with time you have the snowball effect. If you
grow 10% every period after 10 periods you h...
32
Second type of compounding is related to operations. By having small
improvements in many areas you are generating big ...
33
Have a look for example on the effect you would have in retail if you
improved number of customers by 15% and the avera...
34
In low cost model you use both effects extensively
Time related Operations related
 Even if the growth is small applie...
35
For more business hacks check my on-line course. Below specially for you a
big discount. You will find there a lot of a...
36
Check also business modeling in Excel
Business models
Practical guide for startups and entrepreneurs
presentation
37
I recommend also looking at some techniques to improve
your business. Click on the cover below to go to the
presentatio...
38
….and how to perform market research
Market research
Practical guide for startups and entrepreneurs
presentation
39
Subscribe to our channels:
www
40
Check my extensive presentation on productivity hacks to see
how you can me 10x more productive
Management consultant
p...
41
If you need more detailed version on productivity hacks you
can check our course on productivity hacks
Click to check m...
42
Check my presentation on restaurant business model to
understand it properly
How to open a successful
restaurant
A prac...
43
Check my presentation on on-line models to understand
them properly
On-line Business Modesl
A practical guide
presentat...
44
For more check also my on-line course
Click to check my course
45
Check my presentation on starting and running consulting
company
Start and run consulting
company
A practical guide
pre...
46
You can also find useful some tips on Excel
Essential Excel for Business
Analysts and Consultants
A practical guide
pre...
47
There is an interesting summary of ways to test cheaply
businesses
MVP – how to test your business
idea without buildin...
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Low cost business models - overview

The success of many companies depends on figuring out a clever way to grow, earn or operate that will change drastically change the game, stack the cards in their favor. There are many interesting business hacks that give this result. In this lecture I will show you how one of such business tactics – the low cost models has been successfully implemented in many businesses. This powerful tactic applied has already disrupted many industries like airlines, hotels, retail. One of the best known examples are IKEA, Southwest and Raynair

In this lecture apart from the case studies of companies that implemented low cost model I will show you the math behind the low cost model that fuels the whole business and makes it so successful.

In what way will you benefit from this presentation?
The presentation is a practical, step by step guide loaded with tones of, tricks, hints, examples that will show you where you can go with your business. There is little theory – mainly examples, a lot of tips from my own experience as well as other notable examples worth mentioning. My intention is that thanks to the presentation you will know:
1. How low cost model work?
2. How you should build it in your industry?
3. Where you have to look for improvements to be competitive?
4. How to estimate your competitive advantage using data from your industry?

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Low cost business models - overview

  1. 1. 1 Low Cost Business Model How to create no-frills low cost business model and kill the competition
  2. 2. 2 Successful companies after achieving the product-market fit manage to start growing almost exponentially  Well executed business hacks, tricks and tactics
  3. 3. 3 One of such business hack was the low cost business model that required total change of approach to specific industry
  4. 4. 4 Low cost model has been quite successful in many industries Airlines Furniture Buses Retail Hotels Fitness Clubs
  5. 5. 5 In this presentation you will learn how low cost business model works and how to apply it to your business
  6. 6. 6 Click to check my course What I will show you in this presentation is a part of extensive on-line course where you can find also other useful business hacks Business hacks, tactics and tricks - practical guide $90 $15
  7. 7. 7 Low Cost Model- introduction
  8. 8. 8 In low cost model you have important pillars that fuel the model Simplified product and services 1 type of assets Better asset utilization Efficient process You target only 80/20 Scale matters Simplified operations
  9. 9. 9 Low Cost Business Model - examples
  10. 10. 10 IKEA
  11. 11. 11 IKEA has been very successful in implementing low cost model in furniture Model „big box” built outside the city center Design Consistent message Diversified revenue streams Operational excellence Business scale Retail Acquisition Activation Retention Revenue Referral
  12. 12. 12 Raynair
  13. 13. 13 Raynair is an example of a great execution of the low cost model in airlines B2C Services Acquisition Activation Retention Revenue Referral
  14. 14. 14 They have used 1 type of aircrafts and increased their capacity B2C Services Acquisition Activation Retention Revenue Referral 1 type of aircraft No classes No reserved places More places in the plane Better Loading factor
  15. 15. 15 They do only point-to-point and use cheap airports B2C Services Acquisition Activation Retention Revenue Referral Point-to-point Regional airports No waiting for passenger
  16. 16. 16 Raynair is also master of operational excellence B2C Services Acquisition Activation Retention Revenue Referral Shortest taxi time and turn around time More courses per day Shortest time of preparing Better usage of people
  17. 17. 17 Raynair has been also very creative on the revenue side B2C Services Acquisition Activation Retention Revenue Referral Dynamic pricing and not so low prices Unbundling Charge for everything Alternative revenue stream
  18. 18. 18 Biedronka
  19. 19. 19 Biedronka keeps it simple on the operational side Retail Acquisition Activation Retention Revenue Referral Narrow range – they used to have just 1000 SKUs 1 retail format Optimize supply chain and in-store process Scale Expansion model similar to Walmart and Starbucks
  20. 20. 20 They went deep into product management Retail Acquisition Activation Retention Revenue Referral Gradual move from discounter to supermarket Quality and origin obsessed Own brands & selected premium brands (often powered by) No e-commerce For long time excepting only cash
  21. 21. 21 Fitness clubs
  22. 22. 22 There are plenty of examples of successful low cost fitness clubs B2C Services Acquisition Activation Retention Revenue Referral Get rid off things that do not generate sales: reception, sauna, solarium, café, relax room Unbundling (shower, fitness classes require additional fee) Low on staff; much more self service Higher density of machines and usually bigger format Usually more technologically advanced Available 24 /7 UK Germany USA 0 20 40 60 80 100 Price Join Online Opening Hours Club Design Technology Hospitality # of staff Low cost gym Mid-market gym
  23. 23. 23 Hotels
  24. 24. 24 There are plenty of examples of successful low cost hotels B2C Services Acquisition Activation Retention Revenue Referral Targeted at people who just want to sleep well (sales reps) – extremely comfortable beds Limited non-core space: reception, kitchen Very small, densely located rooms with big king-size beds. Very limited breakfast; no proper restaurants; vending machines available Very clean and with great smell Unbundling of services 0 1 2 3 4 5 6 7 8 9 10 Eating Design Room size 24-hour reception Furniture Bed quality Hygiene Silence Price Ibis Budget 1-star 2-star
  25. 25. 25 Math behind the Low Cost Business Model
  26. 26. 26 What drives the profitability of low cost model?
  27. 27. 27 Just let’s have a quick look at the pillars of low cost model Simplified product and services 1 type of assets Better asset utilization Efficient process You target only 80/20 Scale matters Simplified operations
  28. 28. 28 Low Cost Models are great at optimizing the Profit to Assets Ratio Better and longer usage of assets 1 type of assets Optimized processes Quicker change of assets Using purchasing power to get assets Fewer processes Reduce the complexity and limit the choice Profit Assets Unbundling Dynamic pricing Creating big purchasing power Innovative revenue streams Reduce the dependence on people Reducing non-core assets
  29. 29. 29 Compound effect
  30. 30. 30 There are 2 types of compounding effect. The first one is related to time Time related  Even if the growth is small applied over long period of time gives big end-results
  31. 31. 31 Even if the start is modest with time you have the snowball effect. If you grow 10% every period after 10 periods you have 2.6x what you had in the beginning Time related  Even if the growth is small applied over long period of time gives big end-results = 2.6 x StartStart x (1+10%)^10
  32. 32. 32 Second type of compounding is related to operations. By having small improvements in many areas you are generating big difference Time related Operations related  Even if the growth is small applied over long period of time gives big end-results  A lot of small changes in many areas may produce a big end-results = 2,6 x StartStart x (1+10%)^10
  33. 33. 33 Have a look for example on the effect you would have in retail if you improved number of customers by 15% and the average revenue per customer by 20% Time related Operations related  Even if the growth is small applied over long period of time gives big end-results  A lot of small changes in many areas may produce a big end-results # of customers Average revenue per customer Revenues x +15% +20% +38% = 2,6 x StartStart x (1+10%)^10
  34. 34. 34 In low cost model you use both effects extensively Time related Operations related  Even if the growth is small applied over long period of time gives big end-results  A lot of small changes in many areas may produce a big end-results # of customers Average revenue per customer Revenues x +15% +20% +38% = 2,6 x StartStart x (1+10%)^10
  35. 35. 35 For more business hacks check my on-line course. Below specially for you a big discount. You will find there a lot of additional resources Click to check my course Business hacks, tactics and tricks - practical guide $90 $15
  36. 36. 36 Check also business modeling in Excel Business models Practical guide for startups and entrepreneurs presentation
  37. 37. 37 I recommend also looking at some techniques to improve your business. Click on the cover below to go to the presentation How to become world class analyst A practical guide presentation
  38. 38. 38 ….and how to perform market research Market research Practical guide for startups and entrepreneurs presentation
  39. 39. 39 Subscribe to our channels: www
  40. 40. 40 Check my extensive presentation on productivity hacks to see how you can me 10x more productive Management consultant productivity hacks How to be lazy and still get things done presentation
  41. 41. 41 If you need more detailed version on productivity hacks you can check our course on productivity hacks Click to check my course Management Consulting Productivity hacks
  42. 42. 42 Check my presentation on restaurant business model to understand it properly How to open a successful restaurant A practical guide presentation
  43. 43. 43 Check my presentation on on-line models to understand them properly On-line Business Modesl A practical guide presentation
  44. 44. 44 For more check also my on-line course Click to check my course
  45. 45. 45 Check my presentation on starting and running consulting company Start and run consulting company A practical guide presentation
  46. 46. 46 You can also find useful some tips on Excel Essential Excel for Business Analysts and Consultants A practical guide presentation
  47. 47. 47 There is an interesting summary of ways to test cheaply businesses MVP – how to test your business idea without building the product A practical guide presentation

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