Unprofitable Business Model Part 3 of 6

Over the last 2 blog posts, I went over the 5th and 6th most common reasons why companies are not successful, according to the Small Business Administration of the United States. You will see that there are some common elements to each of the 6.

Every business has a model from which it is based upon. That model, in most cases, helps the business to increase its revenue. There is nothing wrong with having a different business model from others in your industry. For some companies, that is the point of uniqueness that they bring to the market and allows themselves to be differentiated from the rest of the market. That is how some companies have been able to take over the market, with that alternative business model.

Two recent examples of companies which have alternative business models in comparison to the traditional competitors is Uber and Airbnb.

Traditionally, you called a cab company or hailed a car on the street to be able to get from point A to point B.  With Uber, you are able to go onto the application, find a car near you that is available, find out the price of your proposed trip, and contact the vehicle to have it pick you up.

When travelling, you traditionally contact a hotel chain to book yourself a room. Now with Airbnb, you are able to book a room within someone’s house. You are travelling but you have the full services available to you as if you were in your own house, for a small cost.

When you are evaluating your business model, there are certain things you should be looking for.

Show Me The Money: Is your business model set up so that you can generate transaction revenue, at the very least? During the internet bubble of the 1990s, there were a number of companies that were commanding high valuations from the equity market but yet did not have a plan on how to generate revenue from their model.

Unprofitable Business Model

Uniqueness: Is your business model unique or a divergence from the norm within your industry? Does your customer interact with you in a way that the rest of your industry does not? Are your internal systems set up to allow for productivity gains? Companies that are able to develop a unique business model are greatly able to disturb their market, like Airbnb and Uber.

Sustainable: Is your business model sustainable and scalable for when you grow? You may have a customer centric business model which requires a new customer experience person every 25 customers. Are you able to find someone in a timely manner to help your newest customers?

What is the most interesting business model have you seen? Do you see it replicated in other industries? Would you consider it to be a failing or winning business model? I would love to hear.

Have an awesome week.

Kevin

Kevin MacDonald is a Business Consultant at L6S Business Consulting Inc (www.L6SBC.ca). L6S offers services in management consulting, Controller and CFO contracting, and lean management with either project work or teaching/mentoring of staff. Kevin has his CMA accounting designation along with a Black Belt in Lean Six Sigma.

Kevin is active in the community by volunteering for different groups and donates platelets at the Canadian Blood Services clinic on a bi-weekly basis.

For help with your business, contact Kevin at kevin@L6SBC.ca or 780-868-1867.