Many entrepreneurs and businessmen, especially those tech-savvy (co-) founders whose rise is almost as accidental as that of Facebook, do not know or give enough consideration to business model of their businesses. Small businesses and startups are especially prone to this problem, as they focus on (new) product releases and never pause to assess and review their businesses or just vow for a “marketplace” business model. The results? Many startups created but most of them fail without achieving any traction nor causing any significant impact.
What is needed is a paradigm shift. Every business venture/initiative needs to have a business model in a short- or long-term. The model expands on how the parts of the business work together to create profit and (eventually/ideally) growth. While the proven razor-and-blades model has been working and stil lworks for many a business, many startups and small businesses grow exponentially by embracing innovative business models for such wide and overcrowded markets as online gaming or discount markets.
What is needed is creation of a business model around a thick value. A flawed/misconceived business model might have a number of shortcomings, including:
- un-Sustainable – if the business is built on momentary or not well-thought-out concept/trend, it cannot be sustained for long, only working (and perhaps providing profits in a short time span).
- un-Scalable – This is usually the result of business short-sight when first launching the business. User-base, marketing or demand growth can all lead to decreasing efficiencies/quality of the product. ‘How long could my business continue to operate successfully without me?’ If the answer is not long then it is to dependent on you. The result is your business can not be scaled up beyond your own personal efforts.
- un-Profitable – Companies might grow but not become profitable, the eventual side-effect of any sustainable and successful business. There is a deep need of understand the concept of a profit model.
- un-Valuable – Is the business creating a real, thick value? Is it addressing an (un-addressed) need in a market? Is it addressing an (addressed) need in a more innovative, cheaper and sustainable manner? If NO for any of the two, than perhaps it is time to re-invent your business.