Changing your Business Model Part 1
Your current business model is the way your business earns money. A change in your business model can bring substantially more income—sometimes for less work and lower overhead costs.
Technologies and markets change at an ever-increasing rate, opening new growth opportunities that may just require a shift in your thinking. Many business owners have had to make quick adjustments in the way they operate this year. For some of them, this has opened up new ways to reach customers that they had not considered before.
First, identify your current model
Think about the current way your business makes money. Some examples include:
A software company’s business model is to sell software programs through computer shops.
A lawyer sells expertise by charging an hourly rate.
A publisher sells books through bookstores.
Consider new models to adopt
A change in your business can be relatively minor or could mean a radical change in direction.
The software company could start offering Software as a Service (SaaS) on the cloud for a monthly fee.
The lawyer could offer a monthly subscription service for legal advice instead of charging by the hour.
The publisher could move away from printed books to e-books sold through Amazon, Kindle, and other online platforms.
These examples all involve changes to an existing business model to produce more revenue and grow.
Identifying ways to grow your business
Look for a new business model to complement your existing business and see where it takes you. Some business models are outlined below.
Selling Idle Capacity
Separating each activity in your business into a profit area can show you which activities are profitable, and which are marginal. The payoff can lead to new insights into your activities that help you focus on necessary changes or innovations.
For example, if you manufacture exercise clothing for your business, you may identify some unused capacity. How can you change your business model to grow? You could:
Start contract manufacturing for other businesses. This could fill your capacity, increase profitability, and offer leverage to get better buying prices since your volumes have now increased.
Produce your goods under different brands (for instance, a premium brand and a ‘house brand’) and let other distributors sell them to the market. You can offer drop-shipping and increase your profit margin even more.
Hire out part of your facilities to others. For instance, a bakery rented its premises and ovens to a start-up cookie business during its ‘slack’ period of 6 pm to 2 am.
Try to identify any unused space or capacity in your business that could generate income.
Take your business to your customers
Instead of waiting for customers to come to you, can you take your business to them? For example:
A new business model for a coffee shop would be to buy a mobile coffee cart to use at meetings and events. Suddenly, they are now in the mobile event business.
A bakery starts charging a small fee to download unique recipes from their website. They are now in the online licensing business.
Like these ideas? Check-in tomorrow for Part 2: Changing Your Business Model.
Want to chat?
If you want some guidance on future plans for your business, we are here to help.
