How to make the enterprise's assets generate cash -- Talk about the business model

One morning, you opened your eyes and suddenly didn't want to work for others. You wanted to be your boss. In terms of fashion, you are determined to become an entrepreneur. So what is the first thing you need to do?

Someone may say that you have to get a sum of money first, and you have no money to start a business! But this is not your top priority. Another thing is more important than financing. That is, before you get the money, you must first think about how to use it.The first step in entrepreneurship is to figure out what you want to do.. You must determine the direction before you start. Entrepreneurship is not a journey. You cannot pack your backpack first and then consider where to go. This is why entrepreneurs have to write a project plan before financing.

Generally, before getting started, you have figured out which industry you want to engage in. You have a basic judgment in your mind. You think that you can make money to provide a product or service. Then, the next thing will be quite natural. You have to plan how to produce such products or services, how to deliver them to consumers, and how to retrieve the payment. In a word, you need to figure out the steps through which your "ideas" can become a reality. In management, these steps are called "business model ".

"Business Model" is actually one of the most critical aspects of entrepreneurship. It is a bit like a magic that can send all your resources and let them try to generate cash. Without the "business model", your entrepreneurial dream will be stuck in the discussion stage, just a wave of waves in your mind; once you find the correct "business model", all your assets will be fully operational and become a machine that constantly creates cash for you.

The famous American entrepreneur ceth Godin used a full chapter in the entrepreneur Bible to discuss the business model. Let's take a look at what he said.

1. What is "business model"

In layman's terms, the so-called "business model" of an enterprise is the way an enterprise makes money, that is, how an enterprise effectively combines all its human, material, financial, and other resources, A series of methods for generating cash flows. It is the key to your success. Even if your product is common, but as long as your business model is excellent, you can still succeed.

Let me give you an example. Suppose you have invented a way to fry a delicious chicken leg, and you decide to start a business by fried chicken leg. Next, you will begin to think about your business model, that is, how you plan to manage the business of fried chicken legs.

The obvious business model is that you open a fried chicken leg shop on your own. This mode is more conventional and may fail to succeed, but it is certainly difficult to achieve a large growth in the short term, and it is very hard to open a shop. However, there is another model that you don't need to open your own shop, that is, the machine that you lend chicken legs to other restaurants for free, on the condition that every time they sell a chicken leg, you get 5 cents. It seems that the second mode is easier than the first mode, and the space for growth is relatively large. Imagine how much money would you earn if there are restaurants all over the country selling your fried chicken leg?

In fact, this is the departure model of the KFC chain fast food restaurant (KFC. In 1952, a 62-Year-Old Retired colonel Harland sounds' failed to operate a restaurant and he had to find a new business model. Later, he thought of the idea of selling fried chicken recipes. The new business model eventually creates a fast food kingdom with annual sales of up to $8 billion. From this example, we can see how important a good business model is to the development of an enterprise.

Ii. How to develop a business model

The trick to develop a business model is to use the reverse method to roll back from the end consumer to the production stage step by step. You can ask yourself in the following order:

Step 1: who will buy your product? Why purchase? How big is the market?

Step 2: How much is the customer willing to pay for your product? What is the competitor's price?

Step 3: Where can customers buy your product?

Step 4: How much is the sales cost required for customers to buy your products?

Step 5: What is the maximum production cost you can afford to produce these products?

Through this series of steps, you can figure out the outline of the business model, including the following key points: product positioning (how the end consumer views your product) raw Materials (who is your upstream manufacturer), production process (how the product is produced), and pricing (What are the prices you sell to wholesalers, retailers, and consumers) and distribution channels (How do you sell your products to end consumers? Which middlemen are there? How do you pay for them ?) Marketing (How do you let consumers know about your products), market entry barriers (will your competitors easily replicate your business model), and scale up (how to expand your business) and so on.

Iii. Features of successful business model

A successful business model has some common characteristics. You can check whether your business model has these features.

1. This model should eventually be profitable. Companies that cannot make profits will close sooner or later, so making profits is the minimum requirement. However, when you start a business, you may suffer from losses for a period of time. At this time, you should study the causes of losses and learn to distinguish whether this is due to the defect of the business model, or whether it is a normal period before the formal operation. The trick here is to judge based on the cash flow. If your project cannot generate cash flow or the cash flow is always shrinking, it is likely that your business model has problems.

2. Your business model should not be easily copied. If your competitors can easily create a company that is exactly the same as yours, you will be in a lot of trouble. You must ensure that you can provide different things to customers, or things that customers can only buy from you. Otherwise, you will have to work hard and fall into a price war, after a year of hard work, the company had little revenue at the end of the year. If you cannot guarantee that you have exclusive technologies, it is a common practice to determine the market segments and focus on building your own brands.

3. Your business model should be scalable. When starting a business, an enterprise is very small and serves only a few customers. At this time, your business model will work, and it does not mean that the business will work in the future. For many successful small enterprises, once they expand their business scale and jump to the level of large enterprises, various problems may occur, and the growth of profits may slow down or even cause losses. It may not be difficult for you to stand out from 10 competitors, but it is difficult to stand out from 10 thousand, 0.1 million, or even 1 million competitors. There is no general solution here. You just need to explore it by yourself. After all, not every company has the opportunity to become the top 500 in the world. However, in many cases, a small market can ensure the survival of enterprises.

4. Your business model should not contain too many individual factors. It means that you should not rely too much on a single individual or enterprise, whether it is an employee, a supplier, or a customer. If your company depends on a person, even if this person is yourself, it also means that your company has a lot of constraints and risks. If one day, you lose this person, then your company may fall. On the other hand, if your company is not very dependent on a specific object, it is easy to get a good estimate when transferring and listing.

Iv. misunderstandings of business models

When developing a business model, there are some common mistakes you need to avoid:

1. Do not start an enterprise because it is easy to start. As mentioned above, the business model that is easy to copy is often not a successful business model.

2. Do not start such an enterprise because it is very interesting. Because fun doesn't mean it will succeed, but running a failed enterprise is certainly very boring. The fact is that it is easy to survive to run a very boring enterprise.

3. You need to find out whether you belong to a freelancer or an entrepreneur. The two business models are different. Freelancers like the freedom to start their own businesses, rather than taking too many risks, and are reluctant to drag their own lives down by the trivial matters of enterprise management. The goal of an entrepreneur is to create a profitable business. He is willing to take on more risks and devote himself to enterprise management, even if he works 60 hours a week.

4. Do not think you can create a new business model. In fact, there are several ways to make money in the world. It is very difficult to invent a new way to make money. What you should do more, is to make full use of the business model that has been proved effective by others. Since this model has been proven to be successful, you will not go into a completely wrong direction, and you can also learn from others' failures.