Suntaujan: no unprofitable business model

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NIU president and the electrical business:

I like to be straight. I think that the core of entrepreneurship is "business", so there is no money-making commercial model.

Now we are talking about entrepreneurship and are willing to talk about the general direction. For example, I was asked to say, Sun always, I am starting a business, do you think the mobile Internet is a good way to start a business? Everyone is talking about a lot of patterns, I am Chinese what what, what the United States has done very successfully I want to copy the first time to China. I think these things have deviated from the nature. First make a purchase, and secondly, find a way to keep this thing going. This is entrepreneurship.

All of us can use the word "business" in turn to see what we are doing. Everyone is talking about the business model. What is business model? To put it simply, how do you make money? A lot of people, especially the electricity quotient, divides the business model into two categories, one is very sexy, has the development foreground, but does not make money; I don't think the division is tenable. There is only one business model that can make money. There are basically no unprofitable but promising models. A lot of entrepreneurs are going to do it in a way that doesn't make money, and I think they're running away because making money is too hard to do.

The business model is essentially an arithmetic problem. Everyone can take a piece of paper, a pen, to do this problem. What is your income equal to? Then break it down to the minimum. I cite the convenience store terminal of Lakara as an example. Lakara's income equals the number of outlets multiplied by the contribution of each dot. Further down, the net contribution is equal to the amount of my business multiplied by the number of transactions multiplied by the average number of transactions multiplied by the average amount of revenue generated by the single transaction. Each of these items can be subdivided until all the things are broken down to the minimum and no more points. This result is your business model, you see it has no mishap, the establishment is not tenable.

Let me give you one more example. The customer price of a certain electric dealer is 100 yuan, the gross profit is 60%. 60% of the gross margin is already very high, only own brand to do it. Brand name means that your marketing costs may account for 15% to 20% of the turnover, 100 dollars you will spend 15 dollars, 20 dollars advertising. Then the logistics costs, warehousing costs. We all know that it takes 18 dollars and 20 dollars to make a delivery, which is another 20%. In addition, you have to add management and various other expenses. Finally, you will find that no matter how you do not make money, even if 60% of the gross margin is also sold a single loss.

What does that mean? Your customer unit price is too low, can not be used as a private brand of the way to do business. I often say that a single product does not understand the account, 10,000 single is not clear, a single product can be accounted for the account, 100,000 single can also be understood. You can figure out whether to earn or lose from a single. Customer unit price does not increase, your profit formula will never exist.

So, can this customer's unit price be improved in the future? Because you come here because your things are cheap, when you sell expensive things, people will not go to buy. This is also a feature of China's electricity dealers: the network to live with the cheap people. A study of American electric dealers will find that many of the things sold on ebay and on Amazon are not on traditional shelves. Electronic shelves can sell 1 million kinds of products, while traditional large supermarkets such as Wal-Mart can only sell 3000 kinds. In China, electric dealers sell the same products as offline, so they can only sell lower prices.

Another typical case is group buying. Two or three years ago in the heyday of the group, I and the "entrepreneur" of the cow president published a fallacy, said group buying is not good, many people blamed.

On the cost of this, group buying as a large platform for additional services is very good, icing on the cake, but as an independent business model, it is not tenable. The business logic of group buying is to use a very low price, so that more people experience, and then bring about sustained consumption. The problem is, only to achieve a very low discount to form group buying crowd, if this very low discount is the normal, businesses can not stand, if not the normal, consumption after the return of the original price, users can not stand.

So, do the electrical business, everyone in the design mode should not take for granted. When you break down the income model that I just said, you don't lie to yourself and see if there are a lot of them that are not tenable. If so, then you say that I will make money when I am so big that it is wrong. This is also the cow president has always said the drawing circle or concentric circle problem. Over the years, too many people like to draw a great circle of routines, no model, constantly financing, build a large network, expect to accumulate users to eight or nine years after the money to earn value-added services. I would like to advise you, this mode do not do, the chain is too long, the result is often not to the eighth, Nineth year you die, or a new thing out to replace you. This model is a very small number of people, God's voters can play, you can say that I do not have to consider making money, as long as the accumulation of users can be. I think only Zhou out of this path. For the vast majority of entrepreneurs, you must first make money, and then consider the future is not the ceiling is relatively low, is not only become a billionaire, can not become a billionaire.

There is one, with the ability to make money, and to make money, this is still two different things, or a sky, an underground. A lot of people will tell you that you make money when you see me. You tell him, OK, you go and make it, point it out to me. There are more than half people can not make. Because what is the tendency of all of us? When it comes to predicting revenue, it likes to forecast more and forecast costs, preferring to predict less. So, calculate the time income 1 million, cost 900,000, earn 100,000, one to do to find, income dozen 80 percent, cost spend exceed, on loss. From your business plan you can calculate the money, and you really make money, or across a mountain. So I suggest that all entrepreneurs should be able to make your company make money.

I did not expect to write so much, I hope I can help you.

Author: Suntaujan (Chairman of Lakara)