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1. leninkster
   Member

   So you've thought of a product or service that you can sell. You've done your market research and have decided that a business is feasible. You've looked into the costs of building your sales channel, the costs of administration, the costs of insuring yourself, your company, and your employees. You've looked 5 years down the road to see (realistically) where you could be, and you've extrapolated all those costs and profits, sales and losses into some form of business plan.

   What! You mean you haven't? OK, then you need to. One at a time, and carefully, with an objective head, not the passionate one that thinks you product or service is going to be wanted by everyone.

   Wow! You have! Well done. Now what? Take it easy! go slowly and follow your plan. Don't deviate from it. At the end of the first year, if you are still in business, analyse your plan again. Go over everything. Be realistic. Build into that plan some business strategies. Watch your overheads. make it a date, do this every year, and more often if your business grows rapidly.

   Don't make big changes to your business model, add to it, yes, but don't change it.

   Stay lean, and I don't mean fire everyone, make sure you are getting the best out of every single overhead and investment you make.

   If you get in above your head, ask for help, and where you can, get it free. Get a second, third, fourth... opinion. Don't aim for failure, but don't be afraid to fail. It's not the failure that defines you, it's what you do afterwards.

   If you are lucky you'll get rich/famous/happy whatever you want. If you are not, you'll get experience. In either case, it won't come easy, and it won't come quickly.

   Good luck and happy hunting!

   Posted 3 years ago #

2. green
   Member

   

   I know that quite few successful companies actually DID change their business model, and not once, but 4-5 times... World is global and agile nowadays. If you'll stick badly to old and proven to work (last year) business model you can end up nowhere.

   Posted 3 years ago #

3. leninkster
   Member

   Changing a business model over a long period of time is not necessarily bad. But on a start-up, if you're original business model is failing in the first year or two, it is unlikely changing it completely will save the business. In the case of someone like McDonalds or Dell for instance, not changing their business model has caused them problems.

   But these are companies that have made a huge success for a long period of time using the same business model, and have missed the fact that the demographics and desires of their customers have changed. McDonalds have pulled back some of the latest failures, they have added to their business model, and modified it, but they haven't changed their underlying business model.

   And this is what I was trying to explain. If your business model is to sell things on the internet, using low-cost and rapid service, to alter that business model overnight to one of retail sales in a shop with a higher, better more personal service at a proportional higher cost will not necessarily save a failing business. Augmenting an existing model with additional model options, and then gradually phasing out the older model may. In either case this is unlikely to save a failing start-up, and something more fundamental needs to be looked at. changing your business model every year (implied by your "last-years business model statement) is not a good business policy. Changing you business plan is. Designing a strategy for a business is a long term thing, and should be a "living document". Constant tactical changes invariably fail in the long run, and only in very few cases, and normally with a huge amount of financial backing can pay-off long-term.

   Posted 3 years ago #

4. green
   Member

   

   I didn't work or deal with big enterprises with their business models/goals, but I know something about startups. I should say that startups is the most unpredictable thing, for which I would never say DO they need to change business model, or DO NOT. Just in example - PayPal started with one idea, and by doing the business they changed it to very much different (oh well, they left one thing the same -- to work with money :-). And because of that they got their success. And I can give a lot of such example, but they will prove only one thing. If business model fails, it does not mean that you shouldn't change it. I think you need to, but even if you will not, you still have a chance to succeed.

   Posted 3 years ago #

5. leninkster
   Member

   I've worked with both large enterprises, and with many startups, and my advice stays the same. PaAypal didn't change their business model. Their original business model was to offer a brokerage on the internet to interface with smaller sites that couldn't go, or be bothered to got through the hoops to deal directly with the credit card companies.
   This is still essentially their business model. The business has grown, but the model is the same. They have incorporated extra functions and features, but their core business model is still the same.
   I'm not sure I understand the argument you are making in your last paragraph. You say "If the business model fails, it does not mean that you shouldn't change it", I am saying, that unless you are a large company and/or have great financial backing, if your business model fails, the business fails. I can give you many more examples of businesses that have found this, than have found otherwise. The point I am trying to make, is to be successfull in a business, you need to put in sufficient due dilligence prior to launching the business to try to ensure that the business model doesn't fail.
   Certainly I agree with your statement that If a business model fails you will need to think of another one, but it is very unlikely your existing business, that is using the failing business model will survive that transition. This is why so many of us enterpeneurs end up trying 4-5 times before we finally find a model that works. The secret is for each failure, learn from it, and don't repeat the same mistakes each time.

   Posted 3 years ago #

6. white
   IT boss

   

   Well, I can't agree with you about the PayPal. The Max Levchin's version of what was PayPal is different of what you say. Globally speaking, both of you can be right, however, I still think that PayPal was able to change the business model and utilized this chance. I don't know if you ever read the Founders at Work book by Jessica Livingston (one of the partners in Y Combinator), but if you didn't I advice you to give it a quick pick. She interviewed Max and there is an interesting store told by Max in her book. From the other hand, there is always a different point of view, and the different story of PayPal told by Elon Musk. However, as it looks to me, the both of them tells that PayPal had major changes in the business models before it appeared as we know it.

   Posted 3 years ago #

7. leninkster
   Member

   To be accurate, the PayPay business model has never changed. It has always been, and still is "seller pays for the right to acccept payments in a risk-free (or at least risk-reduced) transaction" (Max Levchin 2004).

   Changes came about from the formation of PayPal. PayPal was formed by the merger of two existing businesses with different business models. One, Confinity, of which Max was one of the founders, was honed in on security and cryptography, the second X.COM was primary a financial services company. Both were interested in reconciling payments from Palm Pilots. The merger of the two companies did indeed require a re-think of the business model, and it was decided upon as the which Max quoted in several interviews through 2002 to 2004. To my knowledge this has been and still is the "business-model" upon which PayPal still operates.

   We mustn't forget that although the business model never changed for PayPal it radically changed the technology model it used to deliver it's strategy, from Palm Pilot centric to all-encompassing web services.

   I wonder if there is some confusion around the terminology?

   Posted 3 years ago #

8. green
   Member

   

   We talk about the same things, we just call them differently.
   Underneath it all the main goal to have the working business. The most proven way is to stick to something which you started with, but not jumping from very different and inadequate to each other areas vice-versa. But I believe that numerous changes withing your direction are just for better. Even if after all the only common thing you will have the global idea like "do money transfers for fee" or "sell stuff online".

   Posted 3 years ago #

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