As a seasoned marketing expert with over 10 years of experience, I want to share with you the fundamental business models that every entrepreneur should be aware of before starting a project.
Entrepreneurship literature often preaches persistence, perseverance, and never giving up, but nobody tells us when to stop. We hear about the importance of focus, resilience, consistency, and persistence, but nobody teaches us how to evaluate whether a business has a future or when it has reached its peak.
However, what’s missing from this story is talking about the three fundamental business models that every entrepreneur should know, which determine the beginning, middle, and end of a project. As an entrepreneur and businessman with over 200 developed projects and more than 3,500 ventures intervened, I have categorized these models into three:
Short Term Business Models > Speed Business
Medium Term Business Models > Profitable Business
Long Term Business Models > Sustainability Business
Let’s take a look at it.
Short Term Business Models > Speed Business Models
Setup and Development:
These are businesses with low setup costs and relatively low acquisition costs from potential customers or end-users.
Their development time to market is 3 to 5 weeks, and results can be perceived from day one.
They don’t require robust production processes, and are usually solutions that can be outsourced.
What do they solve?
They respond to special and temporary problems and needs, not permanent solutions.
They are designed to generate a rapid cash flow.
These are usually projects that don’t exceed 12 weeks of life, as they are quickly replicated or improved by other players (who eventually saturate the market), as many entrepreneurs simultaneously identify the same opportunity.
Their short life can also be due to changes in the nature of the market or the initial problem.
During the early weeks of the pandemic, when it was identified as a medium-term issue and therefore a great opportunity, many entrepreneurs (and non-entrepreneurs) jumped into selling all kinds of biosecurity accessories. From housewives making masks to brave adventurers buying industrial mask production infrastructure. Those who bought antibacterial supplies to give them a personalized branding, adapting the sales promise, resulting in the same product for everyone in the end.
Another practical example is people offering waterproof jackets with the shields of football teams in a championship during the rainy season, etc.
Main objective of the speed model:
To enter and exit with profits in front of a market opportunity that will soon be oversupplied.
Synchrony is vital in the speed business model, and the success of this business model lies in identifying when to enter and when to exit.
Understanding that value lies in volume sales and not necessarily in unit profitability.
This information clarifies why some projects take off like a rocket and then lose traction soon after. The lack of understanding will lead us to want to give more life to a project that was born with limited time.
Medium Term Business Model > Profitability Business
Assembly and Development:
These are businesses that require development and/or production time ranging from 6 to 18 weeks.
These projects reflect results between three and six months and directly depend on the maturity of the negotiation itself.
Their profitability is directly proportional to the investment and even higher, therefore, they require additional investment of financial and emotional support to mitigate risks.
The million-dollar question is, will I have the necessary resources to sustain the project during that time, 6 months at least?
What they solve:
Middle-term problems that need to be overcome, either bureaucratic, procedural, or development requirements.
These are projects that have a life span of approximately over twelve months, and their transformation occurs through technological advancements, market nature mutations or more efficient third-party solutions, which eventually become threats and, in the best case scenario, push the initial offer to innovate.
Real Estate, software development and design/production of seasonal solutions, among others.
Main objective of the profitability model:
To maximize the benefit from a vesting capital, tangible or intangible, to increase it with the least amount of risk variables and then proceed to a phase of reinvestment and diversification.
Long Term Business Model > Sustainability
Assembly and Development:
These are businesses that develop over an average of more than eighteen months. Results start to show above this time, even more, and at first they only reach the break-even point.
However, after this time, they start an ascending curve with progressive and mainly sustainable profitability.
That is the virtue of this type of business, however, the million-dollar question arises: will you have enough financial and emotional resources to sustain the project throughout that entire period?
This is where business models start to make sense, and it becomes imminent to answer the following questions:
– What type of business do I need at this very moment?
– Which business model does my current idea or project belong to?
– What type of business model am I capable of sustaining?
Having said that, and if you have reached this far, we can say that you now know the three fundamental business models to define the type of project you are facing.
If you need to delve deeper into the definition of your project, entrepreneurship or business, I invite you to allow me to perform a diagnosis of your business, free of charge.
Send me a message and I will do my best to back you up.
Also, read the foolproof strategy to know how to buy customers, I invite you to read the article that I wrote with all the secrets.