Historically total business failures are all to common for start-ups. Plus, the number of existing company failures have increased in recent times. There is no shortage of information about why companies fail in the market. For companies that do triumph, their success centers one main aspect, the sustainability of the organization’s core business model. In each case there was a clear connection of the organization’s failure or success on how to enhance, develop, transform and even disrupt with its core business model.
Every organization is under an unbreakable operational fact called the “Law of Business Reality.” That is an organization will serve its customer in a profitable way or cease to exist. All organizations operate under this law and each organization needs to produce their own version of the law called a core business model. A core business model is how each enterprise will uniquely serve its customer in a profitable and sustainable operation. Only when a company produces a product or service with a solid core business model will a vision be realized, and an organization will succeed.
The interesting aspect for a home business is that it does not really matter the size of an organization. Start-ups flushed with extensive amounts of capital or a business that began on a family’s kitchen table are both under the Law of Business Reality. It does not matter each business needs to produce their own unique core business model. This is the single most important aspect for the owner or leadership to embrace, understand and drive to operational performance.
It takes just one bad customer review or unsatisfied client that could start your core business model to breakdown or even dissolution. This pressure or influence factors that could threaten an operation are significant and leadership needs to understand the impact for success. Flexibility and modification are required tactics to further a core business model and produce continued performance. Influencers that affect your organization follows:
- Environment—industry, geography, governments (regulations), and competitors
- Operation—resources, execution, ownership, and leadership
- Innovation—technology, methods, and procedures
An aspect for any home business is to make sure that you do not depend on technology too much. Technology these days is required but leveraging social media and other technology has its place. Your focus is to produce a viable core business model must be paramount. Unless your core is based on technology your operation needs to stand on its own. Do not be distracted from your customers to get hooked on a single aspect of the latest technology. Why, because the next technology you might miss and it will either enhance or destroy your core business model. All initiatives need to holistically perform to further your core business model.
Preventing a Failure – Focus for Success
Preventing a business failure is more about focusing on success. If you focus on preventing one you have already lost. The focus must be clearly on building and producing a successful core business model, serving your customers profitably. The following items will help analyze your core business model and areas to review:
Items to focus on success:
- Understand implicitly your organization’s core business model and the effect on operation – why your customer buys from your organization instead of your competition
- Understand how the organizations profit generation is tied to the core business model and what influencers will affect the model’s generation
- Constantly review industry trends and changes that might impact your core business model
- Review current and or future technology to enhance, further or disrupt your industry and your core business model.
- Select innovative technology, methods or new approaches carefully to make sure the impact is positive to your core business model
These items will help you better understand the impact of your core business model, influencers and how you bring value to your customer.
There are plenty of stories of organizations that did not understand or failed to recognize the impact of influencers. From building and manufacturing companies using applications that did not fit their core business model and damaged their customer service base. To financial companies that were utilizing too much technology and increased costs to the point of insolvency. Most start-up organizations that failed could not convert their product/service ideas into viable operating core business model. These failure could have been turned around with clarity, focus and a strategy to further their organizations core business model.
Defining Your Core Business Model
The best way to define your core business model is first understand exactly what is your organization’s industry and then what your organization’s products / service your company provides to your customers. Ask, why do customer purchase from our organization instead of our competitors? This needs to be honest and direct. Then compare this information with how the entire operation is actively fulfilling this reason. From that point calculate the profit generation and weather your organization can serve your customers in a consistent sustainable way.
A major concern for many home businesses is a lack of a realistic understanding of the impact of a core business model. That is why I place a level of significance and call it “The Law of Business Reality”. Just like a law in the natural, either you understand and adhere to the law or your organization will cease to exist. Take an honest hard look at your company. Gain clarity on customers’ needs, wants and value that you bring to them. See if you can provide what your customer wants while generating a reasonable profit. Make modifications, be flexible and make the hard decision when necessary.
It is said that the hardest act to do is to maintain a successful company for many years. But if you focus on your core business model you will be able to do the hardest balancing act in the market. It does not matter the size or your organization. Whether your organization is traded on Wall Street or building products on your family’s kitchen table. Serve your customers and generate a profit with a sustainable operation. You will not only have a great company but a company that is valued and do great things for your community.
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