Interview: Business Model vs. Business Plan

Interview: Business Model vs. Business Plan

I recently appeared on the Sage Advisors radio program discussing the differences between business models and business plans.  Below you can find the replay link as well as the promo copy for the interview.

My Guest, Jim Muehlhausen JD has enjoyed the privilege of working with hundreds of business leaders, from both big and small companies, on an intimate level. These business leaders have shared their hopes and dreams, successes and failures, and the inner workings of their business with him.

 

Through the course of all those interactions he came to discover there wasn’t necessarily a correlation between education, intelligence, or hard work and success of the business.  He found many successful business owners who were quite lazy. He found high school dropouts who created highly successful businesses. He also found intelligent, well-educated, and hard-working business leaders who failed to translate these qualities into business success.

 

He asked himself, “If these traits aren’t the foundation of business success, what is?” The answer is the business model. Education, intelligence, and hard work are all applied to a business model. Applying these qualities to a weak or failing business model is like throwing good money after bad in the stock market.

 

This SageAdvisers™ Teleseminar is a powerful introduction of what is a Business Model and why it’s important! By understanding the business model concept — and how it differs from a business plan — will give you the best chance at success. Our goal is to focus on this vital area so you realize that the strength of your business model is what’s sitting at the very core of your business’s success. This will be very informative and I hope eye-opening too!

 

Like most entrepreneurs, Jim Muehlhausen has an eclectic background, ranging from CPA to franchisee, attorney, business owner, consultant, franchisor, public speaker, university professor, and author (Business Models for Dummies and The 51 Fatal Business Errors And How To Avoid Them) along with contributing articles to many publications such as Inc.,The Small Business Report, Entrepreneur, BusinessWeek, etc.

 

In 2009, he founded the Business Model Institute which is devoted to the innovation and study of business models.

Listen to interview

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Noomii Interview Replay

Muehlhausen with Dummies and 51 Errors books

Noomii Interview Replay

turn-around-go-back

5 Checkpoints Before Changing your Business Model

Transamerica-Letter1

The Best Marketing May be None at All

narrow-niche

Don’t be afraid to narrow your niche

Survey-Monkey-Cost

Customer feedback may be worth more than you think

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5 Checkpoints Before Changing your Business Model

5 Checkpoints Before Changing your Business Model

Guest post by Robert Kramers Most people do not like change, not really. Humans are creatures of habit, and whilst they like the excitement that change can bring, they are averse to the apprehension and the uncertainty that comes with it. We only truly enjoy change when the change we’ve made becomes the norm, when the initial fear fades and we realize that not only are things going to continue to be okay, but they will be so in a new and exciting environment. Change is great for the individual and the business. Change helps you to adapt, it helps you to step away from the stagnant and to take a giant leap into the exhilarating rush of the unknown. To succeed in business, companies need to change. It doesn’t matter if you’ve been in business for a hundred years or for ten, change is always just around the corner. Things move fast, technology takes over and we learn newer, quicker and more efficient ways of doing things, and if you don’t build your business around these new ways then your competitors will and they will move ahead of you in the process. Here are 5 checkpoints you need to consider for any major business change to ensure best results:

Planning and Review

As they say, failing to plan is like planning to fail. Some tips for effective planning:

- Review where your business excels and where business focus should be.

- Goal set clearly so that you can measure success throughout the process of implementation.

- Determine where “old ways” may hinder the output for change.

- Assess current intellectual property rights and where issues may arise with the new model.

- Ensur you are collecively (businesswide) onboard with objective goals as this will be your main driving force behind adapting to the change.

Concentrate on what matters – your customers

Times are constantly changing and people want different things now to what they did several years ago. These changes can be big and obvious, but they can also be very subtle and hard to foresee. If, however, you are in tune with your business and your customers then you will see the trends coming and can adapt accordingly. Your customers should be at the front of the line when it comes to making decisions around how the business will continue to provide effective services and products. Some ideas to help:

- Client feedback on where business can improve

- Research non-bias reviews of your business / product

- Execute incentive for customers (new and old) to share thoughts through a survey.

Make sure plans stick

Change is great, but if those changes don’t stick then you’ll probably create more problems than it was worth. Making sure that the change is well executed and well planned and not rushed can help with ensuring sustainable progress toward the common goal, without having to re-visit the drawing board.

turn-around-go-back

Simple steps help with ensuring tasks and milestones are executed effectively and properly. On the contrary, overcomplicating processes can lead to the feeling that there is too much to do and nowhere to turn, resulting in.

Adapt your surroundings

Most business-wide re-modeling projects involve changes to business processes, employment structures and the way people work together. Keeping peer collaboration at the heart of your ultimate solution can be a good way to ensure productivity is maintained. The newsiest technology firms don’t work in stuffy and cramped offices like they did a couple of decades ago. Google and SAS are renowned for giving their workers some creative freedom, for catering for their needs and not focusing entirely on output. That doesn’t mean that by creating a more open and fun working environment you’ll be lowering your output, in fact the opposite is true. A happy worker is a good worker.

work-environments

The old and the new, which one do you think your workers would prefer?

Communication

This is vital for any business. A business that understands and communicates with its customers is one well on its way to success, and the same applies to a business that maintains a healthy and talkative environment with employees, one where everyone feels that they can play a part and are entitled to their opinions. Communication with all areas of the business throughout organizational change can be one of the best assets for determining pain points along the way. Keep this at the forefront!

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The Best Marketing May be None at All

very narrow niche

Don’t be afraid to narrow your niche

Value of customer feedback

Customer feedback may be worth more than you think

hang on to your best employees

Fatal Error #27: Do they graduate or quit

extraordinary guaranttes

Extraordinary Guarantees and Your Business Model

?

Cool business model or waste of time

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Don’t be afraid to narrow your niche

Don’t be afraid to narrow your niche

I saw the van below in a parking lot and it struck me as a shockingly narrow and unusual niche. This stands in stark contrast to many businesses who want to be all things to all people. They sport slogans like, “For all your… needs.”

very narrow niche

Common sense and human psychology dictate that you cannot be good at many things and most people or companies can only be great at one thing. Saying “all things” implicitly states you are great at nothing.

By overly, repeat…overly, narrowing your niche, you offer the customer the opportunity to perceive you as an expert at that. This is not an easy task in an economic environment where nearly every category is over-crowded.

So here’s today’s challenge: how can you tighten your offering to instantly communicate you are an expert because no one else claims to be an expert?

Here are some examples:

  • General web developer continued to develop websites but focused on the niche area of usability
  • Paving contractor focused on more profitable specialty of bridges
  • Alarm company stopped chasing low-margin new construction market and focused on historic renovations
  • General bakery focused on the white-hot area of cupcakes
  • Landscape contractor focused on yard curbing
  • IT body shop focused solely on Ruby on Rails developers and doubled sales

There are many more examples of how companies grew sales by contracting their focus. Here’s the secret: customers will still buy offerings outside your focus area. The landscape contractor still sold mulch. The bakery re-expanded offerings to include cookies. The alarm company still cherry-picked new construction work.

Are you willing to take the plunge and narrow your offering? What success stories can you tell?

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Customer feedback may be worth more than you think

Customer feedback may be worth more than you think

Our organization was engaged in a debate regarding customer and prospect preferences and behaviors. After a bit too much of, “I’m right, you are wrong,” someone wisely suggested surveying prospects to ask their preferences.

We created a short 14 question business owner survey and offered the proprietary results as “payment” for taking the time. This collective output would be valuable to an owner to compare their daily activities and preferences with like-minded peers.

As the results trickled in, we tried to find a way to speed up the collection process to hit our goal of 1000 business owners surveyed. Our marketing director noticed that Surveymonkey offers to find survey takers for you. She proceeded to the audience selection webpage and then saw the screen below.

 

Wow, $22.25 per survey taker! This changed our paradigm a bit. Here’s what was buzzing around our conference room:

  • It’s not unreasonable to charge $22.25 for a survey response, but boy oh boy does it add up quickly.
  • The input and collaboration we receive from our prospects and customers is a more valuable asset than we thought.
  • We need to do a better job proactively seeking input from customers, customer service reps, and salespeople that have increased visibility into customer trends.
  • The customer data we already possess has value and should not just sit on the shelf. Who can we co-mine this data with? What partners could benefit from our data? Could we trade our data with partners who have complimentary data?
  • We should constantly collect data rather than sporadically chase it when a specific need arises.

Most companies are not unlike ours and can benefit greatly from prospect and customer insights. Hopefully the information in this post will spur you to better understand your prospects and mine the gold you already have.

Do you feel you are maximizing your customer/prospect data? What can you do better?

 

 

 

 

 

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Anonymous Business Owner Survey

Create your free online surveys with SurveyMonkey , the world's leading questionnaire tool.


Fatal Error #27: Do they graduate or quit

Fatal Error #27: Do they graduate or quit

You are going to hate me for this one because I am going to tell you that you should WANT your best people to leave you.  No, I am not nuts.  I am simply a pragmatist.

Think about it.  If you have a true superstar, that once every 10 year person... can you really afford to pay him or her once he/she reaches their potential? Be honest - you can’t!

Therefore, you either hold them back in hopes that it takes them longer to figure out they have more potential than you can provide, or they leave on bad terms because they realizes you are trying to hold them back.

Here’s a better option: You let them grow as fast as they can.  You harness the power of their rising stardom.  You nurture and grow them and pay them as much as you can as long as you can. Then, you help them get that better job and celebrate it.

Now you have undying loyalty and gratitude from an employee that knows they could not have gotten there without you.

Think I am nuts?  Accounting firms have done this for years.  They hire the best and brightest out of school in huge numbers, knowing that only a fraction of them will be working there in 5 years.  Then they work hard to help these young auditors get jobs at their clients for big raises and big promotions.  Why?  Because guess who the auditor will be for that client?

Here’s the bottom line:  Ask yourself, do your best people quit you or do you graduate them?  There is no 3rd option.  If they are quitting you, you are failing them and yourself.  You can do better for them and your company will prosper as well.

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Extraordinary Guarantees and Your Business Model

I am a big fan of by Dr. Christopher Hart’s book, “Extraordinary Guarantees: A New Way to Build Quality Throughout Your Company Ensure Satisfaction for Your Customers.” In the book Dr. Hart lays out a blueprint for improving margins and sales via exceptional guarantees. He offers several examples including a powerful one of a New York company that captured a 60% share of their market with a product priced at double the normal rate.

I could not agree more with Dr. Hart’s commentary on guarantees as a powerful business model tactic. However, the business landscape is currently cluttered with guarantees that are anything but extraordinary. Here’s my personal hate list of lousy guarantees:

  • Price matching. Please-- you try to get away with overcharging me then offer me the same price I could have gotten elsewhere if I only would have been smart enough to go there first?
  • 110% price matching. This is a slightly less horrible option. I overpay at your store and now I can stand in line at customer service and duke it out for $3.44. Here’s the math. I buy an item for $53.12 but find it for $49.99 elsewhere. I get the $3.13 difference plus a whopping 10% bonus of $0.31. This is well worth my headache standing in line at customer service……right. I am guessing you, like me, have never taken anyone up on one of these unless it was over $50 or $100….if at all. So what’s the point of having the guarantee, to attract the hyper-price sensitive customers that are willing to stand in line for $3? It reminds me of the movie Christmas Vacation when the out-of-touch Grandmother offers the grandson a quarter to rub her bunions. She felt like a quarter was a nice reward. The grandson felt differently. This type guarantee offers too little reward for too much work.
  • Warranting an item for a period of time less than it should function problem free. I just bought a washer and dryer from a major manufacturer. Most of the machine is
    warranteed for a year. Whoopee! I fully expect a major branded appliance to last a year without breaking. That’s not a guarantee, that’s honoring your defects.
  • Scam-type guarantees. These guarantees seem too good to be true….and they are. Free toothpaste for life if you don’t love our new flavor. This sounds great until you realize you have to travel to Uruguay to visit the prescribed dentist to check you out prior to receiving your “free” toothpaste. A guarantee should make the customer more comfortable with the offering and quality of the product, not less.

Here’s an example of a guarantee done right. I recently stayed in a Crowne Plaza hotel and found the sign below by my alarm clock. We will wake you at your set time or your stay is free. No excuses or yabuts; no exceptions or *’s; and enough skin in the game to make it interesting and worth my while.

More companies need to leverage the power of extraordinary guarantees like Crowne Plaza. Dr. Hart suggests in his book that these guarantees increase customer satisfaction, allow for increased pricing, and force operational improvements (Crowne Plaza cannot afford to give away too many free nights so I am guessing they tightened up their wake up system).

What cool ideas have you seen companies use for extraordinary guarantees?

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Cool business model or waste of time

Cool business model or waste of time

The power of a brand

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Fix them or fire them?

Business Model Innovation for Speakers

Tide Basic

Unbranding and your business model

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