The Australian Small Business Blog

Thursday, November 09, 2006

The Diary of a New Business- 3. The Business Model

When you are considering a new business, it is essential to identify your business model. You may be selling widgets, but how are you doing that. Will you sell through your own retail store. Will you be a distributor who sells to retailers? Will you use network marketing? Will you sell online?

Each of these models has its own pros and cons. And this is where your original motivator (see previous article) comes in to assist you in determining which model is best for you.

In my case, my motivation was to actually make more money by working less. Therefore a business model based on selling more coaching hours even at higher prices was not going to satisfy my objective. This business model would always be totally dependent on myself, and would require more and more of my time, spent either in delivering my coaching services, or undertaking marketing which would justify continual price increases. Looking five years from now, that was not what I wanted. I needed a business that I could eventually separate from myself, potentially franchise, and create a passive income. Private coaching was never going to achieve that objective.

So what other models are there? I have been approached by a number of new coaches who wanted me either to hire them, or licence them. In both cases, there was the issue of quality control. I offer a premium service based on my experience and qualifications. This is very hard to replicate with others. If I brought in employees or licensees, I would have to set up a quality assurance process, and a lot of other systems that would create even more work for me. And I had seen a number of coaching franchises fail. It was not that I believed that a good franchise model couldn’t be created, as there are several that appear to be successful, but there will always be that tension between maximising franchise sales and maintaining coach quality.

A model that utilises other coaches to leverage my time, would take even more of my time, and I would also be competing in a territory with some very established competitors, without any particular competitive advantages. When I combined these factors with a mismatch with my motivation, it was clear that this was not the business model for me.

Creating and selling coaching products was another business model I considered. Again, there are a lot of products available in the marketplace and I would need to differentiate my brand. If successful, this would be a great way of providing a passive income. Now I did not reject this model, but I felt it was not viable for me, on its own. It would be something I would want to do, but longer term leveraging off my other activities. I saw this as complimentary to my main business model, not its primary focus.

The other obvious model was a one-to-many coaching model, so that I was selling the same hours many times. This was much more in line with my motivation. But how would I deliver such a service? There are coaches who have regular group coaching sessions at their offices or in a hired room. And while that could have worked for me, and I would be happy to do that, there was another factor to be considered. This time, one where I had a distinct competitive advantage.

A growing percentage of my existing business was coming from the internet. In fact, in most of my keywords I was on the front page of google. eMarketing was a very strong competitive advantage for me. So the logical choice for me was to provide an online coaching resource where clients would get the benefit of my knowledge with a much reduced component of my personal time.

With an online coaching model, I would be able to leverage my time, and also create a business which could over time, run without me. Now this was a business model that was aligned with both my motivation and my competitive advantages.

Does your business model align with your motivation, your competitive advantages and your long term objectives?

The next article in this Diary of a New Business will be: The Reality Check.

Dr Greg Chapman is the Director of Empower Business Solutions and The Australian Business Coaching Club and is a Business Coach and provides Coaching and Consulting advice to Australian Small Business Owners in Marketing & Business Strategies Planning & Systems.

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