Boost success by emulating proven successful model

In working with early stage entrepreneurs, I often challenge them to find an existing business model that has proven to be effective and then try to adapt their business idea to a similar framework.

By Gary Williams
Brigham Young University

http://deseretnews.com/dn/view/0,1249,595104926,00.html

Earlier this year, I was working with a team that was attempting to form a business in Guatemala to grow mangos for processing and importing to the U.S. market. Their motivation was to build a successful company that would not only earn a profit but also help with social causes in a particular region of Guatemala. The team labored for weeks to write a viable business plan to attract investors. In the process, they gained the attention of a number of organizations and were awarded development and research grants.

Members of the team traveled to Guatemala to finalize plans for the production facility, while others test-marketed their superior mango product in the states. The problem and challenge continued to be the definition of a business model that focused on the for-profit attributes of the business while addressing the team’s desires to have a social impact in Central America.

During a particularly frustrating discussion, one of the founders mentioned that he could not understand why it was so difficult to produce a plan that would impress investors when Ben and Jerry’s Ice Cream had accomplished something similar with their business. That was the answer. All the team needed to do was to build their business case using the argument that their model was built upon an already successful business framework.

We have all heard the business maxim for an ideal model: "Buy low, sell high, collect early and pay late." Magazines enjoy this model, collecting in advance for the subscription. I am amazed when I receive a renewal notice for an additional year and then notice on the mailing label that several months are left on the current subscription.

One of my favorite business models involves cross-selling additional products and/or services to existing customers. Banks have become famous for implementing these cross-sell strategies. While visiting the Web page for my local bank, I found that in addition to checking and savings accounts and loans, the bank is advertising personal insurance, investments, a multi-point financial checkup, child and student banking, foreign exchange and even concierge services.

The "razor and razor blades" model has been successful for many companies. You sell a basic product to your customer at a low price and then make your return on the "razor blades." Low-cost printers with expensive ink replacement cartridges are an example of this model.

A great business idea in one geographic market can be moved to a new location. This geographic expansion model has allowed many fast-food and retail chains to expand rapidly once a successful model was developed and refined. In our ever smaller world, geographic expansion between countries is expanding at an ever-increasing rate. A friend is currently bringing a children’s clothing business from South Africa to the United States.

Another successful business model is "selling ammunition to all parties." A.C. Nielsen, the company that measures customer responses in the marketplace, has made this model famous by selling its services to competing entities in the same market.

Using existing business models to define your company’s plans is not only appealing to investors but also will assist in refining your growth strategies while avoiding the downside of making the wrong turns.

Gary Williams is affiliated with the BYU Center for Entrepreneurship. He can be reached via e-mail at [email protected].