Business Model Revision

It is possible that after making all the changes, the desired financial outcome on month 36 is still not achievable. This is despite making adjustments to the revenue generated by the income sources and changing the cost structure. Therefore the solution lies not in right sizing in terms of revenue and cost but a fundamental change in the business model.

As an example, suppose your market positioning is to target the market segment, the high income group, by offering premium products and services. However you decide that to save costs, you will only have an online store with minimal advertising. Although the products and/or services that you offer are premium, you price them lower as one will expect from an online store. Your cost structure is geared towards fulfilling the desired outcome in terms of prompt delivery and accepting returns.

On the initial trials, you find that the revenue can be increased if you raised the prices. However that will drive away customers from the online store. Thus you decide to retain the low prices and go for volume.  With the high volume, you find that the business can be profitable in the first few months and cash flow positive in less than a year. On reflection, you realize that you may have been overoptimistic in your projections. To attain the high volume and projected revenue will require you to invest heavily in advertising. After finding out and putting in the advertisement cost, you discover that it is impossible to get positive cash flow within 36 months, or even 48 months. Therefore its back to the drawing board or in this case, the business model.

 

 

 

Assess and Iterate

Income Sources Revenue Adjustments

Cost Structure Changes

Business Model Revision