When Should You Remodel Your Business Model?
A trio of entrepreneurs from the Lincoln, Nebraska area tackled the subject of if and when shift from their original business model at "Power to the Small," a panel discussion sponsored by Windstream.
The consensus was that the wisest course is to stay nimble and embrace short-term missteps as a way to find the right path.
Don't Sell a Product; Solve a ProblemJennifer Rosenblatt has launched two businesses in Lincoln -- Argyle Octopus Press, a marketing firm, and MusicSpoke, a marketplace for musicians. Listening closely to customers, she says, tells her when to important changes may be needed.
"You might have the best ideas in the world, and think you know all the answers, but your customers know better than you," she said. "You should go into business realizing that you are not selling a product or service, but solving a problem. If you think in terms of just selling a product or service, you are less open to change and to asking your customers for feedback."
Rosenblatt didn't have to pivot her entire business, but she found that she did need to make an abrupt shift in her marketing strategy. "We had two sets of customers -- buyers and sellers of music," she said. "And we had the classic chicken and egg question of whether the buyer or seller came first."
Initially she focused on solving composers' problems, providing a website that allowed them to copyright their work, sell it, and monitor what orchestras and other groups performed it. That aspect of the site caught on so quickly that she soon had a waiting list of composers eager to leverage the site. "But the buyers, mostly music teachers, didn’t learn about MusicSpoke as fast," she says, "so we had to transition our marketing focus to them in order to create the kind of marketplace we had envisioned."
Challenge Your AssumptionsSmall businesses that are skilled at pivoting try to rely on empirical data rather than gut decisions as much as possible.
"We constantly collect data to make meaningful decisions," said Chris Davis, co-founder of Travefy, an online and mobile group travel planner. "You can't be married to an idea and make it personal."
He said that entrepreneurs should not be afraid of making mistakes. "One of our core values is to embrace failure and accelerate success," Davis said. "If you learn from failure fast enough you can correct it. The biggest real failure is the one you won't admit to."
Travefy constantly challenges its assumptions. For example, people who use the planner must provide an email address in order to invite other people into their group. However, the company found that asking for an email address at the start made a large number of potential customers leave, so it switched the model to allow them to explore the site.
"We found that 10 percent of people know exactly what they want to use the site for; 10 percent have no idea how they want to use the site, and 80 percent fall in the middle," Davis said. "We realized it didn't make sense to design the site for the 10 percent who had no idea, so we focused our functionality on the 80 percent."
Embrace a Long-Term VisionStephanie Jarrett, who founded Bulu Box, an ecommerce business that offers monthly subscriptions to health, nutrition, and weight loss products, also discovered that her early vision wasn't right on target.
Originally, the company thought that its revenues would come largely from selling the boxes of samples. After two years, it became clear that success hinged on moving from a purely B2C model to incorporating a B2B focus by selling the data those customers provide back to the makers of the sample products. The brand companies can even publish their sampling information to their product’s profile on BuluMarketplace.com where retail buyers can review and purchase it.
"We knew from the start that the data we collected about customers was important," she said. "We just weren't sure how to monetize it."
After embracing the concept of a dual-sided marketplace, they began collecting even more data from customers by gathering feedback on samples and brands.
"My husband, who is my co-founder, has an excellent sense of when to pivot," she said. "We realize the subscription sample business can't be popular forever, and even though our revenue from selling the boxes was fine, we needed to have a long-term vision."
Viewed from that perspective, she says, what may feel like a setback is, in fact, a course correction on the road to success.
It's never easy to determine whether your original vision for your business was on target and you simply need to power through today's obstacles, or whether it's time to rethink some fundamental assumptions and make substantive changes. Be flexible, build and rely on a network of trusted advisors, and above all get as close to your customers as you can. Those are the key steps in deciding whether your business model remains valid or needs to be remodeled.