By Ed McLaughlin with Wyn Lydecker
Before you start your business, ask yourself: How will you make money? The business model explains how you will pull together and manage all the component parts of your business to create value for your customers and yourself. Your business model includes your value proposition, revenue generation plan, production and distribution details, and resource requirements.
Too often entrepreneurs fall in love with their idea but fail to have a business model worked out for how they will make a profit and generate sustainable cash flow. Having been in an entrepreneurial sales environment, I understood the impact of the value proposition on revenue generation, the cost of building and delivering the product, and the need for management controls to ensure a profit.
When my customer at Baxter International, Bill Agnello, and I developed the business engine to handle hundreds of transactions and construction projects at Baxter through an outsourcing model, the concept was completely innovative. Because I had worked so intimately on developing the business model, I knew the math involved and felt certain of the huge profit potential a similar model could generate for my startup, USI.
In future posts, I’ll explore all the component parts of the building your business model.
Ed McLaughlin, Wyn Lydecker, and Paul McLaughlin are co-writing the upcoming book, “The Purpose Is Profit: Secrets of a Successful Entrepreneur from Startup to Exit.”
Copyright © 2014 by Ed McLaughlin All rights reserved
I found your topic very useful, and will be looking forward to your in-depth thoughts on the idea. I am an up start in travel industry and i am tackling the issues you are raising in your topic in profit generation and cash flow. And it gets frustrating when you hit the lows, even though you are passionate about what you have started. I think this is true for any entrepreneur.
Thanks for your comment; we’re glad you found the post useful. Our book, “The Purpose Is Profit,” will have greater detail on all the building-business topics you see here on the blog. Entrepreneurship certainly requires a lot of fortitude. Those lows are tough. We liked this article for some inspiration on contextualizing those lows in the long run: http://money.cnn.com/2014/02/27/technology/ben-horowitz.pr.fortune/
Do you have your own particular strategy for dealing with those lows?
We want to be as responsive to the startup community as we can, so feel free to keep sharing your thoughts with us.