Four Signs that your Current Business Model needs a change to Sustain in Market
Even businesses that succeed wildly in the past may fail quickly if money stops coming in even for a few months or when the consumer expectations change. The Coronavirus Economic Crisis has already proved that beyond a doubt.
Business is all about staying on your toes all the time and if you don’t have awareness to be able to spot the tale signs of a flawed business model, then any amount of time you spend on it could be pretty much worthless.
So let’s get to the main points that indicate that your current business model is failing and you need to do a serious rethink on it.
1. You are no longer passionate about it.
Steve Jobs rated passion as one of the biggest predictors of success. The reason he said that passion is so important was because that doing something on your own in life can be so excruciatingly hard that if you are not extremely passionate about it, you are going to give up.
When you pick something you are passionate about, chances are that you are going to get it even when the going gets tough. However, that being said sometimes things are so hard that you simply start losing passion for what you are doing. Or maybe things are not that bad but you still no longer feel internally driven to work on your business.
Just because you are losing passion for what you do, doesn’t mean it is time to throw in the towel. See if you can do things differently or take up new challenges in your business that make working on it exciting again. And obviously if it’s making you money, don’t quit! Try to see if you can somehow automate the processes so that your personal presence is not required as much but don’t quit a business making you money unless there is a far greater proven opportunity available to you.
However, if you don’t have passion and you are slogging away for a considerable period of time, over two years with absolutely no glimmer of a hope that things are going to get better, it’s one of the signs that your business is in trouble.
2. There are no Customers or very few of them
One of the greatest yardstick for whether or not your business has a decent chance of succeeding is simply having customers. It is not the only yardstick as I will explain later, but if you don’t have any customers even after a year in business, there is something seriously wrong.
How do you know whether the product or service you are selling is viable business wise? You may love what you create but if others are not loving it, you are not going to make much money out of it. You may think you are putting your heart and soul into your business. But that is not enough. People need to find value in what you do. Great marketing and sales skills only work when what you are providing to people actually solves their problems.
That’s why brutally honest feedback is very valuable in business. Go seek out customers or your target audience. Try to sell to them. If they don’t buy, ASK for feedback. Ask them what’s wrong. Is the price too high, is the product/service not suited for their needs? What is their need exactly? What is it they will be willing to pay for?
Many people may not answer, but some people love giving feedback! It maybe harsh but you can learn a lot from criticism. Go and implement what they say, especially if a few people share the same concerns over and over again. If the same issue is being mentioned over and over again, go and fix it and come out with a new version of your service or change the price. If the people’s feedback was genuine, this time some of them will buy.
If people still don’t care to buy your product/service despite repeated improvements after feedbacks, this is another sign your business is in serious trouble.
3. The market is contracting.
This simply means the industry you are in is shrinking. Even if you are making a lot of money today, if you continue doing what you are doing, over a period of time, the profits you make will continue to decrease because customers no longer care about your products or services OR similar services as much. It has nothing to do with you personally, it just means that your product or service has become obsolete because of newer services that are more in demand.
This has happened throughout history. Whenever an innovation happens, it pretty much kills a major chunk of a previously thriving industry. The candle making industry was huge up until the 1800’s but the invention of the light bulb and access of electricity wiped out a major chunk of it. The horse carriage industry was huge until the Automobile industry took its place.
Closer to present times. Mobile phones eliminated the need for pagers. Whatsapp and Skype severely impacted the market of SMS and Long Distance Phone Calls! So the point is things are going to keep changing as innovation happens. Just because you are earning a lot now in your business does not mean it is going to happen forever. Keep your eyes on the trends and be prepared for the change.
You also need to understand that there is no such thing as customer loyalty. The only thing that matters is value. If your customers get better value elsewhere, they will switch very soon. So if there is a new innovation in your industry that provides better value at a cheaper price (or for free) they are going to switch!
The only thing you can do in this case is to look out for the trends and be in a position to make the appropriate decision as quickly as possible.
Ask yourself. Is this industry realistically going to thrive for the next ten, twenty or thirty year? If not, then what’s your plan when things do change? There are three things you can realistically do,
1. You can choose to stay in the industry right now because it is still making you money and in the meanwhile set up totally unrelated businesses well that will earn you money when this one shuts.
2. You can stay in the industry but always be ahead of the curve and be on the lookout of new business models so that when innovation happens you can embrace it quickly and can continue making money in this industry or a related industry.
3. You can choose to go for an industry that has stood the test of time. For example there will always be a demand for Food supplies, hospitals, legal firms, teaching institutions, alternative medicine (that works) etc. However, do not expect to see much growth unless a major consumer mindset shift happens.
4. Expenses greater than income, no signs of improvement visible.
This is one of the surest signs that your business is in trouble. When it comes to running a successful business, No amount of Facebook Likes or You-tube Views or Website Hits are more important than hard cash. You can’t tell investors that they should invest money in your business because even though it has no chance of making money, it has a big social media following. You can’t feed your family with these metrics. You can’t pay for your grocery bills with Facebook likes.
No matter what changes take place over the years in the nature of how business is conducted, at its core, a business by definition is something you do for profit. The profit need not come immediately but it has to depend on a solid strategy that if you invest money today, there should be a good chance that the money will come back in the future. The amount of uncertainty you are willing to accept depends on you and your cushion of money.
Venture Capitalists funding high growth/high risk startups can take on a huge amount of risk because they have an even huger amount of money. Small business depending upon their own savings or loans from friends and family cannot afford to take that risk. Thus any business, but especially small business with limited cash need to keep an eye on the amount of money that is going out as expenses versus the amount of money that is coming in as a revenue.
If the amount of money that goes out is consistently higher than the amount of money coming in, sooner or later you will run out of cash. Once you run out of cash, your business shuts down, plain and simple, unless of course someone else puts some money into it to bail you out for the time being. But even then, if your business model doesn’t change and money keeps burning without enough coming back in, others can bail you out only for so long. If the model doesn’t change, it is still a failing business that will eventually shut down.
So be smart and monitor your expenses, especially if you are self-financing your business or taking loans. Be very very smart about where you put in your money. If you don’t have much personal savings or have loans to repay to others, it is better you re-evaluate your business strategy and move on to a new business model while you still have time.
