There are many reasons why businesses fail. Here are four of the major reasons:
- A poorly constructed/flawed Business Model
- Poor execution of the Business Model
- External Threats (Competitors, legislation, economy etc)
- Selling services/products that do not solve a big enough problem or have little demand
What can we glean from this? Well, for a start, we can review our Business Model and ensure we have covered off on three of the above points. The external threats issue cannot be controlled as it is outside our sphere of influence.
That said, we can still conduct a risk analysis session and at least brainstorm some scenarios. Once we have a list of possible threats we can prioritize those that are most probable and design mitigation strategies ( actions to minimize the risk of something happening).
Next we need to design contingency activities – these are actions you take when a risk is realized. Say, for example, you have analyzed the threat a major competitor presents in stealing your large clients.
Mitigation activities may include strengthening relationships with existing clients, building and extending alliance partnership arrangements, developing new or better services and products.
Contingency may include having alternative business models to transition to already designed and ready to implement.
As for the other issues, you can review your business model by checking the following areas:
- Your Value Proposition
- Your customer segments
- Customer Relationship & Retention
- Your Channels (Distribution, Marketing, Sales)
- Your Overheads
- Your Revenue Sources
- Your Critical Resources (Intellectual property,trademarks etc)
- Your Operational Activities
Look for flaws or deficiencies in any of the above areas of your business model as well as your current systems of executing the critical processes within your business. If your business is not “firing on all cylinders” then popping the hood and testing ailing areas may result in excellent returns on effort (ROE).
Many businesses run without a formal or defined Business Model to guide them. Successful businesses invariably have defined and documented systems and processes that form the model.
Each process or procedure, checklist, metric or tool is in place for a reason. One important part of your model is the pricing structure for your services or products. Without a well thought out pricing model your ability to profit or scale your organization may be severely impacted.