Choose A Business Model That Can Actually Make Money

Before you build a business, you need to understand one thing very clearly.

How does this business make money?

That sounds obvious.

But you'd be surprised how many entrepreneurs cannot explain their business model in one sentence.

They can explain the dream.

They can explain the brand.

They can explain all the features.

But when I ask:

“Who pays you?”

“For what?”

“How much?”

“How often?”

Things start getting complicated.

Your business model should not be a mystery.

At its simplest, a business model answers five questions.

Who is the customer?

What are they buying?

How much are they paying?

How do you deliver it?

And what does it cost you to deliver?

That's it.

Now there are a lot of ways you can build a business.

You can sell services.

You can sell physical products.

You can sell digital products.

You can sell subscriptions.

You can build memberships.

You can license intellectual property.

You can create software.

You can earn commissions.

You can create marketplaces.

You can own real estate.

You can create education.

You can combine models.

But when you're starting, I want you to resist the temptation to do everything.

Complexity usually comes later.

For a new entrepreneur, one of the easiest business models to understand is a service business.

You know how to do something.

Someone needs it done.

They pay you.

You perform the service.

Simple.

Consulting.

Fitness coaching.

Marketing.

Photography.

Accounting.

Cleaning.

Construction.

Design.

Real estate services.

Professional services.

Service businesses can often be started with relatively little infrastructure.

The disadvantage is that you may initially be exchanging time for money.

Then you have product businesses.

You're selling something physical.

Clothing.

Equipment.

Food.

Beauty products.

Accessories.

These can scale significantly, but now you have inventory, manufacturing, shipping, returns, margins and logistics.

Then you have digital products.

Courses.

Templates.

Education.

Software.

Memberships.

Digital products often have attractive economics because the cost of delivering another copy can be low.

But don't make the mistake of believing digital automatically means easy.

You still need demand.

You still need customers.

You still need marketing.

You still need customer satisfaction.

Then you have recurring revenue.

This is something I want every entrepreneur to understand.

If you have to completely start over every month, your business becomes exhausting.

Recurring revenue means customers continue paying on a regular basis.

Memberships.

Subscriptions.

Retainers.

Maintenance agreements.

Software subscriptions.

Ongoing coaching.

Recurring revenue can give a business greater predictability.

But recurring revenue comes with responsibility.

If somebody pays you every month, you have to continue creating value every month.

You don't get paid forever because you impressed them once.

Now let's talk about something entrepreneurs sometimes avoid.

Margins.

Revenue sounds exciting.

Profit is what matters.

If I tell you I have a company producing one million dollars a year, you still don't know whether that's a great business.

What if the company spends nine hundred ninety thousand dollars to generate that million?

Revenue is one million.

Profit is ten thousand.

Now imagine another company earns five hundred thousand dollars but produces two hundred thousand dollars in profit.

Which one would you rather own?

This is why you need to understand your economics.

Ask:

What does it cost me to create the product?

What does delivery cost?

What does labor cost?

What does marketing cost?

What does technology cost?

What does customer service cost?

What does overhead cost?

After all of that, what's left?

You don't need to become an accountant.

But you absolutely need to understand how money moves through your company.

Now let's talk about price.

New entrepreneurs often price from insecurity.

They think:

“What is the lowest number someone might accept?”

That's the wrong question.

Pricing should be connected to value, market conditions, positioning and economics.

If your offer saves a company fifty thousand dollars, charging five hundred dollars may make no sense.

If you're selling something interchangeable that dozens of competitors offer, the market may limit what you can charge.

You have to understand the value you're creating.

And remember:

Cheap is not always easier to sell.

Sometimes cheap creates doubt.

Sometimes the customer thinks:

“If this is really going to solve a major problem, why is it so inexpensive?”

Your price communicates something.

The goal is not to be expensive just to be expensive.

The goal is to create enough value that both sides can win.

Your customer wins because they receive a result worth more than what they paid.

You win because you generate enough margin to operate and grow the business.

That's a healthy transaction.

Now think about scalability.

Scalability means your revenue can increase without your costs and complexity increasing at exactly the same rate.

If every new customer requires all of your personal time, eventually you become the bottleneck.

That doesn't mean your first offer has to be scalable.

Sometimes you should start manually.

Learn.

Work directly with customers.

Understand what they really need.

Then you build systems.

Maybe you hire.

Maybe you automate.

Maybe you productize the service.

Maybe you create technology.

But don't automate something you haven't learned how to do manually.

Understand the process first.

Then automate.

I also want you thinking about customer lifetime value.

Imagine somebody buys from you once for one hundred dollars.

That's one model.

But what if they buy something for one hundred dollars and then purchase again four times throughout the year?

Now they're worth five hundred.

What if they stay with you for three years?

Now that customer relationship becomes much more valuable.

This matters because it changes how much you can afford to invest in acquiring customers.

This is why great businesses don't only ask:

“How do I get customers?”

They ask:

“How do I keep good customers?”

Repeat business.

Referrals.

Upsells.

Cross-sells.

Subscriptions.

Relationships.

Those can completely change the economics of a company.

Now let's simplify your own business.

I want you to complete what I call your One-Page Business Model.

Write this down.

My customer is:

Blank.

The problem I solve is:

Blank.

My main offer is:

Blank.

My price is:

Blank.

My approximate cost to deliver is:

Blank.

My primary way of finding customers is:

Blank.

My opportunity for repeat or recurring revenue is:

Blank.

And my long-term opportunity to scale is:

Blank.

If you cannot answer those questions yet, that's okay.

That's why you're here.

But by the time you finish this module, I want every answer clear.

Because you're not just creating a business that looks good.

We're trying to create a business that works.

A business that solves a real problem.

A business customers understand.

A business people pay for.

A business that produces profit.

And eventually, a business that can grow beyond you.