MBA2256 How to Choose a Business Model That Works For You

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I'm your host, your coach, your teacher Omar Zenholm. I'm also the co founder of Webinar Ninja, an independent software company I started with my co founder back in 2014. And in today's lesson you will learn how to choose a business model that works for you. Choosing the right business model is actually a very critical step in your journey as an entrepreneur. Sometimes we fall in love with our business idea. We forget that the business model is what's going to run our day to day life, what we have to do to make money. In today's lesson I'm going to break down in simple terms what is a business model in the first place? What are the options out there when it comes to the different kinds of business models you can build your business around, as well as some of the pros and cons of different business models you can choose from. My goal in today's lesson is to give you all the options to inform you so that when you're choosing a business model, or maybe even tweaking the one you have right now, you could choose one that fits your skills, fits the things that you like to do and your lifestyle. So let's get into it. Let's get down to business. I wanna start today's lesson by just breaking down what exactly is a business model in the first place? It's such a jargony word that's used when people talk about business, but all it really means is how you make money. How does your business make money? How do you acquire customers? How do you convince those customers that you have something of value? How do you sell to them how do you, how do you capture that sale and earn money? How do you service that product and make sure it's delivered to the satisfaction of the customer? This, in essence, is your business model, how you're able to serve your customers and make money in the process. The most common business model that people think about when they think about business is creating a product and selling it. Like creating a T shirt with your own customer design and selling it on your e commerce website. The model here is that you're creating something, you're offering it to your customers for a price. They give you that money, you deliver the T shirt. In this business model, you are responsible for creating something, something physical and delivering it physically to somebody's house, right, or to somebody's address. But this is just one of many different business models out there. For example, many people make a living as an affiliate, meaning that they don't even sell a product that they have created. In fact, they don't even touch the product at all. They are recommending a product that exists out there in the market as an affiliate. They get an affiliate commission when a sale gets made. Their job is to promote that product and to build a really healthy business around affiliate marketing. You're really a content marketer. You're building content around the topic or niche of the products. You're an affiliate of how you make money. Well, you promote the product and you get a commission. That's how you make money. That's the business model. Let me give you another business model, something you probably use every day. Spotify. How do they make money? Well, they actually can make money in a couple ways. One is through their free account and the other one is through their paid service if you sign up for their free account. How do they make money? Well, through ads. Advertisers want to run ads on Spotify. They pay Spotify and they expose those ads to people that are free users. Now, if you're a paid user and you're paying a monthly or annual fee, Spotify collects that money from users and in exchange, they allow you to stream their music and podcasts. Now, remember, with music, there's a cost here. Not only just the technology of the streaming services and all that kind of stuff, but also there's some royalties you have to pay the artists that you are listening to. So with every business model, there is some costs involved and of course, revenue how you actually earn money. So now that we've got the definition of business model out of the way, and I've given you some examples, what does this mean for you? Well, the question really is, how do you want to earn your money? What do you want to do? How do you want to spend your days in your business? For example, I used to run an e commerce website to sell physical products which were custom tailored clothing for men. This is one of my biggest online businesses I had over 15 years ago. And my business model is basically people go on my website, they would order a custom shirt, we would create the shirt for them based on their measurements and we would ship it out to them. Now, in this business model, I have to deal with my suppliers, people that supply me, the textiles, the clothing or the cloth for the clothing and the buttons and the thread and all that kind of stuff. I had to deal with labor. I had to deal with people that are actually sewing the shirts. I had to have staff for packaging these items properly. I had to deal with shipping companies, international shipping companies. So if you're hearing this right now and you're like, wow, that sounds like a lot of headache, then this is not a good business model for you to pursue because you're going to have to deal with these challenges day in and day out. If you don't like to manage staff, you don't like to manage suppliers, or have to deal with inventory and all that kind of stuff, then your physical business, as good or exciting as the idea might be, might be not right for you in terms of doing it day in and day out. The actual practice, the practicality of running that business. But somebody who's in a similar business, like a clothing industry business, it doesn't mean they can't follow their dreams and be in this niche. They can change their business model. Instead of selling actual shirts like I did, they can sell coaching on how to dress more stylish. One of my favorite YouTubers and friends, Antonio Centeno, has a great YouTube channel called Real Men, Real Style, and it's all about this. He creates all this great content. He has this huge YouTube channel. He earns revenue on YouTube as a partner, you know, through ads. He also sells courses and books and coaching. So he was in the same industry I was, but his business model was different. And that leads me to another business model you may want to consider, which is digital products. Now, when I say digital products, I'm not talking about software. I'm talking about courses or coaching or books or guides or templates. These are products that live online and really have no cost to mass produce. Meaning if I create, let's say, an online course, once I can sell it to one customer, I can sell it to a thousand customers and the price of reproduction is pretty much nothing. So with this business model, I invest time in building a product. I then sell it at scale over and over and over to other customers. Now, in order for you to do well with this business model, you have to be comfortable teaching and explaining and being on camera. Because again, these are courses. Because this is how you're gonna spend most of your time. You're gonna be spending your most time marketing and writing copy, or at least hiring people to do that for you. So the point here is, understand when you create your business and you say, okay, this is how I'm gonna create my product, this is how I'm going to sell it, this is my business model. Think about, what does that mean practically for you? Every day when you go to work on your business, do you want to be doing those activities? Is that something that's conducive to your life, your lifestyle, your situation with your family right now, or even just your personal preferences? My advice when it comes to choosing your business model is to really do something that you enjoy. Because business is hard as it is. You don't need to make it hard on yourself by doing things you don't enjoy. Things that you don't want to do when you get up in the morning. So for example, my background is in teaching. I was a teacher for over 13 years in the classroom. I have a master's education. It's what I love to do. So I created a business model that allows me to teach as much as possible. I run a lot of webinars, I create video content where I'm teaching, I create live courses, I teach via email through my email newsletters. I teach on this podcast. You get the point. So I have chosen a business model that allows me to do something that I enjoy. Because I know that business is going to be a grind and some days it's hard. And what gets you to do it is that the things you have to do to get up and build your business and improve are things that you really feel comfortable doing. Something that you just know is in your wheelhouse. If you're a non confrontational person and you don't want to deal with lots of employees or staff or suppliers, then think twice about your business model that incorporates these elements. I'm not saying it's impossible to run a business with a business model with aspects that you don't enjoy. Of course you can do it. But why? Why would you put yourself through that?

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Investing involved risk including risk of loss. Zero Account fees apply to retail brokerage accounts only sell order assessment fee not included. A limited number of ETFs are subject to a transaction based service fee of $100. See full list@fidelity.com commissions Fidelity Brokerage Services, LLC member NYSE SIPC I want to mention a couple things that you can look out for when you're choosing your business model. Think about the way you earn cash or revenue. Are you comfortable earning your cash or earning your revenue with just a handful of customers? Meaning if you have, let's say a consulting firm and your contracts are about $100,000 for a year and you're gonna have three or four clients and that's basically gonna be your business, are you comfortable with only having three or four clients or going after that high price point and also understanding that if you lose one of your clients, it's a bit of a blow on your revenue? Some people are comfortable with this because they're okay with selling at a high price point cause they just feel it's easier to sell to three or four people for a hundred thousand dollars rather than, you know, thousands of people at a few hundred dollars. Some people like to earn revenue at smaller price points, like a ebook for example, that sells for $10. It's only $10. So they feel like this is something they're more comfortable with selling. But also if they lose a customer, it's not a big deal. Or one person doesn't buy, they lose that deal, they can get another customer easily. Now obviously you're going to have to have a lot more customers to earn a few hundred thousand dollars. But just keep this in mind. And of course it doesn't have to be these two extremes. It could be somewhere in between. Maybe you're selling a product that's $500 and you just need a that product every single year. Now remember, in this thought experiment, when you're talking about the number of customers and your price point, just remember your costs. If your costs are low, then that's a different story. You know, if you have a digital product, for example, but if your costs are high, like you create a product from scratch, like T shirts, for example, where you have to pay suppliers, or let's say a software company where you gotta pay for servers and employees. Don't confuse revenue with profit. Make sure that you're still profitable and you're getting enough customers to be profitable enough to make the business worth your while. One more tip. When it comes to this topic, some of us, we look at success stories, we look at heroes of ours, entrepreneurs we look up to, and we say, I want to be like that person because I like the result. I like what they, you know, what they look like right now, whether it's the things they have in their life or the things they get to do, like speak on stages or be an expert or be a thought leader. But they don't actually look at what they had to do to get there. What are the actions they had to do? And most of us, if they looked at those actions, would feel like, well, maybe I don't want to be that person. Maybe I don't want to have that journey because that doesn't align with the things that I want or the way I like to live my life. Most people don't see the sacrifices that people make to get to a certain point in their career. Now we're all going to have to sacrifice. We're all going to work hard. But not all sacrifices are the same for everybody. For example, somebody who is 22 years old and has no family or liabilities or people to take care of might not mind working 12, 13, 14 hours a day. They actually maybe are proud of that. If you're a social person and likes to talk to people every single day in person, maybe being a software developer and being behind the computer for 10 to 15 hours a day is something that is not conducive to you. So just think about what it took to get to that level, what do they had to do? And just see, is that something that you want to do as well? We all have to compromise at some point and just find something or find the business model and the actions that align with those business models that we're willing to do. They say, that's worth it. It's worth it for me to do those things, to get the result that I'm looking for. Thank you so much for listening to the 100 MBA show. Hope today's lesson helped. If it did, let us know. Leave us an Apple Podcast review rating. You could do so on Spotify as well. Just make sure you're following us on those apps so that you can give us a rating and review. Before I go, I want to leave you with this. I've built businesses where I thought it was a great idea. I got excited, I just jumped right into it, started building, started selling, and I inherited a monster. I basically inherited a job I hated. And even if you start out with the business model that is comfortable for you, you got to check yourself because things can kind of change under your feet. You know, things can change slowly. You can start making decisions that will change the way you work and to change the way your business is set up. So reevaluate your business model, even if you're an established business today, and see if there's things you want to change in that business model to make it more conducive to the way you want to live and the way you want to work. It's your job to stay on top of this. No one's going to do it for you. Thanks so much for listening and I'll check you in tomorrow's episode. I'll see you then. Take care. Hey, Fidelity. How can I remember to invest every month?

With the Fidelity app, you can choose a schedule and set up recurring investments in stocks and ETFs.

Oh, that sounds easier than I thought.

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Yeah, I do now. Where did I put my keys?

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