Cranial Soup

A Recipe for Profit

2011-01-08T23:23:00.001-05:00

What Exactly is a Business Model?

The short and simple answer is that a business model is a recipe.

Just like a recipe for anything else, it's a list of ingredients and detailed step by step instructions on how to go from ingredients to final results.

If it were a recipe for lasagna, it would be a list of everything that goes into the lasagna (noodles, cheese, sauce, etc.) and step by step instructions on how to turn those ingredients into lasagna. It doesn't leave anything out or leave you guessing about what or how much you need. It's well planned out. You'll know what you need to acquire before you start, what equipment is necessary, and a general idea of how long it will take and how much it will make. If you follow it to the letter, you will make a lasagna.

In the case of a business model, it's all those things you need and how to combine them into the result, which is profit.

Now, how do you determine what ingredients and equipment you need and how to turn them step-by-step into profit? Vivek Wadhwa wrote a great article that will give you a lot to think about as you decide that for yourself and formulate your own profit recipe for your business.

Thank you, Henry Ford, for another fine product.

2010-05-24T07:36:00.001-04:00

Henry Ford didn't waste anything. Wood and sawdust byproducts from automobile fabrication were used to make charcoal.

While he didn't invent the charcoal briquette (Ellsworth B. A. Zwoyer did, in 1897), he did found the Ford Charcoal company, which later became the Kingsford Company.

When E.G. Kingsford, a relative of Ford's, brokered the site selection for Ford's new charcoal manufacturing plant, Ford Charcoal was renamed to Kingsford, in his honor.

Creative thinking and frugality turned a waste disposal problem into a money making opportunity, leading to the founding of a company that today manufactures about 80% of the charcoal briquettes sold in the US, and recycling about 1 million tons of wood scraps, each year.

Thanks to Henry Ford being such a frugal guy, and a smart one at that, Americans have come to enjoy the ritual tradition of going outside on a beautiful summer day and cooking our food there, with a smoky barbeque, rather than in our kitchens and heating up the whole house.

Good Faith is Not for Sale

2009-08-21T06:02:00.001-04:00

I recently came across an article on the company blog of Backstage Technologies, written by Russ Ovans, their CEO.

Here is what he had to say:

We were recently in negotiations to be acquired. Talks lasted about five minutes, but during that time, the VP of Business Development from the prospective acquirer kept warning us not to divulge any of the ingredients in our "secret sauce", lest the deal fall apart (which it did) and we ended up suing them for stealing all our invaluable intellectual property (which hasn't happened... yet).

Every time he used the phrase (which was often) I found myself becoming more and more amused. What the heck is a secret sauce? I assumed he meant competitive edge, or intellectual property, but being a marketing type, he liked using that buzzword instead. Wikipedia tells me that it means any component of a product that is closely guarded from public disclosure for competitive advantage.

So, what is our secret sauce? Do we even have one? We certainly do, and the primary ingredient is the knowledge regarding how to design and build a social game (and its underlying virtual economy) that is both engaging and monetizes well. That certainly constitutes a fair portion of our secret sauce.

But our special sauce (i.e., our sauce that is not a secret to any of our competitors) is our commitment to customer service. Anyone can steal that, but it takes a huge commitment.

This is what makes certain applications and services a joy to use...that human touch by an approachable team.

Without that, your customers will drop you like a hot potato for the first clone that comes along that provides what you do, AND goes the extra mile by listening to them and being approachable.

That human touch makes the customer feel like they are part of the team. It is one of the reasons why services like Friendfeed and the applications from DonationCoder have been as enjoyable to use as they are.

Excellent customer service creates loyalty. Anyone that has made good customer service the corner stone of their business, no matter what line of business they are in, and is considering selling their company to another, should think about this long and hard before making that decision.

There is one thing you can not sell along with the company, and that is good faith. Your customers gave that to you because you earned it. If you sell out to another company that doesn't take customer service as seriously as you have, your customers will jump ship after the sale, and the company you sold out to will run what you have built into the ground.

It might not happen in a day, week, month, or year, but it will eventually happen. The customers will eventually take back that good faith and give it to someone else that deserves it.

Do you really want to see that happen to something you built, something you made such a commitment to, and put a lot of effort and hard work into? Do you want to end up having seller's regret somewhere down the line, wishing you had found a better buyer that would have done the right thing with what you created, by providing the same level of service that you did?

Money isn't everything.

Before you sell out, make sure your prospective buyer is as serious and committed to customer service as you are. It will benefit you in the long run by allowing you to retain the good faith and loyalty you earned. Your former customers will be more likely to trust you in your next venture and be first in line to be your customers again, if they don't feel like they were somehow cheated in the sale.

Sell out to the wrong company and you will very likely be bad mouthed by the very people that once loved you, and they may never be willing to trust you again.

Cranial Soup

A Recipe for Profit

Thank you, Henry Ford, for another fine product.

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Good Faith is Not for Sale