The title of this post might lead you to believe I’m talking about being eco-friendly. And there’s no doubt that eco-friendly is important…but it’s not the sustainability I’m hearing about these days. CEOs are talking about their business models being sustainable. Meaning there’s enough consumer demand of a product or service for the business to endure.
There are many ways to make money but not all of them are sustainable business models.
For example, let’s say you create a product that people will want to buy during hurricane season. While hurricane season doesn’t last all year…it does come every year. So if you can build a plan to take the vast majority of your profit during the season, then reduce operations in off season, this could be a sustainable business model (Note that I said “could” – there are many other factors).
You could also create a trendy product like the beanie baby, pogs, or pet rock, knowing that you’re capitalizing off a fad. As long as you have other products to keep you going when the fad dries up, then the business is sustainable. Otherwise, it’s just a way to make a quick buck.
I recently had a conversation with a business person who was considering building a website offering tips and resources for a healthier lifestyle. Good idea? – yes. Important? – absolutely! Could they make some money selling advertising, sponsorships, etc.? You betcha. Is it a sustainable business model? Well, that’s what he’s trying to figure out.
One of the other things to consider if your business model is sustainable is the size of your audience. Let’s say your business offers a service. The service would be valuable to accounting firms that use XYZ software. There are only 500 firms using that software. This means your business only has 500 potential clients. Now, maybe that’s enough. Or maybe it’s too narrow of a niche.
Whether you’re a consultant, small business owner or manager at a manufacturing plant, you’re constantly involved in decisions about the products and services your organization offers. Part of making those decisions is not only to consider how much money is to be made but it’s also to evaluate how that new offering fits into the company’s overall business model.
Seth Godin wrote about something similar in a post called “Beware the Nile perch”. It talks about how businesses can get distracted by the new bright shiny object.
Or, they could focus on making money and forget to build a sustainable business model.
Image courtesy of Trevor Langbell0