How many companies really have a business model that is thought out repeatable and used to consistently deliver their value proposition to their customer? Okay to be fair most companies have a business model otherwise they could not serve their customers, but are they really clear about what it takes to deliver value to their customers?
Small companies starting out whether offering a service or a product will go from few to several clients to the need for extra employees to fill in the gap, and then skip to the organization chart building out boxes with functions, titles and what these positions are meant to do based on common models or other startups but are they really building out the right organization to the support the business model they have developed?
A business model will clearly articulate how the value proposition of a company is delivered through a product or service to customers. It details how to build customer relationships, develop channels, details revenue strategies and details the resources/cost required to support product or service delivery. Small companies typically going from scraping things together to throwing more manpower at it to straight to drawing the organization chart without revisiting the business model if there ever was one.
I encourage small business to use a simple tool like the business model canvas to build a business model even if they never actually get to use it for several years. While it may not be relevant in the early days as the company grows the business model will be used to:
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- Keep the firm grounded in its original vision on how to deliver value to the customer
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- Help guide the roles and functions to be created and their priority
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- To test whether delivery of new products and /or services fit in with the current business model
Some industries tend to have a well thought business model because they take a rather templated approach; eg in technology startups every Founder is clear that at some point they will have a Sales and Customer Success Team and there are common models to apply so that defining a business model is not a very creative exercise. In one digital startup, rapid growth subdued the business model focus and teams were just delivering until the sales/ service delivery model was stressed at which point they realized they needed to step back and figure out how to improve their after-sales implementation approach. By then they were in the tens of millions of dollars of revenue and had over fifty employees.
You might want to know how you start not just thinking but applying your business model early so that it doesn’t end up being a major task that not only stresses the founder but leads to frustration as new team members are onboarded or results in random disconnected operations that have to be knit together again.
There are three things to consider:
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- Policies – the guidelines by which your company operates, we will focus on customer related policies
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- Processes – these will be partially defined as you have already defined your business model
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- Communication – how you will communicate with associates throughout the organization
It may surprise you that I did not include an organization chart, and that is because the organization and staffing development will be driven by either core functions requiring more resources, and/or available funds. So that will sort itself out once you start adding these new staff members as Founder CEO you have to think of the interactions within the model itself. But this is about starting early, making sure you’re not waiting to feel the pains of frustration, complexity or silos.
When it comes to policies starting early means figuring out the rules that guide the customer interactions and product/service delivered. Policies such as payment terms, refunds etc. are the first to think about as they are part and parcel of the sales process. At the early phase founders tend to accommodate custom solutions since the business is strapped for revenue. While in actual fact one may say “Yes” to these clients in the interim it may be important to still build policies/guidelines around how client features/special requests are handled. If it is software then it doesn’t hurt to start prioritizing the product backlog and every 2-3 mos. doing a quick feature road mapping exercise, plans 2- 3 versions ahead, including .5’s. Getting a system early (even if you don’t use it) will save you from sticky customer situations in the future.
Processes here refer to the actual business model you are using to deliver the product or service to the customers. Start with being conscious of the methods you are using the most, noting what is working most of the time and which steps lend themselves to evolution into a smooth customer relationship experience. Keep noodling what this customer sales/success or CRM cycle looks like. Often startups initially use bespoke sales methods but once steps are used 60 – 70% of the time go ahead and document the process (revise occasionally). Another yardstick is after you share it with more than one person it is worth putting parts of it on paper. By your first leadership hire you will have a few artifacts to share, and they will be able to hit the ground running without draining your time.
Lastly communication and alignment channels, often people wait to get over fifty people to start building the links and glue that will hold the organization together and by then teams are working in silos or the company is split on whether meetings are too many or even necessary. Start developing habits early. When the company is still small it’s great to just roll-up ones sleeves and collaborate however very soon grabbing the next guy will become harder and the layers to get to the CEO will increase. Start building reports and regular communiques even for just a group of five. These are tools that you as a leader will leave behind as you begin to build the organization however, they are the pieces of information that you need to stay informed and make decisions. You are “leaving them behind” like breadcrumbs as the layers deepen pass them along and eventually, they become the very same mechanism needed to communicate what is needed from the developer, salesperson, front desk associate to the CEO. No need to reinvent the wheel. Key team members are familiar with these tools and will disseminate or share them on your behalf.
Usually, most companies will say they have some of these elements somewhere and if they really want to pull it together, they can. This is not just documenting however actually starting to apply and gradually build systems intentionally, beginning to build the space for operations while still in a busy, startup environment wearing many hats. Keep weaving the pieces together adding key decision making and update forums which can be leveraged as the company grows. Maintaining a regular practice of applying policy, process and clear communication leads to well running, ready to scale companies.
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