3 Painful Misunderstandings New Entrepreneurs Have About Business Models that Kill Their Dreams & Leaves Them Frustrated, Scared, and Broke

How Come So Many Great Ideas Struggle to Get Traction or Any Real Success?

As Steve Jobs stated in an interview with Fast Company, “Design is not just about what it looks like.  It is also about

Tawn Holstra Auston

how it works”.  Designing a powerful business model is about what works!

I coach a lot of new entrepreneurs.  Frankly, that is my bread and butter.  So I take their success very personally.   I am in the business of figuring out what really works to get started in 2018 and it is also my business to keep on top of the constant innovations occurring in our field.

There are some very predictable mistakes that new entrepreneurs make, in their enthusiasm to bring their dreams to life, that undermine their efforts from the beginning.  One of them is not taking the time to design a business model that supports their long term goals.  So they spin their story to launch and do a decent job, yet limp along due to the business model they have chosen that does not allow them to thrive, getting frustrated, thwarted, and stressed about money, otherwise knows as broke.

Whenever I speak to an entrepreneur who is struggling to make ends meet, works 80 hours a week just to make enough to keep the lights on, and their idea sounds like a great idea… the first 2 things we will look at is the Offer, and the Structure for Fulfillment.  How are you making and delivering your offer in the market?

What is a Business Model?

A business model is a structure that allows for the profitable delivery of product or services to the end user.

Simple…

So, what are the 3 Painful Misunderstandings that Most Creatives Have About Business Models?

Let’s get right to it:

Misunderstanding #3:   Confuse a Business Model with a Business Structure  

Comment from new entrepreneur:   I’m an LLC (or whatever).

It is important to understand that a business model is different than a business structure.   When I first get this comment, I immediately understand that the new entrepreneur is thinking about S-corps, or LLC’s.   Sole proprietor vs C corp  and think that they are the business models.

It is true that certain business models can only be operated inside of certain business structures, but that does not make the structure a business model.

Best Practice is to choose your business model before you choose your business structure.   At the same time, all things are changeable, some much more complicated than others and by complicated I really mean expensive to change.  So better to choose the model first and then choose the appropriate business structure to scale the model.

Misunderstanding #2. It doesn’t make that much difference  

Comment from new creative entrepreneur:  I will choose that later.

This could not be further from the truth.   The business model can change everything.   The right business model can make life easier, harder, or even impossible to succeed.   A better way of understanding this is that the wrong business model can make it impossible to grow or scale your business.

Misunderstanding #1.   Completely unaware what a business model is  

Comment:  what’s a business model?

This is the #1 reason people choose the wrong business model because they don’t even know there is such a thing.    Most folks pick their business model by default.   They have a product or service they want to sell and thus they sell it however they do and a model is born.

So what is a business model and how do they impact your growth? 

 A business model is a simple flow plan (structure) for moving a unit (product or service unit) from design/creation to end user, profitably.    It is much more of a flow chart or a work flow chart.  It will answer the question, how do we make money and how much money do we need to get it profitable?  It will also answer How many people do we need to make this work?

A few basic principles about business models:

  1. There is not one that is better than another.  A business model creates the mode by which you do business.

For example, when I started Business 101 for Creative Entrepreneurs I was used to my consulting business model.  Private coaching and teaching classes for other companies and that worked for a while until I realized, as most consultants and coaches eventually do, that there is still a cap on how much work you can do and thus a cap on your income.

The pros were high fees and fewer clients, the cons were I was limited to those that could afford my fees and I was always going to be limited by my capacity to coach (time).

Cons were I was answering the same questions constantly and not experiencing any creativity in my ability to give more.  Plus,  I was missing a lot of people who really needed my services and were more of the clientele I was hungry to serve.

So I redesigned the business model to reflect a gym membership type of model.   Where members would pay a smaller monthly fee and make use of the on-line videos (equipment and pool)  and live weekly classes (think group classes, like yoga or Zumba) as they felt the need.    All the work was recorded so it was also more useful to those that had unique hours or were in different time zones.    From time to time, as private coaching (think hiring a trainer) was needed they could schedule for a reasonable rate.

One call or training session could have a lot of impact that way.

If I had tried to serve the clients I most wanted to support, those creatives that are passionate and want to help make the world a better place for all of us, I would have suffered by being broke or not reached them at all and suffered for not following my heart.

Another example is a brick and mortar store front that sells garden supplies.   

This model is usually designed to put out all the money up front.  The entrepreneur has to rent or buy the space, do all the work of making it attractive and organized and an example of what’s possible (for folks to get ideas) and inviting.   Then advertise and hope that folks come in.     It takes the most money and has the most risk of any of the models.

If you are already in this model, it can be enhanced (and most saavy store owners have implemented this already) by collecting email addresses and offering discounts to returning customers through loyalty programs.

It can further be enhanced by offering education, free or for a small fee, to bring in new potential customers —  like how to bring bees and butterflies back into your yard

 A third example of a business model is of a professional who wants to prepare to retire and wants to create passive income that he/she can count on once they quite going to the office   

The traditional model would be for the person to do all the work to write a book and hopefully have a best seller.    What most people do not realize is that writing a book is a huge undertaking and 98% will never sell more than 100 books, and those will be to their friends and family.

A more relevant model is to start by writing a blog, creating really good content regularly while they do not need the income (before they retire).   With good design and good marketing folks can make a real living within a year or two depending on how much work they are able to devote to it.

As the blog content accumulates, the book starts to be revealed, AND there is already a following that has been built during that year, who would want to buy the book.

 For more ideas about Finding Your Tribe read 3 Most Important Activities for Starting A Creative Business  

When I got started as a single mom with 4 kids and no money I was desperate for a coach, but never dreamed I could afford one.   That is what compelled me to start Business 101 for Creative Entrepreneurs to begin with… I wanted to give back and support folks who were working for what they loved.  Our basic program is $37 a month and covers all the basics, with a learn-at-your-own-pace system.

I invite you to accept the free gifts below.   I want nothing but for you to have enough faith in yourself to give try.  The world needs your love and creativity, now more than ever.

Be the spark and remember we are at your service!

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