A powerful secret about business

By  John Paul



The little secret I’m about to tell you was inspired by some of the responses to last week’s survey.

To help you understand it, I’ll use a simple analogy.

A business is like a house. And every entrepreneur has a vision to build one.

Some entrepreneurs want to build a modest bungalow, and some others want to build skyscrapers.

Really, it doesn't matter what you want to build as long as it will make you proud.

However, less than 10 percent of entrepreneurs actually end up starting the project in the first place.

Why?

Like any project, building a house requires money. You need capital.

In fact, the bigger the house, the bigger the capital that's often required.

However, there is a powerful little secret that some entrepreneurs use to get around this problem.

No, they don’t change WHAT they want to build.

Instead, they change HOW they build the house.

Most people know this as a Business Model.

The business model you choose for your business can make a big difference.

It can significantly cut down the amount of capital you need to get started.

It can significantly cut down the type and quantity of resources you need to build your business.

And I’ll prove this with a real-life example.

Let’s say you have a dream to build a business that makes and sells beautiful and unique footwear.

You plan to make shoes for men, women, and kids.

In your vision, you see a factory with different sophisticated machines and hundreds of employees working hard to make your branded shoes.

It’s a beautiful vision, and you just can’t wait for it to happen.

But there’s a problem.

Building a big factory and hiring employees will cost you money. A lot of money.

And since you don’t have that kind of capital, you keep waiting and hoping that someday you’ll find the money.

In fact, you hope that if you keep reading John-Paul’s Friday emails, one day you’ll find that investor.

The problem is, it’s hard to find investors who will give you $5 million to build a factory from scratch.

But there’s another way around this problem.

And it has to do with rethinking your business model.

Nike is an interesting example.

Nike is a successful business that makes footwear and sportswear for millions of people around the world.

Last year alone, it made $36.4 billion in sales.

But guess what?

Nike doesn’t own a single factory that makes its shoes.

Nike doesn’t hire the hundreds of employees who work in the factories that make its shoes.

You know why?

It’s because Nike’s business model is not to “make” shoes.

Nike’s business model is to “design” and “sell” shoes.

And this is the business model that allowed it to start and build its business with much less capital.

What can you change about how you’re building your business?

This is a question that requires some creativity.

And as you know, creativity is boundless.


Two different people can start the exact same type of business, and I can guarantee you that the person with the more flexible business model will need far less capital and resources to get started.

You just need to think and tinker with your business model.

So, all I’ll give you here are a few tips to get you started and get your creative juices flowing.

1) Businesses that require the manufacture or production of physical products are generally more capital-intensive.

This is particularly due to the cost of space (farm, facility or factory), equipment, raw materials, labour, utilities, and working capital.

2) Buying finished goods/products from manufacturers is less capital-intensive and more flexible, and helps you get the business started and grow your capital.

Big-time entrepreneurs like Africa’s Aliko Dangote started with this strategy. He started with buying and bagging finished cement from manufacturers but now has his own factories that make cement.

3) Service businesses are generally less capital-intensive than manufacturing businesses.

4) Knowledge-based service businesses like agency, commission-based sales, training and consulting usually require the lowest capital to start.

Since the product you’re selling is a virtual skill or knowledge, the margins from service businesses are usually quite high.

5) Asset-based service businesses like transportation, software, gyms, restaurants, dry-cleaning, etc. can be capital-intensive if you’re looking to start with a bang.

Again, these are just some examples to get you thinking in the right direction.