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What's the perfect business model?
Pre-covid, Covid or Past-Covid...
This is part of a write up to go with the online webinar we are doing for some young businesses. We hope that you find them useful…
A good friend asked us to co-host an online chat with their entrepreneur teams.
His topic is
“Opportunities for start-ups in a fractured supply chain, Post-COVID”.
We thought we will need to be better than him and decided that our topic will be:
“The ‘almost’ perfect business model for COVID”.
We had been pondering on this topic for some time now.
What businesses will thrive even during extreme time such as a pandemic?
We will not go specific into what industry, but we will instead talk about the characteristics of the business…
Here it goes…
Since the pandemic had happened, a few characteristics had essentially shine over the rest.
We really do not know how various government determine what is essential. The supermarket is deem essential as they sell food and drinks to keep us alive.
Maybe it is easier to define what is non-essential. Non-essential means anything that is above the basic needs as defined in Maslow's Hierarchy of Needs.
It is no wonder that so many people started having psychological issues from isolating at home. But heck, we are talking about perfect business model here so we should have a business which predates on providing basic needs.
The one thing to notice is that basic needs during Maslow time and ours had differ. Our essential services are much wider in scope. Internet connectivity, watching Netflix, playing games on your Nintendo Switch, having food delivered to you at your home can all count towards essential services during a pandemic.
Due to the increasing complexity of production, the logistics of getting food from farm to table has become increasingly complicated and logistics can be seen as essential on a national level. Government had also realised the need for the capability to manufacture “essential products” within their national borders. With masks, PPE, medical gloves being sold to the highest bidder in the early days of the pandemic, national stockpile of masks and PPE become essential infrastructure.
Essential infrastructure could also be data centres which keeps our servers running and our economy connected.
Talents who are able to help with manufacturing to make mask in a short period of time had also become essential manpower. While companies like Beep Technologies* which enable mobile payments & telemetric data for vending machines had been deemed essential as the vending machines help with mask distribution.
It is good to feel" “Essential” and even better to be in the “Essential” category.
We had been operating in the startup world for a while and we are highly influenced by BaseCamp - Jason Fried on the concept of remote working. So being remote is not so remote to us, but for the rest…
Remote Designers and Engineers:
Being in the startup world, we are also comfortable in being remote. For the past one year, none of us are working from an office. We had a regular weekly meeting on a fixed day of the week and everyone can dial in to attend the meeting.
The remote workforce idea is ideal for a startup since there is a need to
maintain a low cost (office space can be a major expense here)
access to the best talent (from all over the world)
We used to work with a startup where the
co-founders are separated in two places - Singapore and Hong Kong
designers reside in Philippines
back-end and front-end engineers reside in Vietnam
data engineer reside in Singapore
Since COVID, we think the concept of remote could be expanded beyond designers and engineers.
Due to the pandemic, offices had been closed. But the administrative function of an organisation like human resource and finance need to continue. There is really no reason for administrative work to be handled in office other than building a camaraderie within the administrators.
For once, all the administrator is working from home assisted by their cloud services. Actually, administrative work can almost be in its entirety be done at home but habits need time to change. The pandemic created the impetus and we think administrative work may forever be changed.
The need to better track what administrative works need to be done also indicate that more automation could be implemented. A
Business travel had grind to a halt. While humans continue to crave human interaction, many who had done business travel will not be relishing for its return. A trip from Asia to Europe and back within 4 days is nothing fun at all.
For the first time, business development and sales are being done through online. The best things of all is that it actually works. More and more businesses are getting comfortable with closing deals online during this period. While we do not expect trade shows to go away anytime soon, the need to fly from Asia to Europe or North-America to do a business deal is gradually diminish.
Remote helps to cut cost, increase talent within the company. Now it can be extended to all segment within the company.
For many, the onset of the pandemic had really started the “downfall” of retail. But retail had been falling for years and the downfall only get accelerated during the pandemic. The upside to digitise the business and sell to the world brings about immense benefit. While a good part of the economy had been digitise, we believe that there is more to be done.
Direct to Customers:
Lots of wholesaler and manufacturers suddenly discover the beauty of cash. Now we can get meat, vegetables, fruits, dry goods delivered directly to your house directly. Wholesalers and manufacturer can get cash directly and not 30 - 90 days later.
If you still cannot figure out how to sell online, them how about engaging CombineSell? CombineSell is a SaaS platform that automates & simplifies multichannel e-commerce selling processes by aggregating popular online marketplaces into just a single platform.
Global Marketing Presence:
With the proliferation of social media/marketing sites such as Facebook, Indiegogo, Instagram, Kickstarter, Linkedin, Pinterest, TikTok and Twitter the possibility of marketing become boundless. You are only limited by your creativity.
Social media presence had become extremely important tool to engage and grow the business. Business can become global on the first day as you are able to target a global audience and test with them. It does not matter if you are selling board games like Lord of the Chords, Potato Pirates or even motorcycle Helmet
With an ability to reach customers directly through social media, it opens up possibility to draw in revenues from all over the world. Local businesses can go global on their first day!
Revenue is the key ingredient to any company surviving. As a new business, most of them have only one source of revenue. The main things to understand is that most business may continue to focus on a particular segment, they must be able to have have multiple sources of revenue to survive a pandemic.
The hottest business in the investing world is the Software as a Service business model. The investors can say whatever they like but the most important thing that attract them to the business is that revenue is technically recurring thus “predictable”.
One of our subscriber had commented that the our newsletter look like a form of recurring revenue. While we somewhat agree, this newsletter is created to monetise our research which had been a cost centre in the past.
Recently, Substack allowed writers to connect their custom domains to Substack. In normal times, SubStack would have created this as an additional feature. Now it had decided to charge. We guess some money is better than nothing! Looking at the response from the community, a lot of people paid their USD 50.
Motorist.sg* which is involve in the motoring trade started to put advertisement on their website and their App. While we were initial adverse to the concept, it had obviously work for them . Now instead of having just getting a cut from the car dealers, they have also advertising revenue from them too. A good deal which works for the everyone.
Amazon taught us is that we can always swap a cost to a revenue line. Build different type of revenue streams to diversify your business risk!
Relationship with customers:
Once the pandemic happen, the ability to onboard new customers become more difficult, thus making retention of customer critical. Research done by Frederick Reichheld of Bain & Company shows that increasing customer retention rates by 5% increases profits by 25% to 95%. We believe it to be so and it could be done by different ways.
Lots of product and services provide automated-service to their customers. Why do we provide a staff to answer a question which could be easily answered through a chatbot? The complaints do not come from a customer who cannot get a satisfactory answer but from a customers who had been waiting for an hour on a call and still cannot get a satisfactory answer.
One way to better automate your service is to do it through Novocall*. With Novocall you can automate sales calls, track call campaigns and chat with customers via WhatsApp, LINE, Messenger – all in one place.
Self-service used to be associated with low cost products. It is no longer that way. Customers are willing to self service if the self service takes up less time and is more convenient. Automatic Teller Machines (ATMs) have also revolutionised how people withdraw and deposit funds, and how self check out counters are revolutionising the relationship between the supermarket and their clients.
During the pandemic, we managed to get a replacement part from Philip through WhatsApp. That is just a much better experience than scrolling through their e-commerce site or their call centres.
And our favourite is communities which help one another. No longer a customer but a community (what a marketing spin!). Human inherently want to help one another and by engaging your customers as a community, one can build a good database of questions and answers which could help any newbies. Your customer basically become your advocate for your brand.
Our favourite communities come from the education space. When we are learning a programming language, the best help often come from the community!
Retain and deepen the relationship with your customers but it need not come at a steep price!
“Perfect” Business Model:
So the “perfect” business model would include
a low business operating cost structure,
utilising the best talents from all around the world,
being remote requires a level of digitalisation,
create direct customer relationships,
creating tons of data on the customers,
allows you to sell to the world through various medias,
which will create opportunities for multiple forms of revenue,
including recurring, unit and advertisement sales,
the customer could be kept happy
through automated, self-service and communities,
An almost perfect business in which the company while being FOCUS on their core business has a DIVERSIFIED Revenue Streams which has HIGH Gross Margin. The ability to continue servicing their existing clients using largely automated and self-service allows for HIGH Net Margins. Being able to deal directly with their customers and collecting cash means that there is LOADS of cash on hand allowing them to weather any calamities and allowing their business owners to pay themselves handsomely.
Wait! Isn’t that what we always wanted for every business we ever own?
Maybe the ideal business Pre-COVID, COVID and Post-COVID are not that different after all!
If you have any comments, do hit the comment button below.
*Beep Technologies, CombineSell, Motorist.sg and NovoCall are startups that we had helped in the past. We are also also backers of teams behind boardgames like Lord of the Chords, Potato Pirates and motorcycle helmet Argon Transform.
We do not receive any commission from any of the startups we had mentioned above. Do drop us a note if you want to get a sweet heart deal from the SAAS startup ww had worked with above or if you require any service to help you grow your startup as well.