Friday, February 15, 2013

Idea: Business Model

Here's a business model.  I've been trying to figure it out in my head for some time because I wanted to offer it to Lori, but she's not interested in it.  So, I'm posting it here in case anyone else wants it.  Right now, it's tailored to an on-demand food business (commission bakery, catering, etc.) but I think there are elements that could be adapted to other types of businesses.  I'll describe it from the terms as a commission bakery (that is, no storefront, all products made based on pre-orders, pre-paid whenever possible) because that's the lens I've been thinking about it in.

The model was designed to:

  • Control growth / scale on your terms
  • Produce repeat business
  • Create strong brand advocates who will brag about you to all their friends
  • Allow for on-the-job improvements to the product with a less-demanding audience
  • Create strong demand through exclusivity
  • Control costs and initial investment
  • Allow flexibility / part-time / time-off
  • Eliminate advertising costs


INITIAL SETUP

First, you need a good, personal name.  While you might eventually consider franchising or scaling out the endeavor, this name needs to be very personal, maybe even your name.  Your business is going to be the relationship with the customer so that personal connection is vital.

Next, a value proposition.  While other keys will come into play, this is one of the more tangible hooks for future customers.  This might be the use of all-natural products or the lack of dyes or gluten-free or lactose-free or something.

Finally, a very simple website.  It should be either black with silver/gold typography/iconography (to denote richness and exclusivity) or white with a soft color palette and a muted closeup of the product to denote the attention to detail and the quality craftsmanship.  The website is not for directly selling.  There's no contact information (beyond the general geographic area you cover).  This tells your story and reinforces the exclusivity of your product.


GETTING OFF THE GROUND

This can be done simultaneously, or even before you have a name and a website.  Take a few commissions for a few friends.  Work hard on the product, sell it for less than the materials, make sure they are supremely happy with the work.  (In Lori's cases, a few times she completely scrapped and remade cakes because she wasn't happy with how they turned out.)

Collect feedback and start amassing a catalog of favorite recipes.  Make notes on what worked and what didn't, who ordered what, and what their feedback was.  (Keep track of what you charged them as well - you will eventually shart charging a fair market price for your products, but you'll want to increase prices slowly on your original customer group.)


LAUNCH

When you finally decide to go legit -- after about 10-15 commissions -- create some laminated cards, each individually numbered.  These are your customer numbers.  The first person who paid you to make them a cake is now and will always be customer #1.  They don't actually need to keep the cards because they (and you) will definitely remember they were customer #1 or customer #2 or customer #3.

Hand-deliver these cards with two cup cakes, a hand-written note and one referral card.

As you've probably guessed, not just anyone can call you up and place an order.  You must have a customer number, or a referral card from a customer, or the third option - a monthly commission lottery on Facebook.

You will determine how many commissions you want to make a month, and produce a monthly email newsletter letting people know about the new products you've created and comments from customers who recently received a commission from you.  You will need a calendar as this supply crunch will lead to people wanting to lock in a reservation (and pay for it) months in advance.  Limiting commissions will also allow you to schedule around busy times in your life.


REWARD YOUR CUSTOMERS

Your customers are your partners in the process and because you've put out an awesome product that you can't just pick up the phone and order, they will love the exclusivity you've given them.  This will cause them to subconsciously rate your products higher and will cause repeat business.

You can then reward customers by keeping prices low for customers who generate great referrals, you can also reward them by giving them referral cards on a regular basis (not a pyramid scheme, they don't get a cut on referrals) and you can even give them opportunities to beta test new products/recipes you're thinking of offering.  (Not to mention little things like surprising them with a cupcake on the anniversary of their first commission, stuff like that.)

That's essentially it - a closed system that people will fight to become a part of, a kind of exclusivity that people will talk about (or even brag about being part of).    If you make a go of this, I'd love to hear how it works out, maybe I can learn from you and refine and improve it.
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