How to Choose Your Business Model

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If you've tried driving a car while talking on the phone with your headset, you know you still have a tough time driving.

The mind's ability to focus on multiple things while performing 100% on each doesn't happen.

Try watching a TV while you're working.

  • Your comprehension of exactly what's happening on TV sucks.
  • Likewise, your laptop-working-skills sucks.

(Protip: If there's something crazy happening on TV and you still want to work, try leaving your laptop in a separate room from the TV -- and run back-and-forth between commercial breaks; your grasp of both TV and on your work soars by freakish multiples.)

How Companies Destroy Revenue

Think of BoShmiSchmoSchmo Bobson.

  • BoShmiSchmoSchmo has a side business doing computer tech for small companies.
  • He also has a music business where he promotes local artists.
  • He also builds apps for the App Store to make additional revenue.
  • He also has a graphic design business for night clubs.
  • He also sells eXcess energy drinks to family members.

Now, he might present to the world that he's filthy rich; but those with even a slight understanding of IRR (internal rate of return) knows he's full of shifreakiskablamamas.

  • If Opportunity A gives you a 5% return, and Opportunity B gives you a 20% return, you should really pour your resources into Opportunity B (with some hedges depending on how risky you're feeling.)
  • Doing anything else just destroys your earning potential.

BoShmiSchmoSchmo Like Corps

If you think of BoShmiSchmoSchmo as an actual corporation, where the corporation dives itself into multiple revenue opportunities without a singular focus, you think of conglomerates:

  • Conglomerates with strong central management just don't happen anymore in free-market economies.
  • Companies that have tight business models ('making money on X') have made them obsolete.

Why Have Conglomerates Failed?

Congolmerates are multi-taskers who couldn't maintain their focus on becoming great at one thing; trying to become great at multiple things rendered them S-U-C-K at all things.

Trizzy terms it The Tiger Woods Concept: The longer you work on your focus on making money on X, the better you become at X.

It's like you're playing basketball for the first time, and each and everyday that you working on improving yourself at basketball, the better player you become.

  • For instance, you suck more than Jim at basketball because Jim has practiced more hours of basketball than you.
  • Now, replace basketball with X -- and you have your model of The Tiger Woods Concept.

Win By Skill

Companies arbitrarily dabbling in various ways to make their money destroy their chances at becoming great at just one thing.

Instead, companies with a tightly-focus business model, in which they improve their "Tiger Woods" daily, ultimately defeat anybody who even tries to compete with them.

For instance:

  • Google's business model remains tightly focused on advertising.
  • Walgreen's business model remains focused on convenient local stores.
  • Goldman Sachs's business model remains focused on helping companies succeed financially.

The "closest-thing-resembling-a-conglomerate-with-freakish-success" Berkshire Hathaway succeeds because its central headquarters takes an absolute-hands-off-approach, letting the subsidiaries' homegrown managers run their companies as distinct operations:

  • Geico's business model revolves around insurance.
  • See's Candies's model revolves around confectionery.
  • Dairy Queen's model revolves around soft-serve fast-food.

Yes, you can make money with your business by diving into multiple revenue-generating opportunities, but diversifying your funds on lesser profitable opportunities keeps your most profitable opportunity from succeeding to its fullest.

Say NO! to multi-tasking, and start focusing on becoming great at one way to make $$$.

(Caveat: Your one way to make money should be eternally relevant; confining your business model to "Apple iPhone apps" probably won't be relevant 50/100/200 years from now; "helping people organize better" will.)

Focus tightly. Improve daily.

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Posted on October 04

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