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Refining Business Model

Nortec is now in our 20th year and it looks like it will be a good one. I am afraid to get overly optimistic with the economy and markets just recently improving. Many companies are showing good results and have used the difficult times to make the hard decisions on how to run a leaner business. Business leaders are not in a rush to add non-revenue producing overhead. The result is businesses are creating a more successful business model!

A successful business model is the silver bullet! Ok, it is not a silver bullet; I just wanted to say that! A successful business model is one of the key success criteria and something that business leaders need to continually analyze to try and find ways to improve. Otherwise, you could end up with “bullet ridden body syndrome” – essentially a business with so many holes, there is no hope. If the business model is broken it does not matter how much business you bring in and how great of work you perform you will just create more of the same problem and this is usually in the form of losses.

I used to think that scaling a low profit or break even business model would get the economies of scale and then somehow the business would go through metamorphoses with the result of a thriving well established business at the other end! This is the model that you sometimes see venture capital drive businesses toward. In some ways it makes sense, as you need a minimal size otherwise profit is not material. If you can pull this little maneuver off great! The challenge is that driving profit in a larger organization is not really any easier and may even be harder. Figuring this out and driving a profitable business in every stage ensures that the discipline needed is in place and the model works. Then the questions become: 1. Will the business model scale? 2. Will the business grow?