How to Avoid an Unprofitable Business Model

There are so many business models corporate companies can pick from; all of which differ in one way or another. However, it's important to know that not all of them are profitable. Altogether, the profitability of the model you employ depends on a range of factors in your business, such as your budget, loan exposure, your business flexibility, and much more. This article is poised to educate on the best way to avoid business models that will end up being unprofitable. Continue reading to get the full lowdown.

Implement your budget and monitor it

An unsuccessful business model can be avoided by simply implementing your set budget and keeping a close watch on it. By so doing, you will be in a much better position to keep all expenses under control. What’s more, following your financial plan strictly entails that funds will only be released when it's for the benefit to your organization, hence generating more revenue. Also, it's quite important to revisit your budget every quarter, if not every month. This way, as an entrepreneur you can keep your budget aligned with business expansion.

Seek expert advice outside of your company

Sometimes, business owners run an unprofitable business model out of sheer ignorance. This may be due to the fact that everything revolves around the organization, and no room has been created for external counsel. In every facet of the business world, there are professionals and consultants who are experts in their fields; their job is to open your eyes to opportunities and pitfalls that you may be too busy to notice.

While running a business, many find it impossible to separate their vision from the realities. Thus, outside guidance can help you discover so many new things about your industry. As those shortcomings are uncovered, you will equally receive advice on the best way to counter them. However, there is a need to embark on a background check before hiring the services of a consultant. This way, you will most likely hire someone with a good reputation.  Also, you need an individual who can justify their high fees as they deliver on their promise.

Stop bleeding money

To ensure that your business model is profitable, you need to stop bleeding funds. For one, you must identify all the avenues that money is eroding from. Then, your marketing resources shouldn’t be going into any channels that are not quite yielding profit. Even the channels that are currently earning proceeds should be narrowed down to the top 20, because face it, these are the only ones worth investing in. By so doing, you can restrict your investments to channels that are highly profitable, while cutting down on the less profitable ones.

In addition to all this, there are perks and facilities, which can equally be cut down on. A lot of money goes into water supply and electricity, so, it wouldn’t be a bad idea to turn off an air conditioner that is not in use. These measures save funds, which tend to add up in the long run.

Also, don't forget to cancel all agreements and contracts that are not yielding money. For instance, moving from an unnecessarily large office space to a co-working environment can save funds monthly.

Avoid unpredictability

ROI can be quite impressive during the first couple of months, but the results may not be significant in the succeeding months. Often, entrepreneurs spend so much time entertaining complaints from customers, or your off-takers may not be too pleased with your services. All this unpredictability is the direct result of inconsistency in business.

Unpredictability can be solved by creating a viable business process that will lend support to consistency in day to day business operations. Secondly, you need to implement standard operating measures in every single step of the way. Moreover, you should never overestimate the role external data plays in business, and your forecasting should always be based on analysis that is predictable.

Institute an advisory board of the company’s major clients

Your client, customers, stakeholders (whatever you may call them) play a huge role when it comes to profitability. They are the ones to either make your business model profitable or unprofitable. Also, your best customers are the ones who would be glad to see your business profit. For this reason, you need to allow these customers to point out your weaknesses and strengths in the business.

Armed with this information, you will be in a better position to improve his strategies from the customer’s viewpoint. Consequently, you will be able to develop products and services with greater demand from your clients, and of course, higher revenue will naturally follow.

Monitor your current loan exposure to the banks

Perhaps, you feel your current exposure to bank facilities is choking your business; simply ask your financial institution to restructure your loan. Sometimes, bank facilities can become a huge burden causing us more harm than good.

If your current business model involves a loan that is too much or you're over-trading due to excess revenue, the responsibility is on you to ask your bank for new terms. All in all, go for something that is a lot more convenient for you. That way, repayment won’t be eating into your profit so much.

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