The thing that makes a company sustainable is its ability to solve a problem or multiple problems which is called creating value, some of that value is captured for the investors, the larger the denomination the better. Fortunately, at least for those who have the head for it, there is no shortage of opportunities to face problems in the world. One of the first lessons that we learn in problem solving is to reduce the issues to their least common denominator. This makes the problems easier to think about and can make the solution more readily apparent. The same can be said for solutions.
In my study of jiu jitsu the competitor prepares for his attack by building a string of offensive techniques which can be implemented consecutively. Those moves are second nature; they're practiced into his muscle memory. Similar to a company, the jiu jitsu practitioner moves forward to gain a dominate position. Once established he maintains that position and works to apply a finishing move that will cause the defender to surrender. In business the persuasion is more subtle, we don’t get to twist the customers arm to get him to purchase our wares. The customer already wants to purchase (assuming a market exists) what is offered, the question is why should he purchase it from your company? I have identified ten different ways that business people routinely use with great success to make money. Maybe you can think of others as well. If you do please share them.
The first is to build a Product that people will want or need. This process normally begins with the petition for a provisional patent, it requires the procurement of a particular set of assets (like say a factory) and the special technical knowledge to transform raw materials into something of value in the marketplace. A product also requires a mode of delivery.
The second way to make money is the Resale of a product or a mixture of products made by someone else. There are many kinds of resellers, those who have brick and mortar establishments, online stores, catalogs, street vendors and so on.
Services are another familiar way to make money. Anything from an individual whose paid to organize a hoarders kitchen to privately owned utility conglomerates operate as services. Services companies can be very complex and require enormous capital investments or they can be a simple one man show like a barber shop. The commonality to all service companies is they are labor intensive.
Agencies are another form of making money. In this case it could be reselling, a service or a combination of reselling and service products. The defining characteristic is that the agent does not own the assets directly, instead he contracts with the owner in a sort of partnershipping. The Agent takes a fee to market/deliver the product(s) or service(s) on the behalf of the owner. Insurance, real estate and healthcare are all examples of agencies where value is provided under this kind of arrangement.
Subscriptions to magazines, online content, special interest associations and newspapers offer another popular form of making money. This provides arevenue stream where the content sought is something that the customer typically enjoys making it unnecessary or requiring a minimum or effort to convince the client to renew. The subscription is viewed by the customer as a necessity to keep up with his hobby, interest or vocation. There is a regular attrition factor, but new subscribers offset any loss of revenue.
The aggregation of groups with shared interests is related to the subscription but like the Agency this form of making money is one step removed from actual ownership. An example is a social network like Facebook which allows users access to content that other users provide. By concentrating value in such a manner, the provider may monetize through enhancements. Charging for more access as LinkedIn does is one form of monetization, charging advertisers for their promotions is another.
Options represent another form of a money making strategy. When seats are purchased for a sporting event what is really purchased is the opportunity to attend the event. Only those carrying the options (ticket) may enter. Similarly options on commodities, company stock and other things of value are routinely bought and sold.
There is much risk everywhere in life. Insurance makes money for those who promise to pay out a certain sum (in exchange for a regular premium payment) in the event that a certain kind of event occurs. Just about anything can be assessed for risk and therefore insured.
The lease is a popular money making technique. Owners lease property for all kinds from real estate, and motor vehicles to seating for special events. The asset only has to be durable enough to revolve from one leaser to the next to make such an arrangement work.
The final way to make money (at least the ones I am aware of) is throughadvertising agency. Many companies are able to make money bundling products and services in multiple ways. The more ways that you can figure to generate positive revenue streams, above the cost of goods sold (COGS) for your own company the more stable your business will be.
However business is not a static game but rather it is a competitive environment. So it follows that there will typically be others who are also in a position to offer similar value to your existing customers. Having a patent or proprietary interest in your product is a great advantage. Even then new innovations will arise to challenge your position.
So it is most important that we use the best tools to accurately gauge the worth of the value which our company provides and adapt continually. Remembering that change is the only constant in business.
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