A Business Formula combines four essential ingredients, or ‘building blocks’ of a business model:
1. Your own definition of Success
Is this just about money? Or not about money at all? Does it include your purpose? What about lifestyle considerations? With whom do you want to work? Do you want a big or small business? Local or global? There are many other dimensions you may wish to include.
2. Your Creative Talents and Passion
What is the creativity that you want to express through your enterprise? What is your passion? What kind of work inspires you? What is the energy that drives you? Understanding this is important for you personally, and also for the business formula.
3. Your Competitive Advantage
You have creative skills – but so do many other businesses! How can you compete when many others are better than you? The secret is to identify the thing(s) that you can do better than other businesses. In this way you can play to your strengths. Don’t try to compete where the competition is too strong. Choose an area of business that you can dominate. If not globally then locally, or in relation to a particular market. [Read more about Competitive Advantage in Section 15 of this course.]
4. Strategic Marketing
This is about focusing on the right customers, not trying to sell to everyone. It means recognising that not all customers are good customers. Find customers with whom we can be our authentic selves, because the ‘get’ us and are on the same wavelength. If we find the right customers that want the things at which we excel, we don’t need to do the “hard sell” because everything just clicks into place. [Read more about strategic marketing in my book ‘Chase One Rabbit: Strategic Marketing for Business Success’.]
The point at which we can connect our competitive advantage with the right kind of customers is the “sweet spot” that indicates where our business will be most effective. In this way we can get the best of both worlds: doing our best work and selling to customers who love what we do and are prepared to pay well for it because they value it. It’s not about a trade-off between our creative talents and market realities because here they come together in harmony. We do rewarding work and get paid well for it. What’s not to like?
This is what an effective Business Formula is all about.
In the diagram below, product/service 7 (in red) is the one in which we have the strongest competitive advantage, and the selected customer type/market segment (in green) is the one that particularly values this product. The ‘purple spot’ indicates the point where competitive advantage and strategic marketing connect.
This point should be at the heart of our Business Formula.
Download PDF diagram showing how the Business Formula is a combination of competitive advantage and choosing the right customers.
Read more about Competitive Advantage in a separate section of this online resource.
Read more about strategic marketing in my book ‘Chase One Rabbit: Strategic Marketing for Business Success’.
And it’s all about focus. It’s certainly not about trying to do everything and sell to everyone.
Here’s a case study about an English fine artist focusing on his competitive advantage and creative passion to devise a winning Business Formula:
An Artist with a Passion – and a Focus
What do do next:
– Define success precisely and in detail for yourself or your own enterprise. What are all the parts of your definition of success?
– Understand your own talents and passions, and analyse those within your business and team. These are the driving force you can you to propel your enterprise in the right direction.
– Identify your Competitive Advantage. You can do this with a combination of objective analysis of competitors and also from the experience of what works and doesn’t work for you in business terms. If we listen, the market tells us where the competition is too strong for us, but also what we are especially good at.
– Reflect on your current and past customers. Which ones were bad customers? And why? Which were your favourite customers who were a joy to work with? Why? The clues are all there.
– Define one perfect customer and devise a way to find them and approach them.