In Part 1 of my No Man’s Land “4 Ms” article, I described how changing the model of certain aspects of your business can help accelerate growth. I cited the example of a Texas-based entertainment lighting firm who updated their business model and found success. Please find the conclusion of the firm’s story below.
How to Navigate Through No Man's Land: Optimizing Your Strategy for Success
Figure 3
The new model that the company adopted is shown above in Figure 3. What we see is that prime countries like Germany and the UK continued to be serviced directly; the smaller countries were also serviced directly.
Eliminating the prime country’s distributor’s profit margin enabled a price drop to customers in the outlying country, thus making the product substantially more attractive.
Margins Bolstered
Additionally the company went out to lending organizations in Europe (a multilingual broker in Amsterdam) and enabled leases to be subsidized at zero percent financing. This again was paid for by eliminating the prime country’s distributor’s margin.
The manufacturer’s margin was not diluted. The final customer bought lower priced product, availing themselves of zero percent financed leases. And the electronics company was positioned to sell more volume---because the customer’s credit line was untouched, enabling follow-on sales of accessories and parts.
The above example has highlighted a case of international trade, finance and margin management. The manufacturer was not a party to the financing agreement. No revenue recognition or tax issues were raised by this approach.
Changing Your Business Model for Growth
This is just one example where a company changed its basic business model without too much disruption to its customers and operations, contributing to help it get past No Man’s Land to a new level of growth. For many entrepreneurs, the choice may not be as straightforward. But the principle is the same: a willingness to modify the business model.
The common thread? As middle market companies systemize their operations, their business model must change—to accommodate greater delegation of responsibilities within the organization and professionalization of the business in its dealings with customers and suppliers. More next time on navigating around the Four M’s of Model, Market, Money and Management.
About the Author
Peter Duff is a versatile operating executive with a long record of accomplishments running a wide range of companies. As an EVP, COO and CFO, he has been responsible for significant improvements achieved in revenue, margins, expense and cash levels. Contact or learn more about Peter here.
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