If you have a demand and a profit you have a business, if not you don´t.
Sound quiet simple right, nevertheless, I have lived in the illusion of running a business without really having a demand and a profit many times during the last 20 years.
Maybe because I would really love to run a business within a specific area but sometimes also because I have asked a lot of people about what they think of the business and almost every single person have said “yeah I know that problem and your solution sound good”.
But will they pay for it and is it profitable? A lot of times this was not the case.
The demand framework is a simple but powerful way to evaluate if your business will have a demand and be profitable.
We use it as a simple way to frame the demand of a business, it´s profitability, business model and potential.
The demand framework consists of a customer axis and a price axis.
You can target your business to many customers or few customers, to a low price or a high price.
While the businesses that are in a high-end market (Louis Vuitton), mass-market (P&G) or golden-goose market (Apple) all have the potential to be profitable the ones that target their business to the labour of love market are often doomed to fail.
From this perspective the single most important decision you can make as regards to a business is what is the average selling prices of your product / service and to who do you target your business?
Every single element of your business, from sales model and market mix to product / service offering can be defined from this decision.
Before starting a business and using 3-7 years of your life building it use a bit of time to choose the right price and customer. It will serve you in the long run.
Join 2000+ subscribers on my free newsletter and get the tactics and tools you need to find your path in business and life.
As a young football player, I was told “you play as you practice” meaning if you want to be a professional football player you must create the best habit of practice that you stick to and act on each week. Your consistent small actions will then compound and lead to your goal. This simple lesson from my coach has led me to an insight that counts in football as well as in life: Goals, choices, and habits shape our lives and the daily habits and choices we make have a compound effect on our...
It might be new to some but here is a bold statement…humans don´t make rational decisions. In traditional economics a person is expected to weight the benefits and drawbacks of an action and choose the option in their own self-interest. We have all been educated to think this is true in business as well as in life but everyone that have observed real life behavior of people know that this is not right. In the high-speed society that we live in today real-world choices are very often...
A couple of years ago I learned the difference between a cashsuck business and a cashflow business and that I a lot of times have sucked at making cash do to this little difference. Here is the difference between the two kind of businesses: In a cashsuck business you provide your service and then you get your money. In a cashflow business you get your money and then you provide your service. In a cashsuck business you only make money 3-4 times a year. In a cashflow business you earn money...