Business Models are one of the key factors in determining future success. If you get the Business Model right, then the harder you work, the more money you tend to make. If you get it wrong, it may not make any difference how hard you work or how well you can execute a plan-- the harder you work, the more money you can lose. The dot-bomb era certainly demonstrated this in a big way. Napster had a terrific following but almost no revenues. So we want to evolve a Business Model that give us every chance for major, large scale success.

To see if we could produce a Business Model Scoring Machine that would act as a guide for entrepreneurs and intrapreneurs, we first looked at what our research has taught us about constructing Business Models. But first, let's redefine what a Business Model is:

"A Business Model is a one page description (usually in the form of a flow chart) of the 'engine' of a business. The Business Model follows the money (Suivez L'argent) from customers and clients to the business and through the business to its network of suppliers (the supply chain). It shows how products and services flow in the other direction, up the supply chain to the business and the business' clients and customers. Lastly, there is an 'orthogonal' dimension of information flows which describes how the relationships between the business and its customers and clients are maintained-- i.e., how marketing information flows so that potential clients and customers can learn about the business."

"The Business Model" for an Aspiring Entrepreneur

Use our Business Model Scoring (BMS) test only as a guide, which is all it is or can be. If your business model scores low it does not mean that you will fail just as a high score does not guarantee success. FedEx, for example, scored just 55%. This is because our BMS test is biased against Business Models that: a. require a lot of capital to start, b. require a large marketing budget to attract clietns and customers, c. take a long time to breakeven, d. have to create the market (e.g., the market for overnight package delivery did not exist when Fedex was started).

Nevertheless, Fred Smith succeeded brilliantly with FedEx by taking huge risks and many years of superhuman effort were required. So a low BMS score does not mean you won't or can't be successful. However, I would guess that if 1,000 entrepreneurs tried to start FedEx, only one of them (Fred Smith) would have succeeded. What we are trying to teach in Entrepreneurialist Culture is how to plan for success; so Business Models for startups that require a huge number of things to go right will score lower than simpler models that may evolve additional complexity over time, but don't start that way.

Entrepreneurialist Culture for entreprenureurs and intrapreneurs is focused on successful startups that can be bootstrapped and not on well financed, Venture Capital funded ones. So if your stratup has a business model that requires a huge investment in Superbowl ads before attracting your first launch clients, you will probably get a lower score than another Business Model that can be started for less than $100,000 say.

Business Model for Web Design and Development Company

Want to see what a business model looks like for a recent startup? Check out our version of the business model for i-SoldIt.com, a recent innovative attempt to become a national reseller for EBay.com and compare it to their competitor AuctionDrop.com.

For startup firms that have access to large amounts of VC funding, different rules seem to apply. For most startups though (more than 90% of all startups never have access to any large outside sources of investment capital), they better have the Business Model right from the get go because they don't often have enough funding for a second chance. So selecting the right opportunity with the right startup model is pretty important. In fact, Emily Barker's article in Inc.com about Greg Gianforte (Start with Nothing) makes a strong argument that bootstrapped businesses are more sustainable types of businesses anyway. Some type of capital rationing is almost certainly good for all business startups and new intiatives.

The BMS test is also designed to measure the potential for large scale success. So if you are interested in running a 'hobby' type business or one based on gadgets and gizmos, you are also likely to have a low score. This doesn't mean that home based businesses or hobby based businesses are bad businesses. On the contrary, if you know going in that your gadget, gizmo, small enterprise, whatever, is a hobby, you can only be pleased with the results.

For example, my kids operate a home based business (StreetPaddleTennis.com). If at the end of the year they have made a profit of $1,500 each, why, that's a great result for little kids (ages 11 to 14). For serious entrepreneurs and intrapreneurs, it's a disaster. (Their score on the BMS test was 65% btw. Pretty good, actually, and higher than I expected.)

The BMS test is relevant to intrapreneurs as well because new initiatives even within large established firms should meet, in my view, the same tests as entrpreneurial startups like: a. is this a wise use of capital, b. can we build a large scale business from this, c. how long will it take to breakeven, d. where do we get launch clients and customers, e. can we use guerrilla marketing to get our message out, etc. Even in large companies, if you can start a new division using bootstrap capital provided by, say, launch clients, you are more likely to get approval (and keep your job too).

Every business and business unit should have a business model and, of course, that business model will evolve over time. It should and must change as you learn more about the opportunity. You can return and retest your business model many times.

NGOs, charities, not-for-profit corporations, indeed, government departments and intiatives also need a Business Model but they should not use the BMS test; their requirements and measures for success must indeed be considered but this test is not appropriate for their use.

After you have scored your business model, have a look at other results for companies that we have looked at and see how the test weights each of the variables. You may want to change your Business Model-- Get the Business Model Right by Definition-- and then retest it to see if you can give yourself a greater opportunity for success. You always want to keep in mind too that having some competitive advantage in your Business Model is helpful-- some 'Pixie Dust', if you will.

Please send your BMS test scores to us so we can add them to our research data base. Tell us:

a. the name of your company;

b. your industry;

c. the nature of your product or service;

d. your BMS test score.

Send your results to Dr. Bruce Firestone.

We have four scoring categories for the BMS test. These are:

a. If your Business Model scores less than 50%, you may expect-

You will need a lot of good luck to be successful. You may need to create the kind of near hysteria that spawned success for the Hoola Hoop, the Frisbee, Trivial Pursuit and Pogs and no one really seem s to know how to do this with any great consistency. It is kind of like trying to create a hit film or song. It isn't easy to predict success here. Maybe you should rethink your business model or, if not, well then "Good Luck" (or perhaps you may want to start buying lottery tickets.)

b. If your Business Model scores 50 to 64%, you may expect-

Maybe you are like Fred Smith of FedEx fame-- he was smart, determined and was prepared to do pretty much whatever he needed to do to become successful. You too will likely need this kind of commitment to be successful with a business model score in this range.

c. If your Business Model scores 65 to 84%, you may expect-

You will probably still have to have great execution and a lot of time to achieve the success you are looking for. Great businesses take at least 7 to 12 years to build and often a lot longer.

d. If your Business Model scores above 85%, you may expect-

You may have a 'can't miss' opportunity on your hands except that there is no such thing as a 'can't miss' opportunity. Having said that, you do have an extraordinary business model and with an abundance of effort, focus, concentration and some luck, you should be able to plan on success. Planning for success is a position to be envied-- you aren't trying to 'capture lightning in a bottle' like the Hoola Hoop folks needed to do before they could enjoy success and you don't have to win the lottery of life to become rich and successful.

Here is how some others scored:

"Household" Names-

Dell 84%

Fed/Ex- 55%

Home Depot: 63%

i-soldit.com: 72%

AOL Time Warner: 76%

Microsoft: 87%

WalMart: 59%

Ford: 59%

GM: 59%

Boeing 69 %

BOMBARDIER INC. 51%

AT&T: 72%

Trivial Pursuit (Board Game craze of the 1980s)- 46%

Amazon.com (online B2C sales)- 50%

Pepsi Co: 64%

Coca-Cola: 64%

Walt Disney: 80%

AOL Time Warner: 76%

General Electric 78%

Intel 71%

Hewlett Packard 76%

Motorola 79%

Lucent 80%

Lockheed Martin 70%

Cisco 71%

Phillip Morris 67%

EDS 65%

City Group 47%

Bank of America 48%

JP Morgan 46%

Willis Fargo 46%

Merrill Lynch 46%

Morgan Stanley Dean Witter 58%

K-Mart 57%

EasyCar 64%

Nokia Home Communications 56%

Local Companies-

Brymark.com (promotional items)- 69%

FuelIndustries.com (web designers and developers)- 76%

Gondolas.ca (boat tours in replica gondolas)- 71%

gradeAstudent.com (on-site computer repair)- 88%

Corel New Ventures 65%

Ottawa Senators 68%

WildernessTours.com 82%

CEO.TV 76%

CertainKey.com 77%

OfficeServer.ca 80%

Canadarch.com 81%

EnvisionOnline.ca 78%

BlueHeronStorage.com 72%

DigitalGuard.com 81%

ICHU.com 87%

StreetPaddleTennis.com 68%

NobleOak.com 62%

ThirdWall.com 54%

Tanjun.com 75%

Footeworks.ca 77%

I don't think the test scores for Dell and gradeAstudent.com are much of a surprise. When Michael Dell started his business, the PC industry was exploding in volume, prices for components were dropping like a stone and people were becoming more confident in their ability to self select their PC configurations.

So for most entrepreneurs, business models that cater to a large, existing demand, require small amounts of startup capital, can use guerrilla marketing and bring some creativity to the industry probably have a higher probability of success. Think about Michael Dell again-- he started Dell Inc. from his College dorm with a phone and no money and no inventory and now Dell is the largest PC maker on the planet, so it can be done.

When four of my former students came to me with the idea that became gradeAstudent.com, we didn't have the Business Model scoring machine available to us then but I knew they had a potential winner on their hands. The idea of providing on-site computer repair, installation and maintenance for home owners and SMEs was a winner. The PC repair industry is huge and growing-- people don't fix their VCRs any more, they chuck them, but they sure do fix their PCs a lot. The industry is relatively backward with lots of 'Mom and Pop' shops and there are few large, sophisticated players in this space-- large companies generally hate these types of 'last mile' spaces-- too small and finicky for them.

I wasn't surprised by the FedEx score or the Amazon.com score either. I consider the fact that both of these companies are successful, amazing. Amazon.com has been saved, in part, by the fact that they had access to a practically unlimited source of funding unlikely to be repeated for another 100 years. (These sorts of investment frenzies come along from time to time but you can die waiting for it to happen to you. It happened with the spread of the RailRoads in the 19th Century and again in the 20th with autos in the early part and the Internet in the latter stages. But you can't plan on being alive at those times in history so for most of us, we have to become successful the old fashioned way-- with hard work over long periods of time using smart Business Models.)

Amazon.com's business goes soemthing like this: you go to their ws, you buy a book and a couple of CDs, you pay for it, someone schleps into an enormous warehouse on rollerblades to pick the products and puts them in a bag, which gets put on a truck, which goes to an airport and gets trans-shipped to another hub and then flown to an airport near you, it gets put on another truck which comes to your house to find no one is at home, so you get a notice that tells you to pick it up at some warehouse in an industrial 'park' that looks like a hangout for derelicts, only to find that you have to pay some custom duties that you didn't know about, then you get home and find out that one of the CDs is not what you ordered so you ... You get the picture.

So businesses that require enormous up-front capital investments and huge marketing budgets like, say, Fed/Ex or Amazon, don't do well in the BM Scoring Test. A low score on the test doesn't necessarily mean that a business can't succeed but it does probably mean that the odds are not with you. Fred Smith, the entrepreneur behind Fed/Ex, had to raise huge amounts of capital, take enormous risks and then create the demand for his product. At that time, there was no market for overnight package delivery- on their first night of operation, after Fed/Ex put in place a large hub and spoke delivery system with its own aircraft, they moved fewer than half a dozen packages.

I also wasn't surprised that Trivial Pursuit scored the lowest at 46%. This is a bad score, no doubt about it. The story of how Trivial Pursuit became a sucess is so unlikely that if one of my students came to me with this Business Model, I would advise them to immediately start buying lottery tickets because success is more likely. (Please do not take this as adice to buy lottery tickets or gamble. It isn't.)

I was surprised a bit at how well Brymark.com, Gondolas.ca and FuelIndustries.com did. I think that this reflects different things for each of these businesses: for Brymark.com, they have relied on excellent execution over a long period of time (more than 25 years in business to become a successful SME). For FuelIndustries.com, they have been able to achieve success by being very high end web designers and developers for specific market niches and having a customer base that reflects that focus. Gondolas.ca is a much smaller and newer startup than the other two but the barrier to entry is surprisingly steep and their ability to capitalize on that is an important variable.

What all this says is that the Business Model Scoring test is just another guide, although perhaps an important one. It requires careful study of the results to be really useful to entrepreneurs and intrapreneurs. Possibly the most important thing it may measure is relative changes in scores as you improve your Business Model over time. Every business and industry has 'secrets' to their success; as you learn them, change your Business Model. Have the discipline to create one in the first place,update it as you go and have all your employees buy-in to it. Put it up on the walls where you work even. And then stick to it. If you come up with other great ideas that don't fit your Business Model, then don't pursue them-- leave them for another life (or another stratup after you have sold this one.)

Copyright. Dr. Bruce M. Firestone, Ottawa, Canada. 2004.

Getting the Business Model Right

Getting the Business Model Right- some examples

Instant Web

Guerrilla Marketing Ideas

Twenty Five Steps to Business Success

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