Platt Perspective on Business and Technology

Planning for and building the right business model 101 – 36: goals and benchmarks and effective development and communication of them 16

Posted in startups, strategy and planning by Timothy Platt on March 22, 2018

This is my 36th posting to a series that addresses the issues of planning for and developing the right business model, and both for initial small business needs and for scalability and capacity to evolve from there (see Business Strategy and Operations – 3 and its Page 4 continuation, postings 499 and loosely following for Parts 1-35.) I also include this series in my Startups and Early Stage Businesses directory and its Page 2 continuation.

I began discussing three exit strategies in Part 33 of this, that all hinge on how a new business would enter into and pursue its first real growth phase after establishing itself as being consistently profitable:

1. A new venture that has at least preliminarily proven itself as viable and as a source of profitability can go public and with all of the organizational change and all of the transparency and reporting requirements that this entails as they begin offering stock shares.
2. A new venture can transition from pursuing an organic growth and development model (as in exit strategy 1, above) but to one in which they seek out and acquire larger individually sourced outside capital investment resources, and particularly from venture capitalists.
3. A new venture, and certainly one that is built around a growth-oriented business model, might build its first bricks and mortar site, in effect as a prototype effort that it would refine with a goal of replication through, for example a franchise system. And there, licensing fees and ongoing franchise-sourced income going back to the home company, would provide funds that could be used for further capital development, among other things, to keep a fiscal systems focus here on what I include in this list.

I have addressed the first two of these scenarios since Part 33 in this series, leading me to Scenario 3: the topic of this posting. As noted in Part 35, this is the business development option of these three that I have discussed and analyzed the least overall in this blog, at least up to here. My goal for what follows is to at least begin to address that gap in coverage, starting with due diligence considerations as to how this approach would be followed so as to improve its likelihood of success. And I will begin with the core business model itself, and then move on to consider the people involved, and in operationalizing and building a such business so as to limit unwanted change or divergence throughout its overall system, while supporting necessary business-wide flexibility that can address local needs and opportunities.

I begin by acknowledging that the founders of a single storefront business might start out planning on building to a single location and just that, and that their success there might prompt them to reconsider their single location assumptions and particularly if they see both significant success in what they are doing there, and a specific next step growth opportunity in a second location. And if they see this type of move as desirable and even necessary in some way, if they are to realize their full mission and vision goals of providing to their markets, but they come to realize that they personally would be stretched too thin if they tried running a second (or further) storefront on their own, they might in effect drift into realizing a franchise-type approach as a growth and expansion model.

But I will assume for the most part in what follows, that those business founders start out their venture with the possibility of franchise system expansion in mind, and that they in fact build their first location storefront with that, and with prototyping from it in mind. And that means developing and fleshing out their business plan with a very specific type of robustness in mind: building a business system that would in all likelihood be successfully transferable to new locations with different local markets that they do not currently personally know. And this business model would be built around an operational and management template that they could train new non-founder managers into. This would involve and in fact require development of a standardizable brand and layout, and a replicable corporate culture that new franchise owner managers could buy into and follow. And crucially importantly, the core business model involved here would have to be built around effective quality control due diligence systems, where consistency and storefront-to-storefront quality of appearance, service and product offerings, and back-office support would be explicitly defined and carefully maintained.

Most franchise systems give measures of entrepreneurial independence to their franchise license holders, but they do require and enforce adherence to a basic standardized form too. And this can and usually does include centralized control over what is offered through all of their franchise outlets. And most central offices of these systems manage overall marketing offered, and in fact take on that responsibility for their entire system, as well as offering a variety of other consistency-enabling resources. There are in fact franchise systems that even insist on centrally providing all cleaning supplies used by all of their franchisees to maintain consistency, and positive control there too. Their basic argument there, as with centralized control over what goes into franchise product inventories, is that one poorly run outlet, or outlet of poor appearance or reputation can harm the overall reputation of all other franchise operations in their system, and even the entire franchise system and its brand as a whole. Consistent, and consistently high quality control and for all publically visible metrics and for all back-office business effectiveness metrics too, are crucial to making these systems succeed. I presume here that a capacity for all of this is built into the basic founding business plan and business model and from its beginning, and at least in embryonic form for all of the crucial details.

I stated above that I would begin this discussion with the business model in place and then move on to consider the people who would become involved in this type of venture. I am going to continue this discussion in a next series installment, starting with that area of consideration. And I will begin there, with the business founders and would-be overall owners of this type of, at least potential business empire too. Then after offering at least a basic organizing discussion of who would most likely build a new venture with this possibility in mind, and successfully so, and after going on from there to consider franchisees and who would be good fits for taking that type of career opportunity on, I will reconsider the issues of business-wide consistency, as well as storefront-level flexibility, and both in prototyping new possibilities and in addressing local-to-store opportunities and challenges.

Meanwhile, you can find this and related postings and series at Business Strategy and Operations – 4, and also at Page 1, Page 2 and Page 3 of that directory. And you can find this and related material at my Startups and Early Stage Businesses directory too and at its Page 2 continuation.

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