A New Business Model

What makes a business owner decide to switch business models? How does she know when the time is right?

One of my clients is a French fashion designer. Her name is Brigitte. Her label is Manouche. Her clothes are amazing, and she was designing them out of the basement of her suburban home, while raising her kids. She sold to boutiques all over the country.

She loves designing and selling. But she does not like managing the manufacturing part of the business -- dealing with vendors and outsourcing cutting and sewing and shipping. She kept saying she wanted a boutique. I asked her if she really wanted to contend with inventory and being in the store and hiring employees for when she was not there. That stopped her -- for about a year.

Then, one of her own customers wanted to sell her boutique so that she could move. Brigitte took this as a sign to change business models. She is only designing a little bit, now. Instead, she is a boutique owner, selling designer clothes in Greenwich, Connecticut. The store is also called Manouche. Manouche is French for gypsy. The store is small but very colorful and exciting. Brigitte is happy.

If you ever visit North Greenwich, near Banksville, go to Manouche. At the old Manouche Web site, http://www.manouchefashion.com/index.html, under stores, look up Elizabeth Day Lawrence. That is now Manouche.

Watch Your Numbers

This week an entrepreneur showed me a one-page summary he had sent to an Angel investing group. "Why did they turn me down?" he asked.

After I quick glance, it was obvious. His EBITDA was higher than his Revenues. I told him. I also told him that was impossible.

"Do you know what EBITDA is?" I asked. "Oh, sure," He could rattle off what the acronym means, "Earnings Before Interest Taxes Depreciation and Amortization."

But how many entrepreneurs know what that really means or why it's important? EBITDA is another name for Operating Profits. It's essentially a proxy for your cash flow from operations. That's why it's so important to investors. That's why it should be important to you -- the business owner.

For investors (and for savvy business owners), the numbers tell the story of your business. You need to spend the most time figuring out your costs and your revenue assumptions. If you can't, then you need professional help.

The SBA Web site has free help. SCORE has free help. Or you can hire a professional to help you. (like me -- www.upstartbusinessplanning.com)

Competitive Advantage

When writing a business plan, you need to be able to describe your competitive advantage. Why are you going to beat out the competition? How will you defend your business as others enter? Pundits used to say that being "first to market" was the best way to do this. But time and again, this maxim has not proven out. YouTube, Microsoft, Google and Starbucks were not "first to market" in their respective categories. But they all had qualities or practices that made their products or services the ones that most people wanted to use. Think about it. Visit their Web sites, read their information. Figure out what makes them great.
www.youtube.com
www.microsoft.com
www.google.com
www.starbucks.com

Entrepreneurial Marketing

Whenever I meet business owners, they're worried about one of two things -- not enough sales or not enough cash. They can't grow sales without spending money. But they have no money to spend. Somehow, many of them just grow organically, in spite of themselves.

But the smart ones think like an upstart. They use entrepreneurial marketing. That is, they find the ways to get the most bang for the buck.

I'm going to try to answer business and marketing questions with this blog. I'll share my opinions of what's going on in the business world. And I'll share some case studies from buisnesses I've known.

Finally, I'll provide links to resources that can help you grow your business.