Six Lesson of Business, Business Model and Revenue Model I Learned As Digital Commerce Entrepreneur and Consultant

As an e-commerce entrepreneur, I believed and believe more in having a robust revenue model first before going to more philosophical business model. I believe that any business must start earning money first to spend on other aspects like value delivery mechanism, human resource etc. While saying so, I am no way reducing the importance of business model; after all, revenue model is just a subset and business model is universe.

The "Harvard Business Review on Business Model Innovation" charts four basic tenets of a business model: how the company creates and delivers value to its customers, the ways in which the company will earn a profit, which key components will be utilized and which key processes the company will incorporate. Key components include staff and human resources, machinery and technology as well as branding efforts. Business operations such as manufacturing and training make up the business's key processes. Each business model differs depending on the organization's size, industry and expectations. A revenue model is a subset component of a business model. The revenue model focuses on answering the question of how the business will generate revenue and, ultimately, how the company will be profitable.

Puritans and experts may disagree with me, but my experience has taught me to start earning money first; you can’t be right or wrong with empty stomach. You may write the best business plan, you may build a great product but what will be it’s benefit, if it is not earning you any money; and you will agree with me that banks accept only money or something which has monetary value and not the business plan.    

I am going to share one experience of mine, which re-affirmed my belief of building a revenue model first. I was entrusted with the task of setting up a digital commerce venture for a businessman based out of Delhi. We (Myself, CEO and COO of the parent organization) discussed and agreed on the business plan and business model. It was initially agreed that multi-channel sales model will very much be the part of our business plan, because it will start giving us money at the earliest and moreover, I give first priority to make business self-sustainable and then touch and work upon other aspect business model. It becomes imperative also, because in the e-commerce field in India, which is already a clutter place, a businessman is just another player adding absolutely no value other than selling his/her products/services on digital platform. These products are anyway available at nearest possible location across India, if not at every nook and corner. Local traders offer better price most of the time than any e-commerce players, because they pay hard cash to buy it from producers and most understandable and communicated language across the world is hard cash. Poor logistics added with multiple and confusing tax regime creates another set of problem. So, what becomes more important for an e-commerce entrepreneur is to reach out to new customers as quickly as possible through all legal and logical routes, if you don’t have a great product, for which consumer may fight tooth and nail. More time you take to set your business model right, more money you spend on things which could have otherwise been spent on earning money. Coming back to my story, though COO, a seasoned marketing professional, understood and fully supported the way forward decided by me, but CEO, the moneybag behind this project, was bit influenced by the like of Mark Zuckerberg, Kevin Systrom and Mike Krieger, but was a Delhi businessman deep down his heart. On the one hand, he wanted to create something like Facebook or Instagram and on the other hand, he wanted money to flow into his bank account every month. Things went on perfectly well as planned for 2-3 month, but then came a project head of the business, who, for his own benefit, gave air to innovator and value creator streak of the CEO and he ballooned to become something he was actually not. The entire revenue plan went for a toss, money earning part stopped and we started focussing on building something which could succeed or fail, we were not sure. The more we delayed the money earning, more we increased our capex and opex without having anything in our bank account. I kept arguing to keep earning money and let this money support administrative cost of new business but my all effort were made to vanish in thin air, and thus vanished my commitment to continue with this project. This thing continued for another 4-5 month, till the time CEO had streak to become Mark Zuckerberg and he spent something around Rs. 60-65 million on setting up new offices, hiring manpower around all new product and business plan. I had detached myself from this project and was planning to discontinue pulling along.   The businessman from Delhi made a came back, when he saw money going out and nothing coming in and it brought the immense pressure of earning the money, which we could have earned during this period. I was out of the project by that time. Mounting pressure of recoup the lost time made few more people to leave the organization. To get the better rates of the products company was dealing in, they had to infuse more money, which was already spent. They started selling products in negative to increase the turnover and get the better rate from suppliers to mitigate the losses incurred due to negative sales price.  One thing led to another, and now almost 80% of the workforce has either left the organization and has been asked to leave. They are on the verge of adding one more name in the list of failed e-commerce venture. It taught me lot of things, which I feel like sharing with others:

1)      Any new business plan should be about simplifying the existing processes and practices and adding value. If you try to copy the generic, you will become generic and then don’t expect big returns like Facebook, Twitter or Instagram.

2)      Big business takes big amount of time to establish and you will have to be patient. You can’t expect to make big money instantly other than by looting banks or dealing in drugs or by running some ponzi scheme.  

3)      Business model is a big thing, start with the small thing called revenue plan; start earning money.

4)      Big ideas work but don’t leave small ideas for chasing them. Remember, a building is built by bricks only.

5)      Decide a business road map and work on it; don’t change the direction mid-way.

6)      Sustenance is more important; after all you take only money into the bank.