You run a small language school and your classes fill up. Every term enrolment beats the one before, yet at the end of the year no money has built up and you’re not teaching a single hour less yourself.
Your first thought is to advertise more and take on more students. But the problem may not be your effort. It may be your business model.
Your business model is simply how you make money
A business model is who your business sells to, what it sells them, how it gets it to them, and where and how the money comes in. Every business has one, even if you’ve never put it on paper. The day you decided what to sell, at what price and through which route, your model was made.
A model isn’t the same as a canvas or a business plan. The model is that logic itself, the business model canvas is the page you draw it on so you can see it, and a business plan is what you write to carry out one specific decision.
Every model has a ceiling
The common small business models each hold you back in one particular place:
- Selling products. Like a shop or a workshop, where the money comes from the gap between buying and selling price. Its ceiling is the profit left on each item.
- Services. Like a school, a design studio or a repair shop, where you’re paid for people’s time and skill. Its ceiling is the number of hours your people can work.
- Subscriptions. Like a gym, where customers pay every month or every year. Its ceiling is the point where, each month, as many existing members fail to renew as new ones join, so your membership stops growing.
- Brokerage. Like a website or an agency that brings buyers and sellers together and takes a cut of each deal. Its ceiling is whichever side you have less of. With plenty of buyers but few sellers, your deals and your income are capped by the number of sellers.
How can you tell the model is the problem?
If the problem is your effort, more work brings more results. If the problem is the model, more work just wears you out and brings no more results.
Ask yourself: if your customers doubled tomorrow, would your profit double without your own working hours doubling too? If the answer is no, then either the profit left on each sale is very thin, or each new customer takes more of your own time, or you have to keep giving discounts to hold on to customers. All three are signs of a model problem.
Where was the language school’s model going wrong?
The school runs on a service model, and you teach most of the best classes yourself, so every new student means more of your own hours. The course fees are low too, and each class only covers salaries and rent. More students can’t fix that, because the ceiling of this model is your own hours.
The fix is changing the model, not working harder. You might prepare another teacher to take the classes you teach so the school’s capacity no longer depends on your hours, raise the fees for specialist courses, or build a recorded course that sells without you there.
And if you can’t tell whether your business’s problem is the model or the execution, in a free diagnostic session we will work through it together.