When To Redefine Your Business Model

Imagine a condition where business is doing well, and sales volumes are steadily increasing, your share is growing in the market, and customers can't get an adequate amount of your company’s latest and greatest product offering. The market envies your business. Then, suddenly, everything seems to go in bad shape. Your costs have risen, sales have decreased, you’ve lost market share, and you often hit one roadblock after another. However, did this happen at the same time and simply catch you unexpectedly, or is it possibly a thing that has been building as time passes? In essence, did you just neglect the warning signs when everything close to you was screaming it was time for you to redefine your business model? Unfortunately, quite a few companies overlook the warning signs until it’s too late. So, what exactly are these indicators and what must your business do to steer clear of the damage they're able to inflict?

Your Company’s Objectives and Goals Change

One of the surest signs your business model needs restructuring happens when you, your management team, along with your employees, all start moving away from your enterprise’s stated goals and objectives. Often it’s the consequence of following where your market leads your company. After all, perhaps it will simply be a sign of an ever-changing business environment. However, once your marketplace changes, and you must also change together with it to be competitive, then take the time and energy to revisit your organization’s goals and objectives as part of your overall business model. Make sure your company plan is responsible for the new realities of your market. It will help give a clear path on pursuing these newly established objectives and supply every employee and manager with a common long-term goal.

Your Cost Structure Increases and Revenues Decrease

If there exists one essential rule of business, it is most likely to be that profit should always be protected. In fact, profit is important. It’s the reason why your business is running. While most would feel that an increase in costs, along with a decrease in sales, would immediately be recognized and managed, the truth is entirely different. The fact is that both occur gradually after some time. Rarely do sales volumes plummet overnight unless a major contract is lost. Instead, costs often slowly increase, while sales numbers gradually decrease. In most cases, the increases and decreases are gradual instead of happening immediately. This is why companies must keep assessing their overhead by analyzing their direct and indirect expenses, while at the same time tracking their income on sales. Again, these signals are gradual, but as soon as they’ve taken hold of your business, it will be too late to adopt any short-term solutions.

You Grow Too Quickly

 It’s challenging to find issues with business growth, particularly in today’s economy. However, growing too soon can have serious outcomes, especially if your business plan and model isn’t scalable for your new growth. It’s not difficult to imagine the results of a business that can take on more than it can manage. Sales, marketing and customer support, can suffer beneath the weight of increased customer expectations. Manufacturing can suddenly have difficulties with quality and production throughput. Supply chain and inventory management can suddenly encounter higher costs of inventory ownership when they struggle to find vendors and creditors competent to deal with the excess workload. If not prepared, increase workload can damage your business reputation.

You Ignore Critical Benchmarks

Another sure sign of trouble is when your business neglect key performance indicators (KPI) or continually misses one vital benchmark after another. Your company might have defined these parameters early from its history. In fact, your original business strategy likely included several vital benchmarks, ones you deemed important to securing your long-term future. They were considered pivotal milestones and periods of reflection, the ones where your enterprise could look at the failure or success of individual strategies. Once your organization starts ignoring these benchmarks and glossing over deadlines, it moves towards a time of triviality, one marked by frequent rescheduling and missed opportunities. Don’t allow this to occur. Sit down with the management team if you find your business is missing critical deadlines. This period is important in order to redefine your business plan and model. It’s also a chance to revise your schedule in order to find ways to make those benchmarks relevant again.

You Start Losing Your Biggest Customers

Losing a huge number of customers has both immediate and definitive long-term effects. This is usually caused by 80-20 “Pareto Principle” or rule. For this rule, top 20 percent of shoppers contribute 80 percent of a company’s sales. Losing all of those big customers means an abrupt and drastic decline in earnings. Unfortunately, many businesses rationalize these losses, particularly when they are seemingly in advance stage of their growth curve. However, losing one customer may appear simple to overcome, but losing a large customer isn’t. Therefore, understand where your biggest industry is and why they might be willing to move to your competition. If left unchecked, you will suddenly see yourself losing more people.

Ultimately, whether external factors or internal factors are pushing you to change, rethinking your business model will refresh your culture, your team engagement, and your bottom line.