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So I have seen quite a few things flyback offers on Twitter this week. So I picked up a couple of these that caught my eye.
First up was a tweet from a guy called Sam Shetler, and he was talking about the pros and cons of different business models and how you can actually combine business models to help mitigate some of those problems. So his tweet says. He was replying to a different tweet that says digital products suffer from piracy and unpredictable revenue agencies have high marginal costs.
Most sites, businesses have no might pick your pain. And then Sam replies with every business model, has its pros and cons. Combine them when possible. So what he’s talking about here is that. The delivery mode or the service or the thing that you’re offering can have a big impact on. What competition there is in that model and also what some of the other pros and cons are with, i.e. what your customers are gonna be doing, how you acquire your customers in the first place and things like that. So he particularly mentions digital products. Now, obviously, in today’s modern age, starting with Napster and then going onto BitTorrent and all these other various things, Megaupload, Kim Dotcom. You are very susceptible to having whatever it is that you produce can be grabbed by someone else I just distributed through one of these other sort of black markets, inverted commas. And so you really have to try hard to find ways of adding value and otherwise other than just the thing that’s being downloaded. So that you move as a music of really struggle with this in recently is. And. You know, the way that they’ve tried to approach doing that is through the aggregation of value add side of things. So the people who are really going great guns on video, digital content and who are doing music really well have doubled down on convenience. So, for example, Spotify, you pay one relatively low monthly costs and you get all the music, which is great for convenience. You just you can go away. It just goes on your credit card or debit card, whatever it might be. And, you know, you can have the music, same thing like Netflix or Apple TV. Again, it’s like a pretty painless monthly payment. And you get all of your TV, all of your films, all of your kind of stuff. So as a smaller business, obviously, we are not Spotfire and we are not Netflix. You know, if if we have a digital product or if we’re running an agency so that people with agent agencies as high marginal costs are going to pay for people, you got to there’s a relatively high price sales process, things like that. If you’re operating a software as a service. The big problem is, is that it’s relatively easy to replicate your product. So if you come up with some cunning new software as a service software product, all it needs is someone with a bit of cash and some access to some reasonable developers, and they can quite quickly clone and copy your product to the way you go. So these aren’t SAS, but the classic example of this is Facebook basically just stealing every single thing that SNAP ever did on their products. They just integrate that straight into Instagram and then that becomes, you know, copycat essentially. And so what he’s saying here is, is like can you find ways of combining these different business models so that they, the pros and cons like balance each other out as you go around the size? Have you got any thoughts on this?
Yeah, sure. So I think the best prediction for any company is to create the brand or in other way build an audience. But they’re both correlated, so are intertwined.
So creating a brand, I mean, people that just stand for your brand is the most important thing. Then you can try out yet different business models. So, for instance, Apple has a very strong brand and that’s highly valued. And then they can go try out. They do hardware, they sell the iPhone on iPods and so on. But they also in the software business because of that of the App Store or Apple TV, also for bodies of service.
And yet so much more. They also produce their own so far. So, yeah, they have a subscription, business models, hardware, services. So but bedding down. It’s the Apple brand.
And on any lie, anyone you follow on YouTube or or elsewhere, it’s important what they say or what they stand for and what they recommend or rather done is more important, the brand and the people behind the brand than the business model itself. So if you are on business as well, if it’s a B2B business, for example, they will buy you how you treat them, your responsiveness, your price, maybe whatever it is.
So. So they like to work with you. So saying if you are a B2C business to consumer brand, your audience will value your messages.
You know, your way of thinking, your stance on being critical of things and maybe, maybe, hopefully your products and services. So because yeah. Combining the different business models is. Yeah. I want to go but it’s difficult. Also you will. It’s not that simple and they’re very different actually. So something that walks us by now further it may not work as a subscription.
So usually subscription to offer a subscription you need especially on the Internet. You need to produce vast content. Or or give some access to certain. Yeah. Could be a community or or some added value, as you said.
So add more value, either convenience, YouTube, you know, vast resources or quality resources. Yeah. Concentrated into one subscription or logging. Plus access. Yeah. To maybe a network for instance. Also Disney. They face this competition from Netflix, but they have a strong brand because they produce quality content. So they stand for that. They always kept that high standard of content. You know, we called Marvel as well.
It’s like they keep doing every year or so great movies, but with these same themes.
But it’s a brand legitimately. Yeah.
They create havoc and they’re quite happy to invest quite heavily in proven IP and brand. So, you know, so they bought Pixar and they bought Marvel. So, you know, they never lost Star Wars. So they’re stacking those intangibles on top of each other.
Exactly. Yes. So it’s so you can double down on brands because it’s safer, Don, trying different business models.
And it’s easier for you as entrepreneur to create the brand or, you know, a person brand than trying out too many brothertown services. So broadly that that my recommendation would be build a brand.
And then if you have an audience on a proven business model, then try out alternatives just to mitigate your risk.
Yeah. But yeah. Prioritise your audience. Listen to them. Learn from them. Yeah. Go for it.
Co.. So you picked out another tweet from this week, and this was from a guy called Jafa Ali and he often tweets some really interesting stuff on them, e commerce and direct to consumer stuff like that.
And for this particular tweet, he tweeted, A major problem afflicting entrepreneurs and businesses is doing things out of order. Too often, assets required in the wrong order. Processes are added in the wrong order. People are hired in the wrong order. Functions are added in the wrong order. And the list goes on. What was it about this particular one that caught your eye? What are your thoughts?
Well, I felt. Yeah. Identify with.
We’ve got experience as an entrepreneur in many ways, especially when when you get to investments and how you prioritise. So I would say I mean, it’s almost inevitable unless you have a lot of experience on what you’re doing in your industry. But at some point, you didn’t have that experience. So you need to go through it. But I would say the safest would be just under this say as well that. Usually entrepreneurs rarely regret or firing people. So although yourself nice, it really needs to justify the cost of hiring someone initially re justified. So just be careful on that or on increasing costs, because most of start-ups fail lie within like nine, nine or eight out of 10 within the first three years. So at least those are the studies. So it’s important to stay on business, in business. So and you will need to adapt. You need to go home yet change your business plan and adapt quickly. And you may not have money or resources. So you better build a low running cost company, make sure it works. You cut the margins and growth from there.
So that’s then the like, most common advice. What makes sense? But yeah, probably it doesn’t apply to every industry.
In some industries. You will need to take, you know, a bold investment choice or if you are innovating, for instance. Yeah. You know, I like space industry. So all if you are going to send rockets or all these satellite companies buy one web, which was highly controversial.
Now, the UK government bought a stake there product because of Brexit that they are being left aside, the European initiative and so on. And they wanted to have, you know, some stuff out there on space. These satellites were promising for Internet connectivity and so on. But it was a massively loss making company. Actually, it went it filed for bankruptcy. So. So they take a bold. Decision to go invest? I think they invested hundreds of millions or more. Yes. Five hundred million. Yes. So I think yeah.
So. So but. But that company was Marsal really so was out of business. So at some point, yeah. You still need to make those difficult situations. It doesn’t mean if you do that in the wrong order doesn’t mean you cannot fix it.
But if you have the option, our if you’re unsure, the safest is to just spend the least possible if you were to spend any money at all. Yeah, I would always say that sales is the most important. To just hired sales people or do marketing or anything that can drive sales for your business. The approach on building a certain technology or a product that is so, you know, it takes years of. Development, therefore, loss making, because you no sales. It’s a risky one. So sometimes it’s needed. But you need to play it very carefully. And definitely even if you are planning that, you should go and keep an eye on sales.
So I think the. This is a lesson that you learnt through experience, right? So if, you know, the longer that you’ve been involved in business and taking these decisions, you eventually learn which decisions are how were the ones taken out of order? Which ones were right and which ones were wrong and things like that. So if you are an entrepreneur with not much experience, what are the telltale signs that the decisions you’re making or the things that you’re doing have the potential to be out of order? Or you know what? What were the warning signs that something like this might be going on in your experience?
So many things there. If you’re unsure. You can go seek mentors.
Just talk to people. You can find mentors for free as well. You will surprise on board directors or non-executive directors or just advisers to your company.
Probably tried to avoid, you know, asking family and friends because usually they will be highly complimentary on what they’re doing. So and you don’t need that.
You need critical advice or, you know, critical thinking off from people with experience in the monitor. So I think that is a like a free I’m kind of valuable guidance you can get. And also, when you’re looking for hiring, probably that’s also a good way to look at it.
So hire for sure people that complement your skillset. So don’t find people like minded. Just go find people that have different ideas or skill sets that will certainly complement your weaknesses and tried to build teams and align interests as well.
Yeah. So build groups at the end. Ultimately, companies are just a group of people that that that hopefully have a common goal.
So yeah, if you’re thinking if you think up as a company and that way it may help you all when you need to hire.
So human resources usually say HIAS. So your overheads are your highest cost usually. So people, which is probably your main asset at the same time. So, yeah, hiring them. It’s yeah. It’s an important process. Probably. You wanna go hiring hiring spree like too fast. That’s unlikely unless you have something really trendy or cool going on.
I’m brawly. You will need to have money anyway. So you will be backed by the investors who will hopefully know what they are doing as well. So but as a Start-Up, I don’t think so. It’s more about Braly. It’s not about the investment, but the choices you do on what you prioritise. First is the problem that we’ve talked before, these podcast about distribution versus brother, which one is most important person to complete the distribution?
So sales is more important.
So if you go out and focus on sales. So understand that you will need to sell the product. Start with then, you know, low cost lean Start-Up model, where you do MBBS to test the market and adapt.
Build the brand as much as you can to build trust and to have more resilience, online opportunities as well to heighten it and then hire people who complement your skills. Go grab advice from outsiders, people you may not know. Just there are many ways to reach them. LinkedIn. Just do it. Do your research and enrich and just contact them directly. It was a price within social media that they will come back. I’m sure they will help you. There’s loads of programmes for entrepreneurs, incubators, etc.. So, yeah, if you wanted, you will get it. So yeah, you can minimise your errors. The more information you have. Certainly.
Yeah, for sure. So following on the e commerce theme, another tweet which popped up into my. News feed the other day was from a guy called Jay Bason Tha Raja. I may have murdered that name. Apologies I have.
And he tweets some really interesting stuff about e-commerce as well, as well as the previous guy. Jeff Riley says, often worth poking in and seeing what he’s getting up to. But he’s got a really great thread on there about the relationship between e-commerce and. Stores and their suppliers. The relationship between those two entities, and it’s a good long thread, but it’s the sort of the main point of the thread is he says, I often see e-commerce businesses having only a transactional relationship with their suppliers. This is the wrong approach. You need to start treating your suppliers like they’re your investors, straight business partners. If you succeed, they succeed. And he illustrates the point in that thread with the example of Phil Knight, who’s the guy who started Nike shoes. And back in the 70s, it was a relatively small operation. And he went out and there was a big at the time there was a big sneaker manufacturer or training shoe manufacturer in Asia called a Tiger Shoes. And he went out and basically negotiated the sole U.S. rights to these line of Tiger sneakers or training shoes. And the way he did it, this was without having any sales of Chinese shoes or sneakers whatsoever in the U.S. But the way he did it is by going and pitching them on the relationship and how, you know, he he he and Nike would build the Tiger brand and tiger sales in the U.S. where they didn’t have any exposure at that point in time. And Jay goes on to suggest. When you’re actually approaching supplies, even if you don’t, the main leverage you have as an e-commerce store with your supplies is the amount of volume that you do.
But even if you don’t have much volume, you can still approach these people. And the way that you should be sort of trying to have a conversation with them is by saying things like pitching them like you would an investor and you effectively you want to go to them with a sort of pitch deck that says, okay, this is where and how we’re going to, you know, sell your stuff. This is how we’re going to put it into the market. This is how we’re going to grow your volume and our volume, as well as a win win kind of situation and get them to buy into your vision in terms of how it is you’re going to sell it and how you’re going to grow it.
And the figures and the growth model that you’re suggesting, because if you have the suppliers on board and if you can paint them a picture of, OK, here’s here’s where we are now. But here’s the rosy future over here. And this is where we want to get to. And they’re on board on that sort of win kind of thing. Okay. You’re not gonna do much volume now, but, you know, the volume down the line is gonna be great. You can then often sort of approach them for terms that you otherwise wouldn’t be able to achieve with them. So, for example, you know, you could get sort of better repayment terms. If you get 60 day repayment terms rather than 30 day repayment terms, then that allows you to sell a product into the market, get the money in from selling those things, and then pay off your supplier, which basically means that you have you know, you need less CapEx. You need you know, you don’t necessarily need to go out and get loans or investment from elsewhere. You can get your supplier to invest in your supply chain. And, you know, I’d be a partner in sort of growing your your business. I felt this was an interesting approach, not not one that people won’t have thought of necessarily, but just like doubling down on that partnership aspect with suppliers I thought was quite interesting and the sort of approaches that he was suggesting, taking the final example he gives them. That’s right. Which is slightly controversial. He’s saying about Mexican drug cartels. So basically, they’ve gotten a knife approach to all of their downstream suppliers and they suppliers and they treat them really, really well.
And they have great net terms with all the people who are sort of growing and making all of this cocaine of various sort of stuff. And obviously, they’ve got the carrot and stick approach in that, you know, we want decent terms and you can either give that to us and you might want to or we’re going to kill you or something. But we’re not suggesting you do that. But, yeah, rethinking your approach away from being purely transactional, as in here somewhere over here, I just give them some money.
I get some product, I then go and sell it to. So that partnership approaches is quite interesting. And I think that’s not just in e-commerce. Right. Like any supply you’re got in any business is worth trying to engage and bring that relationship on so that it feels, you know, you’re both pushing in the same direction together. What are your thoughts?
On goods, on business. When do so good scrub down services. Your suppliers are critical and need. It’s not only because of the quality of the product, but also because of your product, your distribution as well.
Ours. How fast can they produce them? How cheaply can they produce them. But you know the quality and materials and then is there and then you come the shipping as well, the turnaround. So especially it’s especially important nowadays or it will be for some industries, you know, globalisation, it’s upside down now. So probably it’s not on trend. Countries are becoming more protectionist. They don’t want to depend from other countries. And if they are lay travel restrictions, would they make or whatever or or for when I trade tariffs, assault like a trade war.
So if you have supplier or sales, where now it’s probably safer to have them within your own country or economic area, you know, countries that are partners or whatever. So there is certainly a shift between that and the relationships that will stand are those that are strong. So. So you in. Yeah. So that’s why it becomes even more important. And you and if if you cannot keep for did you know if it’s not economic only a buyable to keep a relationship with your suppliers and those countries and you will need to find new suppliers, then you will need to again reapproach before it was a commodity. Maybe you can just outsource to Asia. Yeah. Just go for volume and more transactional. But now there is no other way. So it’s such a. Apart from their business and it’s under threat for many reasons, the travel restrictions, tariffs, protectionism in general, like like privacy. To those that are so on tech components, for example. So then then you have all these human rights or working rights as well. So you have costs changing as well. Production costs on each country. So then it’s a highly complex environment. So you so you need to think about your suppliers very thoroughly and uncertainly, build relationships because you can have a hit otherwise or. Yeah. Or be out of business within that product category at least. So you, um, you want to have a great relationship but does well have like a process with them, brainstorming like a partnership as well. Whereas. So if you both are under threat, how can you overcome that or those adversities. Maybe I can start selling together in other countries or you can move production to another country because they have the know how on you. You have the local facilities so you can combine skills to get around it. But you need to do that. You would need to have a great relationship on and I look forward to to grow with them, rather done from them. So you agree it’s really important, especially nowadays for e-commerce.
Co.. Okay, well, that’s a podcast for today. Thank you very much for listening. We’ll be back next week with some more nuggets of knowledge. In the meantime, please cheque out our YouTube channel where we post this and our other podcasts. You can search for net workers, two words or you can find a link in the show notes down below. If you’re interested in a deeper dive into things entrepreneurial, including more detailed information, help mentorship and courses, please do cheque out our Web site. And that is that networkers dot co. See you next time. Thank you.