Page 27 - The Bootstrapper Bible

ChangeThis A business model is a machine, a method, a plan for extracting money from a system. Hereʼs another, simpler one: Buy ice cream sandwiches from a wholesaler. Put them in a refrigerated truck, drive them to the nearest beach, and sell them at retail. You make money on every ice cream sandwich you sell! (I did this in high school, by the way. I didnʼt make much money, but I did gain ten pounds.) At first, this isnʼt such a profitable venture. But then add another layer: Buy cases and cases of ice cream sandwiches from a distributor, put them into 20 trucks, hire high school kids to sell them, and keep half the money. Suddenly, youʼre making hundreds of thousands of dol- lars a year. Go one step further: Buy directly from the manufacturer, at an even lower price. Put your own label on the sandwiches. Then load up 200 trucks. Youʼll need a fleet administrator, insurance policies, and a thousand other things. But youʼve built a business. At every step along the way, our fictional ice cream magnate made choices. He chose to by- pass the supermarket. He chose not to advertise. He chose not to be the cheapest. He chose not to open an international branch. His path shows us all the key elements of a business model: DISTRIBUTION. Where is it sold to the ultimate consumer? What middlemen are involved? SALES. Who is selling it for you and how are will they be compensated? PRICING. What do wholesalers and retailers and consumers pay? PRODUCTION. How do you make it? RAW MATERIALS. Where do you get what you sell? | iss. 6.01 | i | U | X | + | h 27/103 f