Recession-Proof: Business Model

Recession Proof: Solo-Entrepreneur business modelI find there are several types of entrepreneurs in the United States. Each entrepreneur has a reason to start their business. Successful entrepreneurs have a passion that gets them past the difficult times and onto good times. What most passionate entrepreneurs do is think about business in the same way they feel about working for an employer. The most basic of the business models are selling time. Time is one of the variables in a business concept called the Triple Constraint,

  • Time,
  • Scope and
  •  Cost.

In a business model, the customer or employer asks for a guarantee of time. The employee guarantees they will be in the workplace for a period of time (usually 8 hours) every day. What they get done (the scope of work) is not guaranteed. This means that the employee is safe, but the employer only has a "Best Effort" guarantee on the scope of work and the ultimate cost the employer will pay for that work. Business models play with the triple constraint to guarantee one or more of these three variables.

Recently I had a conversation with a woman who wanted to start a business. I think she was a little afraid to tell me what she wanted to do. Once she became a little more comfortable, here passion came out. She wants to help people become more self-aware as a life coach. I thought she wanted to coach CEOs and business executives on leadership. That was my assumption, but that's not what she was thinking. She shared that she wants to help former prisoners come back into mainstream life. She cared about people and understood the anger, frustration of making a mistake but not being able to forgive one's self. She was familiar with mental illness and wanted to help people tackle issues like bi-polar and other mental health issues.

I was surprised. Here I was talking to one of the angels in our world. Not what I'd call a real money maker, though. At least not under the traditional business models. The life coaches I've worked with a focus on people who are usually work-a-holics. One of the side-effects of being a work-a-holic is having lots of disposable income. With a former prisoner, we have a problem, but they haven't been making money for all the time they've been in prison. They may need a life coach but probably can't afford one. Economics tells us that the customer must be able to pay you. Otherwise, you can't help them even if they want your help. What do we do? We spoke for a-while and discussed the next five steps she needed to work out. The first step was figuring how she would get paid. A few days later, I sent her this email; this is not the complete message, but by the end of the email, I realized what we were talking about was an alternative business model.

Dear Melissa,

I did enjoy our last conversation. Now that it's been a few days, there's always a risk that things can feel a little insurmountable. If you have an idea that you feel passionate about, you'll be able to do it. I don't usually do this, but you found me somehow, I thought I'd at least encourage you.

Hopefully, after our conversation, you are still passionate? Just for your information, there are five stages the owner of a business goes through.

  1. Heaven
  2. Hell
  3. Efficiency
  4. Innovation
  5. Re-invention

Heaven approaching Hell – You are kind of in that limbo period. The idea feels good, and it's fun for everyone to fantasize about starting the business. In the second stage (Hell), the entrepreneur builds the business infrastructure, processes, and systems for a healthy business. It's kind of like hell because while taking care of clients, the owner is also building permanent business infrastructure. The good news is that you never have to develop those systems by yourself the next time. The first business system, we created together. (i.e., Invoicing) Theoretically, that's all you need for now. I predict though it won't be long before you also need a business card and a simple website.

When we spoke about the first step, we described that as figuring out how you are going to get paid. Explaining how you will get paid will be your primary business model. There are two ways you can get paid,

  1. Hourly (least profitable)
  2. Benefit Value

Hourly is like being an employee. You give the customer an hour of your time. Your customer pays you for that hour. Hourly is least profitable because you have a limited number of hours in the day. The more customers you have, the more time you need to spend on other things besides helping people. So the more successful you are, the fewer people you can help. The maximum you can make is your hourly rate times 18 hours/day. (assuming you'll be sleeping.) Let's say you make $100/hour coaching; you can't make more than 1800/day. While that seems like a lot, you also have to pay people to help you (accounting, marketing, account management, schedule coordination, etc.), or else you have to stop coaching and spent time doing this extra stuff yourself.

In this business model, income divided your income into three buckets.

  1. Operational expenses (40%), (Costs associated with coaching)
  2. Overhead expenses (30%) (Costs related to the business, like accounting sales, your salary, etc.)
  3. Profit (30%) (money used for re-investment into your business.)

The reason most people fail in this model, is they don't divide the income up this way. It’s easy to intermingle personal funds with business funds.

Benefit Value

This model involves selling the benefit for a fixed price and not an hourly rate. The customer receives the benefit you promised. That's the way we buy clean clothing. We don’t pay the laundry detergent manufacturer for the time the soap is in the washing machine. The benefit is clean clothing. The cost is a box of laundry detergent. Most people think of this model as only for products or commodities. It does work for services as well. It’s essential, though, to define your scope of work. Each time more scope is requested, a new contract is created based on the new scope of work.

You are selling a service, but what are you selling. The benefit for the client is a healthy family life, and being a respected community member. The trick for you is to package your service in this way. If the client self-sabotages, then helping your client requires an additional scope of work. Here's a possible business model for a life coach with these types of clients. Note: This is just an example,

The customer: A reformed prisoner coming back into the community

The problem: As a reformed prisoner, how do I get a good job that will support my family. All without lying or falling for the "easy" path?

The Solution: (Choose 1 or more)

  1. Do It yourself Guide to integrating back into society - $1500 – This is a do it yourself guide of programs, contacts, and strategies for integration into the community. If you follow everything, you'll be able to work again.
  2. Integration Coaching (for prisoners) – We will work with you to help you follow the Do It yourself Guide. This program will follow you for the first six months after prison or until you have your first job. Whichever comes first. Includes one on one coaching to help you through the tough times. You follow the plan; we'll be there for you. ($15,000.00)
  3. Integration Coaching (For the Community) – This is a package for the families, schools, employers, and communities that will be supporting the prisoner as they re-enter the workplace. This includes coaching for the family members to help them build a supportive community for the prisoner. ($20,000)

Marketing Pitch: The value to the community:

The cost of maintaining a prisoner is about $100,000 per year of incarceration. This cost is born by every taxpayer. To reduce the expenses of the future, imprisonment on the community, we must help them integrate into the workplace. For the price of ½ a year of imprisonment, we can bring former prisoners back into our communities. Otherwise, we find the 20 – 30% end up back in prison. Those that don't come back find that their income potential will be greatly reduced. The most successful programs build a community of support for each prisoner. With that support, ex-prisoners become much more active and enthusiastic community members.

Strategic Business Plan

A simplified, high-level business plan Melissa can follow. (More details added as we learn more.)

Step One, as a coach, is developing your first ten successful clients. The prisoners will pay by

  • The grants and loans you find for the prisoners
  • The families and support systems for the prisoner

Step two, With the successful track record, you start going into the local communities, sharing your community programs with church leaders, mayors, employers, and schools.

2-year plan with Key Performance Indicators (KPI)

  1. 10 clients
    1. 8 will be do it yourself = 8 X $1500 = $12,000
    2. 2 will be one on one = 2 X 15,000 = 30,000
    3. Total income $42,000 per 10 Clients
  2. Community Program
    1. 2 Community programs = 2 X $20,000 = $40,000
    2. Each community supports 10 ex-prisoners for each ten
    3. 2 will be do it yourself = 2 communities X 2 do it yourself = 2X2X1500=$6000
    4. 8 will be 1 on 1 = 2 communities X 8 coaching = 2X8X5000=$80,000

Total for this project = a net (before expenses) of $126,000 per year.

Long term business Goal

If you build the communities to 10 communities in 5 years, then That would be $600,000 in income per year. At the same time, you would have helped over 200 ex-prisoners come back to the community and reduced the cost on the prison system by $200,000,000.00.

This, of course, is just something simple as an example to give an idea. Your plan will be something you create with your passion, sweat, and tears.

James

PS, Sorry, I get excited about ideas like this. I can see a great path. This is an idea that will help a lot of people and be self-funding. Plus, I don't think the prisoner will have to pay for it. If we can pitch it right, there are investors and donors that would be willing to donate to a project like this. (I can think of two people who could help in this area for the right project.) It all starts with the research you put together in step 1 to create that on-boarding manual. If you can get it off the ground, I can help you find investors… if this were a direction, you wanted to go.

I look forward to hearing what you come up with.

Conclusion

What is a business model?

Business Model - a conceptual structure that supports the viability of a product or company and explains how the company operates, makes money, and how it intends to achieve its goals.

Do it yourself

Once Melissa finishes her research, she can write a do-it-yourself solution. $1500 dollars may seem like a lot of money, but this manual can be bought by the family before the prisoner leaves. The manual lists all the support groups, contacts, potential employers, attorneys and an outline for a successful plan that will be successful. The plan can be sold online, and Melissa just needs to promote the book with every idea. That's a sustainable business model that Melissa could follow all on its own.

Do it with you

In this model, Melissa is a life coach helping ex-prisoners move back into society. Walking her client through the process described in her do-it-yourself model.

Do it as a community

There will be many people passionate about supporting Melissa in her goals. By working with communities, she prepares the community to support her clients as they re-enter the workforce.

Helping a former prisoner re-enter mainstream society is not an easy thing to do. Especially if we think there is only one possible business model. Besides this hybrid model there are dozens of business models.

  • Manufacturer
  • Distributor
  • Retailer
  • eCommerce
  • Subscription
  • Aggregation
  • And more…

At the time of this writing, there is a pandemic and a major business depression building. Today there are more technology and opportunities than ever before. The first step before doing anything else is figuring out how you will get paid for your work. Everything else will take care of itself.