“A start-up is an organization built to search for a repeatable and scalable business model”

I read this sentence in an article last week and couldn’t agree more. No business is set up with all the right answers. Most business owners already have an idea for a range of products or a service, but that’s just a starting point for a series of discoveries you will need to make on your journey to profitability.

Let’s take a fairly simple sounding business like selling cooked jacket potatoes in the street. At the heart of your model is of course selling jacket potatoes but it’s the subtleties of your model that will help it thrive. How will you price your potatoes? Charge too much and you will put people off, charge too little and you won’t have enough profit to serve quality food and establish a reputation and repeat business.

Where you setup in the street could have a profound effect also. 50 yards down the street or further up the street, next to popular stores or away from (or next to) competitors could make all the difference.

What quality of potato will you sell, what toppings, what packaging, what sauces, will you pay staff minimum wage, or will you pay a bit more and go for service with a smile? What other items might you sell to compliment your potatoes (cans of drink, tea, soup, stew?). How much will you spend on your stand? Could you create an area for people to queue when it’s raining or windy?

Here’s the rub. You can’t have all the right answers to the above questions when you start out. Even if you already own a profitable potato stand, your next one will be subject to a different crowd, different staff, and different competition. Even if you find a model that works today, there’s no guarantee that circumstances wont change tomorrow.

So the point I’m trying to make is this:

There are many potential variables that can be the difference between making a loss and a good profit. It doesn’t matter whether you are a potato stand, card shop, accountants or IT company. As a start-up, your job is to create a structure whereby you are able to identify, test and measure variables until you are sure you have found the best (or at least a profitable) combination. Picking one set of constants is akin to picking lottery numbers. You’ve got to start with something, but you’ve got to be smart enough to vary it.

Here’s a link to the original article where I read the quote in the headline.