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Different types of for-profit company models Different types of for-profit company models
by Joseph Gatt
2020-09-05 09:13:45
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If you get a job at a company, the sales model a lot of times is what will determine you growth, or frustrations, within the company.

A company is basically an organization that sells a product or a service or both. Furniture or TVs are a product, but delivery, installation and repair are services. A restaurant is a hybrid between a product and a service. The food you eat is technically a product, but then the way it's cooked, presented or delivered is a service.

budg001_400So for-profit companies can not survive without sales. Now there are different ways companies approach this sales thing.

Model 1: WE SELL EVERYTHING. TELL US WHAT WE NEED, WE'LL FIND A WAY TO MAKE IT FOR YOU

I've worked with such companies. They are dangerous, and sometimes it feels like you're working for a mafia or something.

These companies usually either use a product as a “front” (for example, they officially sell imported coffee beans or textiles or something as a front). Or those companies will claim to be “conglomerates” and will claim to offer a wide range of products, when they have nothing on the shelves or in the storage facility. Hell, they don't even own a storage facility.

These companies often aim for big construction projects or public works projects or other mega-projects. Failing that, they will aim for mega-orders like ship-building or telecommunications or information systems or security systems or something.

Problem is, they have none of that. They are often set up to cover the CEO's debt, and the CEO often has very “loose” morals when it comes to finances.

So those companies will be roaming different organizations looking for their big break. They will often try to build a network from scratch, and use the network to get big projects. They will then rely on real companies to actually get the real work done, and try to split the profits “evenly.”

Problem with these companies: trying to sell a product or service you have no experience providing can be very, very dangerous. What a lot of these companies do is try to hire competent people once they get the big project, while working with other companies. This often leads to cacophony, misunderstandings, lack of realistic budget planning, corner cutting, and the CEO often commits suicide or ends up in jail or something.

What happens when you work for such companies? They usually sit you at a desk and make you work on all kinds of completely unrelated projects. They'll shut you up if you ask them what it is that they're doing. So you'll work for a company, with no concrete idea of what it is that the company's really doing. You delude yourself and lie to yourself by telling yourself that the company really sells “high-tech products” or something. But you know you're in a dangerous position.

Model 2: WE GO FOR THE BIG BUCKS. ANY PRODUCT THAT BRINGS IN THE DOUGH, WE'LL START MAKING IT.

These companies will start producing any product or service that has market value. Construction of course is a multi-million dollar business, so is entertainment, so are electronics, so is travel, banking, insurance, lodging, retail and other lucrative areas.

Problem with these companies: for products to sell, you need two things. First, you need product quality. Second, you need a wealthy and healthy economic environment.

Now these guys focus on supply rather than demand. That is they assume that because they are a company with a big name, they can supply any product and clients will come pick it up.

Regarding quality, for a product to be of decent quality you need a team of experienced workers in the trade to produce and serve the product. The problem is experienced and skilled workers prefer working for companies that focus on one product, rather than for companies where they could be parachuted from making smartphones to making fridges. They'd rather spend their careers working for companies that focus just on smartphones.

Also regarding quality, such companies often try to “save money” just in case the product flops, and because they are trying to be cost-efficient in production, the product can't compete with companies who don't cut costs when making the product.

Regarding the demand for the product, such companies, that are often Japanese and Korean companies, but can also be American, British or French companies, often say something like “ABC industries was founded in 1870.” But when clients are willing to pay 10 million dollars for a product, they'll probably find out that ABC industries has only been in the construction business for a couple of years, and has not proved its marks.

And even if ABC industries did prove its marks in, say, the construction business, over-diversification is often a sign that profit is more valued than the product and service. If you were focused on product service quality, you'd limit yourself to a handful of products.

Working for such companies can be a stretch. Because of the huge sums of money invested, such companies tend to be overly demanding with their staff. It's never easy working for a company that invests too much money, and that will invest in anything that brings in piles of cash.

After some times, such companies tend to use workers on all kinds of different and unrelated projects. What they will do is they will study resumes and assign projects from different divisions that match the skills on the resume, which tends to lead to overwork.

Model 3: OUR PRODUCT IS OUTDATED BUT WE'RE STILL PRODUCING IT AND TRYING TO SELL IT.

Because in some countries changing business activity can be a lengthy, complicated, bureaucratic and frustrating process, some companies still produce cassette tapes even though very, very few people even own a cassette player.

Now I say cassette tape but the product could be anything outdated, be it in technology or in services. Newspapers are a good example.  

Since there is no demand at the local level, such companies often delude themselves into thinking there might be a demand for the product in “Africa” or in “very poor countries” or something. Problem is such countries have no demand for the product either.

I've worked for such companies as well. They pay minimum wage when you could be making double or triple elsewhere. They tend to employ people who are way under-qualified for the job, but who are trying to gain experience and use the job as a stepping stone.

But they often have one or two regular clients that supplies the bulk of the cash and enables the company to survive. Not thrive. Survive.

Model 4: EVERYONE IS PROVIDING THE SERVICE. SERVICE IS IN DEMAND, SO I'LL PROVIDE IT, EVEN THOUGH I HAVE NO IDEA WHAT THE SERVICE IS OR HOW TO PROVIDE IT.

We've seen this with language schools. We've seen this with schools that provide “coaching” services. We've seen this with companies that provide “computer” services or “web” services. We see this with bars and restaurants. We see this with coffee shops. We see this with franchise stores.

Problem with this model: a language school or a bar is actually no easy venture to manage. For language schools you're going to have to find good teachers (hard to find) and you're going to have to work on curriculum planning (often neglected) and you have to know that language teaching involves textbooks and methods and motivating students and trying to produce results.

Bars are not just about serving drinks. They are about creating a “clean” atmosphere (hard to create at a place that involves intoxication) and the trick usually involves incentivizing patrons to drink responsibly, not to abandon each other if intoxicated, and not to engage in violent behavior or other behavior that tends to be associated with drinking. That's a tough job.

So when you work for those places, a lot of times they're going to be trying to get you to “sell” a bad product. There's nothing worse than being forced to sell a bad product, and with working with a CEO (and staff) that have no idea what they're supposed to be doing. Or even worse, they might give you instructions that involve the “wrong recipe” or false instructions that can lead to problems at best, legal problems at worst.

In sum, when you work at such places, every day has its load of bad surprises. You show up to working hoping no one is going to die at work that day. True story.

Model 5: I PROVIDE A PRODUCT OR SERVICE I'VE BEEN PROVIDING SINCE I WAS A TEENAGER/YOUNG ADULT AND I KNOW WHAT I'M DOING

Finally, the hidden champions.

How do you recognize hidden champions? They have the following traits:

-10% of conversation with them is small talk. 90% of conversation with the CEO and colleagues is about getting the job done and delivering the product or service.

-Everything is so crystal clear that you're 100% focused on the job. Problems arise, and you always know how to solve them.

-CEO and staff anticipate future problems and find ways to fix those.

-CEO often doesn't have real friends. Usually a quiet figure focused on getting the job done, and the occasional relaxation from the job.

-CEO spends time reading, exercising, or engages in some kind of cultural hobby. CEO does not play golf or try to impress his friends or competitors.

-CEO knows the details of the company. CEO doesn't change much of anything, unless something is broken beyond repair.

-CEO contemplates retirement and grooms replacement, but does not retire until he finds someone who can really get the job done.

-CEO is comfortable with his image. Better competitors don't impress the CEO. CEO focuses on his satisfied niche of clients.

-CEO knows that friends and family can ruin his business. So CEO tends to take a distance from friends or family, even when that involves a reputation of stinginess.

-CEO hires people focused on the mission and fires people who lose focus of the mission.

-Finally, CEO has an elaborate information and communication system with staff that involves short meetings, clear reports, and 100% professional relationships with colleagues. No colleague can befriend or gain favors from the CEO.

-CEO works in a country where competitors can not rub shoulders with his competitors or the government or the mafia to kick him out of the game.


    
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