Some (of many) Ways to Make MoneyBy Theresa Lina Stevens | Posted 2005-01-14 Email Print
There are lots of ways a high-tech business can make money by improving its business model. Here are four ways to do it.
If all or parts of your company still have a time-and-materials business model, congratulations for having survived the last three years. But don't rest on your laurels, because you are still in trouble. If you aren't convinced, see my article, Does Your Business Model Make Sense?, in which I summarized just a few of the many problems with this approach.
Whether you are a large firm with many units serving many markets or an independent contractor, there are lots of ways to make money beyond an hourly billing rate. You may not make the shift overnight, but start now on a plan for pursuing additional revenue streams that will give you more predictability. Most importantly, they will remove the ceiling you currently have on revenue and margin potential.
Here are four of the various ways in which you can improve your business model:
- Recurring Revenues– Are there services you can provide that don't have to be sold over and over again? Are there opportunities for retainers, outsourcing contracts, subscription fees, and/or service bundles on an ongoing basis? This is why business process outsourcing is such a hot area – clients love the results-oriented, low-risk nature of the services and investors love the long-term, stable nature of the contracts. Find your sweet spot and make it your goal to have at least 50% recurring revenue built into your model within a given time frame.
Putting tools and licenses to work
Intellectual property– Are there tools, methodologies, and new technologies you should acquire or develop that help differentiate you during sales and delivery? They should give you substantial and tangible competitive advantage -- help you deliver your services more quickly, effectively or efficiently than the competition, make you unique in the client's eyes, etc. Be sure to protect, leverage and document the tangible value of your intellectual property.
- Licenses and Royalties– In addition to reducing your cost of delivery, intellectual property can be a source of licensing and royalty revenue. Look across the industry and your clients for opportunities to get others to leverage your proprietary technology, methodologies, facilities, etc. (One caveat here is that you want to be careful not to let this become too much of a distraction or you could face other operational and strategic problems.)
Stream your deliveries
- Repeatable delivery– Systematize the manner in which you deliver services for speed, efficiency and lower costs. This might apply to an entire service or just aspects of the service. For example, you might designate certain specialists who come in for particular parts of a project, do their thing and leave. Any area in which people constantly reinvent the wheel or climb up the same learning curve over and over is a candidate – find a way to make it repeatable and less expensive to provide.
There are a wide variety of business and revenue models appropriate for a technology services company, but the best ones enable predictability, margin growth and stability. The business model is the first thing an investor examines; so regardless of whether you'll be looking for outside sources of capital, talk to the types of people who invest in businesses like yours to get input, insight, and a critique of your business plan. You'll come away with invaluable suggestions that will lead to profitable, sustainable growth.
Theresa Lina Stevens specializes in market dominance strategy and marketing for IT and professional services companies. She is CEO of Lina Group Inc., which helps clients gain and sustain a unique and high-profit, high-growth market position through a proprietary approach called the Apollo Method for Market Dominance. You can reach her at firstname.lastname@example.org or visit the Lina Group website at email@example.com www.linagroup.com.