In this episode, Jon discusses the most effective and practical ways to create a profitable business model. Whether you're just starting out or looking to improve your existing business, these strategies are sure to help you succeed. Listen now!
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Welcome to Jon Michail’s Personal Branding Masterclass. Jon is the founder and CEO of image group international, an award-winning image consulting and personal branding pioneer established in 1989. This podcast will bring you old-school wisdom, inspiring ideas, strategies and hacks for the new tech world. Here you will learn everything about personal branding: the system, the techniques and the right mindset to have a successful personal brand, image and reputation.
Hello, everybody, and welcome back to my podcast. It's a pleasure to have you here with me today. In today's episode, we'll discuss what it takes to create a profitable business model that can also apply to any size company large or small. As every entrepreneur knows, one of the main reasons why businesses fail is their inability to generate enough revenue to cover expenses. And of course, make a profit. A Yes, a profit matters because entrepreneurship is about making a profit. Why do you need a profit? Very simple, let me give you the obvious, employing people when investing in plant and machinery growth or require funds. And if you're not making a profit, then life in the real world can get quite challenging. That's why it's essential to have a sound and profitable business model in the first place. In this episode, we'll share some strategies, business leaders can adopt to create a profitable business model. Now what am I clear, you know, I'm not an accountant. And I'm not a financial expert of any description. What I am is basically an entrepreneur that has learnt a lot of these strategies, tactics, et cetera, from being in business for over 34 years, of course, I've got a whole team in that that has supported me to get to this level. So you know, for some of you might be really one on one stuff. For others, it might be a little bit more valuable. But just bear with me knowing that I'm sharing this particular information today, because we're challenging times ahead, the economy all over the place, some business is doing very well, thank you very much, others struggling. So I just want to get back to some of the basics. And hopefully this will make a difference to solve you listening that I the first strategy is to exploit new funding techniques, you know, to secure capital and resources, even in the event that you don't currently need it. And also, what I'm going to cover is what new funding techniques are available besides traditional banks. So that means looking beyond traditional funding sources overall, like banks and exploring new options, like for instance, crowdfunding, Angel Investing, and grants, although I will go a little bit deeper on this as I move along. So what's important about all of this is, is to have the funds before you need it. Because the problem is, if you haven't planned for this, and then you need funds, where you do need it, and you haven't got that in order, then potentially you can be in serious trouble. And of course, a lot of businesses operate that way. And a lot of them also go broke by doing that. So by leveraging these new opportunities, businesses can secure the capital and resources needed to start and grow their operations, especially if they've been proactive and done it upfront. So the types of funding available that I want to share with you is one, one of them is debt raising. So there's two breakups of this between debt raising and secured debt. So I'm just gonna give you a bit of a sense what debt raising is that they're raising, of course, involves raising funds through loans provided by third parties. And the lenders of these debts historically have been, of course, banks and public debt markets, especially for a big company, I like, you know, the bond market, but now includes a host of other financial institutions that are increasingly private equity funds. And you would have seen a lot of private equity funds going into raising a lot of money for even, you know, really, really big deals, because that's definitely in competition with banks now. But in its simplest form, that raising involves paying the lender back, its principal, right, and then an agreed amount of interest over the duration of the loan. So the key with this is, of course, theoretically, this model can work. Also for a very small company as well. You just gotta need somebody that's going to come into the engagement to backup and actually fund whatever the deal is gonna be. So that but give me a sense of the size of the debt market in 2021. So this is the global debt market. It was valued at 303 trillion US dollars means that anyone debt raising can avail Gibraltar four forms of debt.
So you can do this in all different ways. So we're talking about here, a gigantic sum. Now if you have a look at that also is why we've had extraordinary growth, especially in the West or over the last 15 years since the last financial crisis of 2008. So there's been a lot a lot, a lot of cheap money. Now, what that's done, of course, is really expanded the economy and has created a very, very big bubble. Now lenders can also include a range of terms and conditions on their loans that protect them on the downside in the event that your company cannot pay or will not pay the money. In broad terms, there are four terms of debt that companies can avail themselves up. One of them is secured that this is where collateral is used to secure the loan, plus enabling the company to a buyer have lower interest rates, as the risk is lower for the lender and others that could be a typical small business. And the owner founder has their house on the line as secured debt. unsecured debt, though, is the next form. And this form of debt includes no borrower collateral. So the interest rate depends on the company's credit history, that this generally is a more established company. And of course, a larger company. And what's important here is the relationships you have with the bank as well all of this come into play, when we're talking about company's credit history. The next one is tax exempt corporate debt, some debt might be eligible all suffered sex exemption. And right now, of course, a lot of projects, especially in the US, you don't have to check locally when your own jurisdiction, but certainly projects in the US related to sustainability, are definitely getting major tax exemptions. And you never know what would the budget in Australia coming out in the next few days, the same thing won't happen here in the new way. So the next one also is convertible debt. Now, usually, convertible debt is considered a hybrid. And what that means is, it's a mixture of debt and equity, whereby the debt can be converted into equity if the borrower prefers. And that's, you know, that's definitely a great vehicle, depending on what the needs and interests are of each particular party. So which type of debt a company raises depends on a number of different factors, and probably is the condition of the financial statements and but particularly the amount of debt outstanding on the balance sheet, okay, so if they, you know, got a good balance sheet, then obviously, the debt rising becomes a lot easier. And of course, their credit then is also normally fairly good. So they would have a lot more chance of accessing what they're looking for. So their credit rating history and the quality of the collateral and borrowers and lenders own appetite for risk also comes into play. At most points of an economic cycle debt is possible for a company to raise like, I've just explained to you with what's been going on in the world with a lot of, you know, what I would call is easy money being lent out to corporations all over the planet, but the cost of interest is not always attractive when the market turns. And that's what you're seeing here. And of course, cost of interest is going up, inflation is going up. So you got other you know, challenges come into play. That's why you need to get your finance or your whole business model spot on. And if you haven't got a spot on that right now, you better get it spot on. And this is where it's a combination of good accounting, but also, you know, the entrepreneur on street smarts, because in my experience, accountants cannot make you money, they do something with the books after the money is made. So that's why you still need marketing, you still need promotions, you know, oil stuff, you know, that's more emotionally based, in reference to attracting clients and so on. As opposed to been ringing a really logical with with numbers normally are by you need a combination of both. That's my point. And number two is equity raising equity raising I love equity raising occurs when a company seeks to raise funds to the sale of its equity or shade the ownership of the company. Now, this doesn't work for everybody. And I've worked with clients that don't want to do any of that. But from the point of view, if you've got enough strength and power in any company, of course, the equity investors can generally be anyone that possesses the cash required is willing to meet the company's owners on its valuation, you know, and this is obviously very, very popular as well. And what that means is a company that overvalues its equity risk, of course, alienating most of investors and you don't want to be doing that, who will fear that seeing the you know, the real adequate return on their investment might see the valuation is a little bit questionable. Okay, so you're gonna watch how you're gonna do these valuations. That's why a fair valuation without overdoing it is important. Having said that, this is where I believe branding does come into play because I've been involved with numerous valuations with clients, specifically with branding, positioning, and putting up a story as actually help the valuation again, something that at times the numbers people and the play is not that important.
But that's not what actually happens. So most companies with positive outlooks I, their equity is attractive to investors, of course can avail of equity funding. Like debt rising, though, soothe equity raising agreements can have different conditions attached. And when this happens, it is usually referred to as preferred equity. You know, the stock market is the largest and most well known method of equity raising where publicly listed companies sell their equity to raise parlance and maintain liquidity. So there's pros and cons of equity raising and the pros are access to the management advisor because of season, equity investors a guide, and no requirement for regular interest repayments, which you know, as with debt raising possible if a company manager to set the company valuation, so technically a lower risk solution than debt rising. The cons, of course, as the company management has given up some of its controlling interests may be in the business, the equity might come with some provisions on consulting investors and big decisions. And the presence of external investments can lead to friction within the company, especially when agendas do not align the upside potential of the company now has to be shared with outsiders. And some people might not like that. And examples of equity raising might be there are several kinds of raising equity with the beat differentiate between between them the stage of the company's evolution to which it applies to, in broad terms, though, the different types of equity raising, again, in chronological order from early companies to mature companies are normally crowdfunding. And crowdfunding could also be of course, your your family, your friends, et cetera, see financing, Angel financing, venture capital and private equity. And of course, the big one public capital markets for listed firms. So all of the above can be also hybrids of pot debt, and pot equity. And that also could happen in the small company as well. There's no limitations here. It's about how you structure the deal. The second strategy those develop after the finance is to develop a comprehensive marketing strategy to drive customer acquisition and loyalty. And a good question is this. What are some examples of comprehensive Lockton strategy to drive customer acquisition loyalty? You know, this means obviously creating a strong brand identity. Remember your brand is what communicates the mark. So a lot of people have said, Oh, that doesn't make the biggest difference. Look, marketing is essential. Okay, it's the it's how you're going to get noticed, recognized. And by good without that you're kidding yourself, okay, companies would not spend billions and billions and billions of dollars if it didn't work. So this means creating a strong brand identity, the resonance with customers using rocket insect legs that are in line with the company's mission, and of course values. So while design marketing strategy can help, of course, businesses attract clients, and then retain them, which is essential for long term profitability. And this is important because a lot of unwind businesses, especially in the service areas, why not get the business again, but sometimes, then methods of retaining, in my opinion, are questionable, because the thing just because they got the initial business now, or it's going to be hunky dory, from here on now, a lot of other things have to come into play as well. But first you got to track right. And that's where marketing comes in. And it's a retain, that's when you've got your systems around the customer service, customer outreach, constant customer contact, et cetera, that plays a big role essential for of course, long term relationships. So my story on this is this, before you sell anything, product or service, you must first build awareness. I can't stress this enough. Okay. And this is interesting, because that's where the big difference is. So it's about building awareness. And the strategy around that is, you know, you got to build once you've got awareness, you got to build a comprehensive outreach campaign that involves also, of course, social media, we know the power of social media, and of course, email comes, that's at times under play. So you need email comms, because you need to then engage customers and supporters. Otherwise if you just do it on social media, that's great. But this also, I believe, eight comes to so many email plays a big big difference in reference to constantly nurturing the relationship. So remember this if you plan to sell anything, you must first build awareness fallen by connection, or gate connection does not happen. First, you got to build awareness first. So swiped us about social media might be definitely a powerful tool for any business to use right now. You can also go against you by the way if you're not using it effectively, but instead
In a powerful tool, when used effectively and of course builds relationships with customers and supporters, and also you get to solicit honest feedback and ideas that can definitely be put into use with your business. By using social media, those smartly, businesses can also create a community of supporters, a tribe, who invested also in their success, considering you're giving them all this value and are willing to advocate on their behalf. In this case, you will be hot. So building a community, building a database, scraping the database and exponent also to your internal system from social media, I could be LinkedIn could be Facebook, etc, is essential. Okay. Because long term, you know, as a side note, the reason you want to scrape information and create your own database off line from the social media companies is because you can't trust the tech companies in the event that they claim your customers as there's many, many examples of that online. And if you want to know more about that, just do a search. And you'll see that that's happened many, many times. So you don't want to do that, you know, you're putting you're putting now your business at risk. And from a risk assessment point of view, this is where you potentially have not considered all the aspects of what that could mean to your business, if they actually lock you out, in addition to their strategies, business should also focus on operational efficiencies, okay. And that means also the use of cost reductions, right. And it's really interesting because cost reductions are essential component as well, constantly evolving as a business. Now, I'm a big fan of obviously, spending to grow a gate, obviously, but at times, yeah, if you have to cut costs, in certain areas that are not producing the results you were expecting, or have gone down or work in that, well, of course, you got to revisit that and then investigate the new revenue streams, where by streamlining processes, you know, negotiating better deals, you know, diversifying your offerings, and also, of course, expanding into new markets. And I've said that before, previously, expanding into new markets, essential zoom, and all the online video platforms, of course, have opened those opportunities wealth in the last three years, and you'd be crazy not to look at it, considering to great opportunity to build beyond your borders. So while these strategies can help businesses create a profitable business model, it's important to note that there's no one size fits all approach. So every business is unique. And what works for one business might not work for another obviously, however, by adopting a combination of these strategies, and being open, to experimenting with new ideas, businesses can create a business small level, create growth, and definitely wealth opportunities. And if you're not thinking that way, then it's like, I don't know anyone in business, that wouldn't be thinking of growth and definitely creating wealth. It's just the essential component of why entrepreneurs go into business. Of course, we want to make a difference. Of course, we want to solve our clients, problems, challenges, issues, whatever the term you want to use is, but in the end, we're not a charity, okay, we need to create growth so we can create Well, again, we celebrate that because that's what free enterprise is all about. Now, so what I'd like to do is share with you a real life example, the client has successfully implemented the strategies, okay, definitely has come out as the real winner. This particular firm, we started working with them, they didn't need any finance at the time, they were traveling very well again. But what happened was, at times that what that recognized from a branding point of view that branding was a little bit all over the place, including simple stuff, like they load those in their brochures and the website at you know, the simple stuff, right? Even they were a little bit outdated. So we created a whole plan together in reposition them rebrand, and then re launch into the market. But at the same time, still doing what they doing and of course, coaching behind the scenes to ramp up the leadership of the company. But at the same time working on the what we call is the fun optics, the fun visual stuff. So as we're doing that we also coach, you know, the leadership for me, branding for me is not just the marketing decision for marketing people. Again, it's also for senior leadership, because it plays a part specifically into communications and of course reputation. So through that we also revamped some of the leadership including how they look including getting new visuals of everything from the leaders presenting differently to of course, new clothes. Yes, the package is the king here.
And of course, are already mentioned the corporate comms Mike gobo, you know, other than the website, and the typical branding collateral, Wilson looked at their trucks is this is was a midsize company, well over $200 million. And basically their trucks at everything that they had a connection with. And what that did was a sense of set them up to a new position where they looked really professional. And, of course, to the point where customers also noted and, of course, commented, so that was followed by media outreach, this is to mainstream media, and also social media. Okay. And that was also a very important part of the whole, the business approach, because people media, of course, is an important tool in utilizing and getting your message out there. And this is essential, especially for a lot of small businesses that understand the power of media. And the way you've got to look at is this way, yes, I know if you've got tight funds, okay, if you've got limited funds, if you haven't got enough, all that that can come into play and make you feel a little bit, oh, it's too expensive, or too, it's too out of our reach. It's not true. There's different ways where you can do this and do this fairly conservatively. As opposed to thinking, you know, the big media campaigns on TV, or major media, what that would cost? No, it doesn't have to be like that for you. Every company is different. But the media outreach for me, that I've explained many, many times is very, very poor in getting your message out there. But this is the key. So this company here, interesting, it was a $200 million company, private a guy and guess what happened from that. And I didn't know this at the time, part of the plan was discovered, obviously, Afters we started working together was to launch it into the Asics Australian Stock Exchange, and raise funds, of course, so they can become the public company, that's what they'll become by being on ASX and at the same time, you know, have a lot more reserves so they can do bigger and better things. Now, from that perspective of the new look for this company, basically, it actually helped their strategic funding, and fun raising models, because they started to look a lot bigger than they were, were before that, you know, great company, but they look a little bit outdated, and son looked a lot smaller.
So there's that, you know, so the story with this, it actually how they funding, you know, they fund and they raised a lot more money because they look like they deserve to be that big. And this is interesting, because you know, if you look at the psychology of this, a businesses is like a human being, okay, if a human being looks, and you want to hear me for what this is, looks like, it's not gonna make it like a loser. Right? Okay, I have to use that term. So you really get it. If a company also looks like a loser. What do you expect, and this is, you know, from a very simple psychology perspective, so I, you know, I prefer to do authentically, this is not about faking, authentically put out the messaging out there. And at the same time, use all the aesthetics, you want to get to put your best face to the world. So to conclude, me, business needs to create awareness, assuming there's no awareness, okay? So I'm talking about a startup or have no awareness to an established, you know, he's already got awareness, but you're still constantly creating awareness. Awareness does not stop. Because if they think you're we're already already well known. And you don't need to keep on creating awareness. Well think about Coca Cola, why do they keep on creating awareness? Why does McDonald's keep on creating awareness, et cetera? Why? Because they know in the human psychology, if you stop doing that, eventually, there will be a time when people forget about you, you don't want to do this, especially especially when you're a small business. Number two is to get connected. So the reason we're talking about get connected, right, is because that's what we're doing awareness, obviously, for people to come to us, we get connected. And then number three, we start engage. And engagement is really the commencement where now you've got an opportunity to sell and Raul, whatever approach you're using to get the customer into your business model. Okay? And that's what I would call is the time now, after you've done all of that, yes, to win the business, okay. And to win the business, you definitely have to do the sale, eventually, whatever you want to call that, okay, because in the end, it's going to be a conversion of some description. And we would say winning the business is, of course, part of having a profitable business model, obviously, right. So to sort of finalize my points here, so explore new funding techniques, by the way gives you a step ahead, because you're aware you're looking for opportunities. Developing a comprehensive marketing strategy is a no brainer from My perspective and of course adopted comprehensive social media strategy that's smart you know, creating the operational efficiencies, reducing costs and exploring your new streams for me is a smart way to build a profitable business and a business model of course that will lead to long term success. So we've come to the end of the episode for today. I hope you found this episode insightful and providing you with you know inspiration and ideas to apply to your business.
Jon Michail’s Personal Branding Masterclass" Podcast is sponsored by Image Group International, a global team of practical, digitally savvy personal brand and image strategists based in Australia, committed to maximizing your impact, influence and authority in the business world. To learn more and apply for your personal coaching, seminars and group workshops, please visit imagegroup.com.au or call 1800 631 311.