At this month's Startup Grind London Vernon Hill II, founder and chairman of Metro bank shared his journey and the business wisdom that allowed him to build two banks and build his assets to £1.2 billion.
We tend to make a big fuss when it comes to defining what we do. At networking events, asking someone "so what do you do?" devolves the conversation into a string of jargon and corporate-speak, leaving a sense of uncertainty about what they actually do. The stream of buzzwords evolves into a meaningless soup of "solutions" and "platforms" when people try to explain what their business does. In order to be successful you need to have a clean, simple, easy to understand business model. As Vernon Hill told audiences: "If you can't explain your business model in one sentence you're in the wrong place."
Keep it simple, specific
Limiting your business model to one sentence may at first feel constricting, but the purpose of drilling down exactly what it is that your enterprise does is vitally important. Once you and your staff understand precisely what it is that your organisation does, you and your team can focus on accomplishing that. Similarly once you have a clearly defined model you know exactly who to target, find out your target market's buying habits, and who the direct competitors to your business are.
Vernon Hill presented Metro Bank's business model thusly: "convenience and service." It's incredibly simple and compact, and tells you exactly what Metro Bank is designed to do, what it provides that other banks don't, and how it's going to attract customers in a jargon-free, consumer-friendly way. However boiling down your business model to two words is likely to leave you with two bland nouns, so instead go for a sentence such as:
[business name] helps [target demographic] with [problem] by [solution] through [unique selling point].
Wait! Before you rush in you need to be specific about how you fill in the sentence, here are examples of a good one sentence business model and a bad one sentence business model.
Bad: ITProPortal helps businesses with making more money by telling them things about business through articles and podcasts.
Good: ITProPortal helps C-level and BDMs of startups and SMEs with implementing positive change in their enterprise by educating and informing them about modern business wisdom through articles based on knowledge gained from billionaires and successful entrepreneurs.
Notice how specific we've been in the second sentence compared to the first; we've defined our target demographic, identified what we do, how we do it, and found what makes our service unique.
Knowing is half the battle
We've got the business model down to one sentence, so now what? Now we've got to build the business and, as Vernon Hill sternly told us, "You can't build a business unless you can sell it." By nailing your one-sentence business model you can now:
- Market to [target demographic]
- Market to those who have [problem]
- Market to those looking for [solution]
- More efficiently find leads
- Explain to [target demographic] why you're unique [unique selling point]
- Focus marketing/advertising to highlight [unique selling point]
- Understand your advantages over competitors
- Understand your disadvantages from competitors
Many are afraid of actually selling, by highlighting what's unique about the product and who your sales staff should be targeting you nullify some of that fear. Similarly by specifically defining what problem your product addresses and how it does it, you increase the sales team's efficiency as they will no longer try to sell to a prospective client with no use for the product or service.
Similarly, once you explicitly state the business's raison d'etre to yourself and the rest of your team, you have a focus. Vernon was evangelical about his "You have to be fanatic about your model" philosophy: by defining your business model in one sentence you identify the business' reason for existence and everything should be focused around accomplishing that.
One powerful sentence
The key takeaway from this is that you need to explicitly and specifically define what it is that your business does. In that one sentence ([business name] helps [target demographic] with [problem] by [solution] through [unique selling point]) you define everything about your business. You've also now got an elevator pitch, a killer introductory sentence, and a mission statement.
In part two Vernon Hill talks about why innovation is essential and how to implement innovative strategies in any business, and in part three he discusses Apple's secret to success and explains how he used it to create a bank.