HOT TAKE: Developing a traditional 30-40 page business plan is a complete waste of time. But…

Today’s Topic - Your Personal Business Model Baseline

We’re looking for the simplest description of your idealized business. That’s it!

But while the description is simple, the power comes from internalizing how you got there.

Quick Review

Over the last couple of weeks, we’ve outlined the basics of your business model.

We’ve got four inputs we call the Four Building Blocks

1. Net Revenue Target

2. Time Targets

3. Fixed Expenses

4. Client Variables (cost and acquisition)

(If you need to catch up, check out the Newsletter Roadmap and read CB-008 and CB-009)

Your Business Model Baseline in story form

A story can be easier to understand than a spreadsheet. So, I like to structure the Business Model Baseline as a paragraph. You want to be able to describe your business something like this:

I am targeting an annual salary equivalent of $____________. To achieve that, my business needs to generate NET revenue of $__________.

I expect to dedicate a total of ________ working hours per year to the business. Of that time, ___% will be dedicated to revenue-generating activities, giving me _____ hours that I can dedicate to client projects.

In total, I anticipate $_______ of monthly fixed expenses, mapping to $______ per year in fixed expenses.

The above paragraph outlines the “fixed” input into the model. The inputs below you’ll vary to explore different scenarios:

The value of an average client (ACV) will be $_______. Acquire each new client will cost ___% of ACV. Of the qualified leads I talk to, ___% will become clients.

This results in a GROSS revenue target of $___________.

If you can fill in all these blanks, there’s a bunch of other stuff you can know too.

Model Output

Here’s an example model output in spreadsheet form from the Big Spreadsheet. It shows everything you need to fill in the above paragraphs PLUS a bunch of other little details about the model.

Time Frame Analysis

I really like to view these outputs across different time scales. So once you have your numbers, just divide them on a daily/weekly/monthly/quarterly/yearly basis.

This will allow you to develop key performance indicators (KPI) to track yourself against. For example, I’ve generally tracked my performance for revenue based on the amount invoiced each month.

But at the same time, I’m aware of how many hours each day should have been spent on revenue-generating activities.

Having context for those variables across different time frames gives you the insight you need to make nimble decisions.

Everyone’s got a plan until….

So you’ve crunched all the numbers.

You know EXACTLY how you want your business to run.

What are the odds things will work out exactly as planned? Somewhere close to zero.

So the real power here isn’t that you have some clairvoyant plan that tells you exactly how your business will work.

The value is understanding how it HAS to work if it’s going to achieve your goals.

There is no path to achieving the freedom, flexibility, and revenue targets you have in mind if the math doesn’t work out.

This understanding allows you to validate a business model that can get you where you want to go while avoiding wasting time on approaches that can never get you there.

Until next time - LFG.

-Zack

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