Why the Right Business Model Matters
If you've ever thought about having a startup, chances are you've thought about the kind of business model your startup would be built upon. It's one of the first things investors ask about and is the cornerstone of any successful company. Gliffy has been succesful in part because our business model aligned well with our business and resonated with our customers. There are a few business models that are common in the startup world:
Virtual Good Model-ie. Clash of Clans or Candy Crush. Basically, this model turns virtual game goods (gifts, level ups etc.) into something you pay for with real money.
Freemium Model-ie. LinkedIn. This model either starts out free then requires the user to pay or has a lower tier that continues to be free while offering a paid product that's more attractive.
On-demand Model-ie. Netflix or a food-delivery app. This model delivers the user whatever they need whenever they need it, including movies, food, transportation etc.
Marketplace Model-ie. Atlassian or Etsy
When deciding on the business model that's right for you, it's crucial that you're honest about the type of business you want and the motivation behind starting it. Get this part wrong and your company is doomed before it gets off the ground.
Gliffy is in the unique position of having been bootstrapped since day one so our business model never had to please investors. That's why rather than being built around a revenue-growth model we were built around a core belief: namely, that work shouldn't have to suck. That's what our founders wanted for themselves, their employees and the end users.
Building around core beliefs is something almost every company says they do. Who doesn't want to make the world a "better place"? But saying and doing are two different things. The only way to move those values out of your mission statement and into the ethos of your company is to bake them directly into your business model.
The Message as Business Model
Gliffy is certainly not the only company that builds its business model upon a core message.
Tesla is a good example of a message-driven company. Their mission is “to accelerate the advent of sustainable transport by bringing compelling mass market electric cars to market as soon as possible.” This is both specific and actioanble and their business model—invest heavily in battery technology to make powerful, long-lasting cars and develop direct sales techniques to get them into the hands of consumers, then iterate to bring down the cost—embodies it.
In Tesla's case, the message and model are perfectly aligned. And as their electric cars improve, their message that these cars are the future, only grows stronger.
This isn't always the case. Facebook claims to want to “develop the social infrastructure to give people the power to build a global community that works for all of us.” But their business model largely depends on ad revenues. There has to be a winner in that equation. Facebook has done great things to develop social networks, but it's also done great things to enrich advertisers.
If you're serious about having a message-based business model, you have to be honest about what your message really is. If your message is just a front for "make as much money as possible", the money will always take precedence and your customers will feel it. If, on the other hand your message is genuine, it can be a powerful differentiator, resonating all the way down to your customers, your people, and the community at large.
Building a message-driven business model begins with deep knowledge of your target customer.
Building for Your Customers
If you have funding, you don't have to provide value to customers from day one. You have the runway to iterate and find the right product/market fit. You can choose to give away your product for free while doing so because people will use a free tool even if it's not great.
Because Gliffy was bootstrapped, we needed to provide value to our customers from day one. Sink or swim. This meant that while we wouldn't ever face economic pressure from investors, we faced a much more real economic pressure, the pressure to survive. We had to find a way to bring and keep customers or there wouldn't be a Gliffy. Even if we didn't initially call it that, our business model was all about helping fellow software engineers be better and happier at their jobs. We knew our customers because we were our customers. Even today, our company has a strong engineering culture and is made up of more than half engineers.
Every company's strategy for understanding their customers is different — it's just important to have one. Whether it's through talking to customers directly or hiring somebody who's really good at looking at data, it should be your number one priority.
Once you know who your audience is, you need to make sure you're talking to them in their language.
Our audience of software engineers tends to be very fact-driven and has a low tolerance for bs. We take that to heart especially when it comes to marketing.
We hate annoying pop-ups, and know our customers hate them. Instead, our marketing focuses on what our customer need to do their jobs effectively. We offer things like case studies with heads of engineering that use Gliffy, who provide candid reviews of what they like and what they don't like.
Something that we've often heard people say when they're building a website and deciding to put in pop-up ads is: “But it works!” Sure—but for your audience. Or maybe it's working on certain people, but driving away other people who would be more valuable in the long run. By respecting your customers through your business model, you'll send a message of trust and build committed relationships.
Building For Your People
A business is more than a product and the profit it generates. A business is created, shaped and grown by the people in it.
Gliffy was built on the idea that people deserve to be happy at work environment where our team members are excited to come to work every day was a value that we wanted to make sure was built into the foundation of the company. If you want to build a business for the long-term, then you want long-term employees. You need to build a company where people actually care about the work that they're doing, want to build great products, and want to continue to work there.
We did this by making time for each and every employee. Rather than pushing to build a huge corporation and constantly adding members we've invested our time in our people and creating the best work environment for them. Even after 12 years, Gliffy is still pretty small — we're currently at about 35 employees and growing slowly (on purpose). You might find that a little odd for a company that's been around for over ten years, but we value our company dynamic more than how big our team is.
Valuing all your employees and their happiness will create a company culture that makes people excited to go to work. Whether it's letting people work from home for part of the week because you know that helps people focus, or providing health stipends and group classes, the little things are what show that your company cares about more than just profit.
You can't just expect to build a culture where the incentive to stay is a pay raise — someone always pays more. People will be quick to leave for a better opportunity.
People work for more than just money. They want to do something worthwhile, work with people that inspire them, and work somewhere that they feel appreciated. A culture that truly makes your team member's lives better will be a culture that makes people excited to come to work today, tomorrow and for a long time.
Building For Your Community
You often hear in the news about big companies donating large amounts of money to support charities or scholarships. But often these big companies only start thinking about "giving back" once they've have hit a certain size and are making multiple millions. Before that, smaller companies are only focused on survival and making a profit.
Giving back only when you've made a large profit shows that this value of building for the community was not baked into the foundation of the company. It's easy to give to charity when it's 1% of a lot. It's much harder when it's 5% of nothing.
One of our company values is “Have Heart”. This follows one of the golden rules you're taught as a child: treat others how you would want to be treated and be a good person. Luckily, having been bootstrapped from the beginning, we've been able to give back where we can. Every quarter we give 5% of our profits to employee-nominated charities, something we love doing and our employees love to be a part of.
Being able to give back brings us a little closer to the community and helps remind us of the things that really matter. It's definitely very grounding to remember why our product was created in the first place: to help solve everyday problems and allow people to spend their time on more important issues. This kind of mentality is something that permeates through the company and makes employees proud to work at a company that thinks of the greater community.
Your Business Model Creates a Values Cycle
If you're serious about creating a company that stands for more than just profit, it's not enough to know your message; You have to live and breathe it. And there's no surer way to do that than if you turn it into your business model.
Creating a business model and values that you're proud of is something that doesn't just impact one aspect of your business or multiple aspects individually. The way that you treat the community brings you more of the kind of person that shares your values to your company during recruitment. That means you're now hiring more and more people who share your values, and they're working with you to do business according to the principles that started your business.
This creates a positive values cycle that helps to grow your business and make you, your customers and the community more successful.