The Surprising Key To Business Longevity: Build A Powerful Ecosystem
How to Create a Business That Survives Forever with Ecosystem Support
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Introduction
There are three types of businesses.
01 - A business that fails within a few months/ years of launch because the business/ business owner fails to find a product-market fit.
02 - A business that lasts as long as the primary business owner is associated with the business in one form or another, and
03 - A business that manages to grow into an institution. This business is not “dependent” on one person/ a few people. This is a business that is run by teams, systems, processes and they become perennial businesses.
Let’s try and understand what it takes to build a perennial business.
Build a perennial business
A perennial business is made possible when the business doesn’t benefit directly through the transaction of a business.
For example, when you go to a restaurant, the moment you pay the check, the money goes into the books of accounts of the restaurant owner, and the profits are (rightfully) pocketed by the business owner.
However, in a perennial business, your business will make a profit, only after one more person benefits from the transaction, before the money enters your pocket/ balance sheet.
Yes, this will definitely reduce the amount of profit your business will make, but in the long run, this is a far more beneficial way to make a lot of money.
Let me explain.
Let’s expand on the same example of a restaurant.
There are two ways in which perennial businesses exist in the restaurant/ f&b business space.
01 - Let’s say the restaurant is not a stand alone restaurant, but a franchisee location of one of the restaurant brands. In this case, the franchisee owner will operate the restaurant location, but the profits will be divided between the location owner and the brand of the restaurant. In this case, the restaurant brand makes money only after the franchisee owner of the location makes money.
However, the way this business becomes perennial for the restaurant brand is because the location owner will be able to service a limited/ finite number of orders every day. However, the restaurant brand can build a network of hundreds/ thousands of locations across the country/ world and make a sliver of profit with every transaction that takes place in all the locations.
02 - One more business that makes money through restaurant locations is food delivery apps. While every restaurant has to manage food costs, rentals, team costs, etc., the food delivery app makes money through every transaction that the restaurant gets through the app.
Again, its important to be mindful of the fact that building a food delivery app, expanding the network to all major restaurants, building a delivery fleet mechanism, and getting users on the platform takes time, effort, energy and a lot more. However, once this ecosystem is created, the food delivery app becomes a perennial business that makes money with every order that’s placed across all restaurants that are listed on the platform.
Conclusion
Success in business is all about execution.
As a business owner, you will always have two choices.
01 - Create a business where your business prospers directly through every transaction (in which case your scale could/ would be limited).
02 - Create an ecosystem, where you make a very small transaction fee on every order placed through your business ecosystem, but you end up creating an institution that pays everyone involved until the end of time.
I hope reading this note till this point has convinced you to start thinking on the lines wherein you’re leaning towards the latter option.
If you’re a business owner and would like to build a perennial income stream in your business, or if you’re an aspiring business owner who would like to work towards building a perennial business from the ground up, it would be my honor to get to consult you. Feel free to reach out to me and let’s connect.Your Thoughts!
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P.S.: Image made on Meta AI using the prompt, “Imagine a business owner who is being appreciated by everyone during the annual vendor meeting. Show a banner that reads "annual vendor meeting" in the background of the image”