The 4 Types of Businesses

The survival of your business depends on you knowing the type of business you are now doing. Only then would you be able to identify the gaps and directions to take in order to prevent a premature demise or non growth of your business.  

The economy can go up and down over a 9 to 11 year cycle; countless number of business appear and disappear with this cycle. Can yours ride out the storm like McDonald’s, Coca Cola or Nike? Would you like to be able to? 

Type #1: Blooming Flower
In 2005, a high ranking official from the Singapore Economic Development Board release their findings; 80% of all small and medium size businesses never survive pass their 42nd month.  These are the businesses they came and are now gone.  It is like a blooming flower, when in full bloom, they are nice to look at, smells good too.  However, they soon wither off, slowly decaying and smells really bad as they rot before they finally nail it.

Does it mean that it was a bad or wrong business, well no, they are all good businesses.  Their final demise could be a whole complex multitude of cause and effects.

If you think your current business matches this type, what do you think you could do to prevent its premature demise?

Type #2: Fireworks
These types of business comes out in a big bang and then as suddenly as they appear, they disappear.  One such business I saw in Singapore is “Bubble Tea”; it is a concoction of red tea with milk and small starch balls.  When it first arrived in Singapore, it came with a big bang, its outlets were everywhere.  At its peak, there was even an outlet in a heartland town that employed sexily dressed models during its peak hours to promote their product.  It sure raised a lot of eyebrows among the women in the heartlands.  The frenzy peaked out around the 9th to 11th month and then it fizzles out of fashion.  Today, we can still find one or two stalls in the heartlands and prices have tumbled by more than half compared to the charges during its peak.

Another example would be “Roti Boy”, they only have a single product, a bun with a butter based caramel filling and a layer of coffee cream on the top.  Baked to perfection the coffee cream turns into a crispy crust that adds to the flavor of the bun.  There were long queues at its early outlets and soon, outlets sprout all over the place.  Just as they appear suddenly, they fizzle out just as fast.

If you have a business in this category, I must say you are either really smart or …  Smart is if you are the type of businesspersons who are great at starting a business and then selling it off at its peak for a good profit.  However, if you are in for the long run well then you are … eh … not smart.

So, please share with me what would you do ?

Type #3: Bonsai Plant
This type of business are usually around for more than twenty years, they are still around, but they are just as they were 5 years ago, 10 years ago, 15 years ago, some are still the same as when they started.  These would be the small business stores you see along the streets.

So why do we classify them as a Bonsai Plant, well they are still in business, just as a bonsai plant is alive.  However, like a bonsai plant, which is actually a large tree, it kept its bonsai size due to purposeful potting.  These businesses have the potential to be as big as a tree and could even reach the status of a Type #4 business, but they stayed as they were.

Some use the analogy of a frog to describe these type of business, they sit pretty and still on their patch and wait for their prey (customers) to come by in front of them, then they lash their sticky tongue out and devour them.  When there are no customers, they sit and curse the government, the economy and lament their sad state.

These business are typically family run.  Granddad started it off, handed it over to Dad, who raise the whole family tree with it and now it is your turn.  You don’t like the business, but you are obliged to take it.  You can choose to sit and let it carry on as it has over the last 20 or 30 years and it will carry on for another 10 or 20 years.  It won’t kill you, on the contrary it would feed you and your family tree.  But it would be like sleeping with a pea under your bed sheet.

So, are you here ?

Type #4: Pine Tree Forest
This is the one every business should attain.  At this stage the business is highly structured with proper controls.  The most important of all, it’s profitable business unit is duplicable across national boundaries.

A great example of such a business is McDonald’s.  You can be in Beijing and the McDonald’s there will provide you with the same familiar furniture in their outlet, they same tasting burgers and fries.  You will be greeted in exactly the same way be it McDonalds in Singapore or McDonald’s in Australia.  When McDonald’s is ready and allowed to open an outlet in North Korea (in some peaceful future), it will also look exactly the same in their deco, the same looking counter, the same cash register, etc.  Does that mean the business is no longer innovating? Nope, they are ever more innovative and adaptive to local conditions.

Take for example Mr MacDonald full size figure does not sit with cross legs in Thailand because in Thailand, it is rude to sit cross leg, so Mr MacDonald adapt to the local culture.  If you have seen how the MacDonald fries were made in America, well they are made in exactly the same manner in the same fryer of the same size in McDonald’s Philippines.

Take another example of a  “Pine Tree Forest” type business; Kentucky Fried Chicken.  They too have a very similar duplicable business model to McDonald’s.  They too, were very adaptive to local cultures, so when in Indonesia, where the culture prefers to accompany their fried chicken with rice rather than a bun, Kentucky Fried Chicken sells their meal sets with a ball of rice in place of the bun.

So, when McDonald’s wants to start their first outlet in Afganistan (in the peaceful future), they simply take out the Standard Operating Procedures (SOP) and follow exactly as it is written, right from the glass doors down to the kitchen cutlery.

What do you think is McDonald’s & Kentucky Fried Chicken’s Unique Selling Proposition? … Comfort Meal – familiar surroundings for a familiar meal, anywhere.

Would you like to grow your business to a “Pine Tree Forest” type ?  Do you know how ?