Power of Models – Part 2

I broke a promise

In my first article here, I told you that I would sieve through the technical jargon and tell you true stories that would explain these did I not quite understand how powerful this could be until we deployed it as we launched our business.

If you have not made that decision to suspend that business plan you are about to write now as you kick-off that venture and go for a defined Business Model (Canvass) instead, maybe this will help you see the reasons;

Three Months into our business kick-off (we started with the low hanging fruit of Real Estate Brokerage), we were running out of operating cash, we were funding our operations at that time from personal savings, we were in a shared office space in a high-rise building just beside NNPC Towers in Abuja, our 3 Month lease for the space was expiring, funds for fueling the car, prospecting, phone calls and sundry expenses were almost depleted. In that dire situation, I remembered my training and told my then partner that we needed to do a “Business Model Canvas” to see holistically how we were running the business and why we were close to becoming another mortality metric in Nigeria; we had the session and what it revealed was at best startling; We had no clearly defined revenue stream, our value proposition was being rendered by a million others, there was no differentiation to our service, partnerships were almost none existent. We could see in clear terms what our problems were, We swung into action; We identified two areas we needed to work on immediately; Partnerships and Revenue

I can share the exact model we used to get in our first inflow in millions now because we no longer use that model, it was updated (I will say why later); Business Models no matter how easy it is to be figured out should not be a front-page conversation, It should be classified.

Now into that model; leveraging our key resources which were;  years of Experience in Real Estate Business Management, Marketing, Business Development, and Branding. We sourced partners who needed what we had but had what we needed;

1. 1. 1. A newbie developer with access to funds or a contractor with a line of credit
      2. A Project Manager with outstanding skill in Architecture and Site Supervision who wants to build a business or be part of one
      3. A Young Real Estate Executive whose pedigree we can leverage on in exchange for equity and a share in profits
      4. A realtor with specialty in HNI relationship

We had a super website and a well-branded social media account, which served as our channels, we defined our customer segment which was “newbie developers, Owners of undeveloped land within the town, and Middle-Class Families with an aspiration for “Masterpiece but affordable luxury”

To the Landowners we were saying; Let’s turn your lands to Landmarks

To the Middle-Class Home Seekers we were saying; Let’s fulfill your luxury home aspirations with ease

To the Newbie Developers with access to funds: We were saying, let’s bring in the technical know-how to ease your entry into the market.

These represented our “Value Proposition” and we had spelled out our “Revenue Sources”; Brokerage and Development Consultancy and we had the data of our average operational cost.

With all the elements in place, we began prospecting, We got a landowner with a property in Jabi (part of our catchment area), and we shared our vision for the land with a beautifully designed brochure that had our equally beautifully designed prototype and our profiles (I, the project manager/Architect, and the Real Estate Executive), the package and packaging wowed the landowners, although she was unwilling to go for a Joint Venture she proposed a payment plan for the land. After we did our calculations, we went for that! Buoyed by our Contractor (with a line of credit) we looked for Investors, we reached out to our “HNI Specialist” Realtor made an offer, and within some days got an Investor interested

The Meeting with the Investor was led by our Real Estate Executive Partner (with pedigree), he committed. We signed the payment plan contract with the landowner, paid our first installment for the land, paid our equity contribution to the Contractor with the “line-of-credit” and the project preliminaries commenced.

This Model was super, remember when I mentioned “Key Resources”, I didn’t mention “Cash-in-bank”, this model got us our first investment in eight-figure millions and made us qualified to go for a property valued in nine figures at our first attempt. But this model failed, the project didn’t succeed due to poor due diligence on our part and bad contractual terms which we accepted in our eagerness.

We will discuss how these two things; “Due Diligence and Contractual terms” can impact a well-structured business model.

There you go, promise kept.

Till next week, I greet you!