In my last blog I discussed making money vs creating value. In this one I want to focus on creating value and trading value. This might sound like the logical order any business must follow:
Step 1: Create value
Step 2: Trade the value
However, the ideal order is actually to trade the value before you have created it as it delivers a positive cash flow impact.
I know this is sometimes almost impossible, but if you are innovative and are serious about changing your business model, you will find a way to change the order to deliver a more positive cash flow impact.
This view of mine gets challenged quite often, especially by businesses that trade in physical goods. They point out how the retail industry has changed their model over the past number of decades from buying inventory and selling it, to where they sell inventory and only pay their suppliers after they have received the money from their customers, commonly known as consignment stock.
Similarly, we can look at Airbnb and Uber; they changed their business models from a very capital intense model to a model where they don’t own any of the assets they use to earn money.
The reality is that someone in your industry is already busy trying to figure this out, so the question is, will you disrupt your industry, or will you be disrupted?
Step 1: Create value
Step 2: Trade the value
However, the ideal order is actually to trade the value before you have created it as it delivers a positive cash flow impact.
I know this is sometimes almost impossible, but if you are innovative and are serious about changing your business model, you will find a way to change the order to deliver a more positive cash flow impact.
This view of mine gets challenged quite often, especially by businesses that trade in physical goods. They point out how the retail industry has changed their model over the past number of decades from buying inventory and selling it, to where they sell inventory and only pay their suppliers after they have received the money from their customers, commonly known as consignment stock.
Similarly, we can look at Airbnb and Uber; they changed their business models from a very capital intense model to a model where they don’t own any of the assets they use to earn money.
The reality is that someone in your industry is already busy trying to figure this out, so the question is, will you disrupt your industry, or will you be disrupted?
