Sometimes we rack our brains to create the perfect business plan with an indestructible financial model topped off with lines of ideal customers. But come game day, we realize that our glorious projections were not the actual case. So, what’s the fix? Think outside of the box.
This methodology isn’t new. When brick and mortar leasing got too expensive, companies adapted to online models. When consumer habits were changing in the online world, apps took over the landscape. And now, it seems like forward thinking actually leads to us revisiting history. If you’re just starting out your planning stage, allow these three mega-successful companies change the way you do business. If you’re a veteran in the process, then let these examples serve as a gentle reminder: it’s never too late.
McDonald’s
As America’s classic burger and fries joint since 1954, it’s easy to think that their fast food model has been the sole reason for their success. If only it were that easy. In 1956, Ray Kroc, a businessman that partnered with and eventually bought out the business from the McDonald brothers, hired Harry Sonneborn. Through his game-changing new hire, McDonald’s developed the business plan that still stands strong today: McDonald’s would lease the land and building and then sublease it at a markup to its franchisees. They molded this even further once they had enough capital to own and purchase the land, leasing out restaurant space 20-40 percent more than market value.
So there’s that — McDonald’s is actually a real estate powerhouse. With over 80 percent of their restaurants franchise-owned, that means no matter what happens within the fast food industry, they will always have their land to fall back on. Talk about stability.
Costco
A popular business model amongst gyms, newspapers, magazines, and well, Costco, subscription-based membership focuses on large and guaranteed membership volume to supplement their income. Why does Costco do it best?
Besides the fact that the samples are the best thing known to mankind, Costco promises wholesale prices to the average person, guaranteeing that you’ll always get the best deal when you shop there. Their promise rings true in that Costco reports only making 12-13 percent profit on average — which includes a mix of brand name products and Costco-owned Kirkland products. To top it all off, Costco admits that its biggest loss leaders include the famous $1.50 hot dogs, $5 rotisserie chicken, and the incredibly low gas prices. Why? Because Costco knows that if they place the chickens all the way in the back of the warehouse, customers will weave their way through the massive aisles, only to buy more things along the way. With a whopping 88.1 million members reported in early 2017, Costco has hit the nail on the head with one thing: a simple, consistent, and much-needed product. It makes it tough to side-step a $55/year membership for a unique buying experience.
IKEA
Also known as a 20-something’s household staple and a place where relationships go to die, IKEA is also equivocally known for its infamous Swedish meatballs. Let’s be clear: the simple, delicious, and perfectly placed restaurant is like a water haven in the middle of a dessert. By the time families have hit their peak over Ektorp sofa colors, you can smell the food just in the horizon. For IKEA, their secondary stream of meatball revenue earned them an astonishing $1.8 billion in 2016.
This classic example shows that extra revenue streams are key to help businesses stay fresh, or, you know, just make a little extra cash.
At the end of the day, these business models thrive because they deliver essential products into the world. So, what do you have to offer and how will your model change the game?
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.