BilthMoment: Business Model, With Peter Tonka

Peter Tonka is a young gentleman who holds a degree in Business Administration Marketing from the University of Education Winneba Business School.

He is a marketer by profession and a singer by calling.

Tonka is a self-taught graphic designer, MC, Events Consultant and a ghost(anonymous) counselor.

Peter Tonka

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This is why he is the CEO of three fast-rising companies: Goglo, Hilltop Publication and Petals Gas.
He has achieved a lot of amazing successes, which is kind of mind-boggling because of his young age at every accomplishment.

As a teacher in one of the renowned basic private schools (Happy Child Learning, Centre) in the Northern Region, he rose to become a headmaster in 5 months only with an SHS certificate.

He has held and still holds several leadership positions in some associations.
He is not married and has no child.

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He has been serving as the deputy procurement officer at Baptist Medical Centre, Nalerigu even before he completed his university education.
This gentleman is a good listener and always wants to try new things out.

He loves YouTube, LinkedIn, Tedx and Adobe Creative Cloud; he is a lovely person.
Mr. Tonka set the ball rolling by first acknowledging Bilth Studio for the opportunity and wondered how he was going to squeeze a topic that took him years of experience into an hours presentation and asked for God’s help.
He also admonished the members when he said, “I want to believe that due to the numerous presentations deliver, a good number of us in this group are now business owners or probably starting a business. If you haven’t done any of these yet, then I plead that you join a startup.”

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He continued by saying that understanding the problem you are solving for your customers is undoubtedly the biggest challenge we’ll face when starting a business. Customers need to want what we are selling and our products need to solve a real problem.

But ensuring that our products fit the market is only one part of the coin, the other side is figuring out how you’re going to make money and this is where the business model comes in. 
What is a business model?
“At its core, your business model is a description of how your business makes money.

It’s an explanation of how you deliver value to your customers at an appropriate cost.

Simply put; the business model refers to a company’s plan for making a profit.

It identifies the products or services the business plans to sell, its identified target market, and any anticipated expenses.”
According to Mr. Tonka, business models are important for both new and established businesses.

It helps new businesses to attract investment, recruit talent and motivate management and staff.

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Established businesses should regularly update their business models or they’ll fail to anticipate trends and challenges ahead.

The business model also helps investors to evaluate companies that interest them.
“A business model is a high-level plan for profitably operating a business in a specific marketplace” he added. 
According to Joan Magretta in “Why Business Models Matter,” the term ‘Business Model’ came into wide use with the advent of the personal computer and the spreadsheet.

These tools let entrepreneurs experiment, test, and, well, model different ways that they could structure their costs and revenue streams.

Spreadsheets let entrepreneurs make quick, hypothetical changes to their business model and immediately see how the change might impact their business now and in the future.
In their simplest forms, business models can be broken into three parts:
1. Everything it takes to make something: design, raw materials, manufacturing, labor, and so on.
2. Everything it takes to sell that thing: marketing, distribution, delivering a service, and processing the sale.
3. How and what the customer pays: pricing strategy, payment methods, payment timing, and so on.

“As you can see, a business model is simply an exploration of what costs and expenses you have and how much you can charge for your product or service.

A successful business model just needs to collect more money from customers than it costs to make the product.

What most of us are so much interested in. This is your profit—simple as that” he continued. 

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New business models can refine and improve any of these three components. Maybe you can lower costs during design and manufacturing.

Or, perhaps you can find more effective methods If marketing and sales. Or, maybe you can figure out an innovative way for customers to pay.
“Keep in mind, though, that you don’t have to come up with a new business model to have an effective strategy.

Instead, you could take an existing business model and offer it to different customers. For example, restaurants mostly operate on a standard business model but focus their strategy by targeting different kinds of customers” he added. 
*The different kinds of business models*
You don’t have to invent an entirely new business model to start a business. In fact, the vast majority of businesses use existing business models and refine them to find a competitive edge.

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Here’s a list of few business models I think you can use to start your own business. Or maybe grow an already existing business. 
1. Advertising:

The advertising business model has been around a long time and has become more sophisticated as the world has transitioned from print to online.

The fundamentals of the model revolve around creating content that people want to read or watch and then displaying advertising to your readers or viewers.

In an advertising business model, you have to satisfy two customer groups: your readers or viewers, and your advertisers.

Your readers may or may not be paying you, but your advertisers certainly are. This is why I can’t afford to miss a post from Bilth Studio, they get me what I want to see; especially contents about movies.

They’re the reason I watched Money Heist.

An advertising business model is sometimes combined with a crowdsourcing model where you get your content for free from users instead of paying content creators to develop content.
The talk of CBS, The New York Times, YouTube are good examples.

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2. Affiliate:

The affiliate business model is related to the advertising business model but has some specific differences.

Most frequently found online, the affiliate model uses links embedded in content instead of visual advertisements that are easily identifiable.

For example, if you run a book review website, or an inspirational website like WordInspired by Enock Kabange you could embed affiliate links to Amazon within your reviews that allow people to buy the book you are reviewing.

Amazon will pay you a small commission for every sale that you refer to them.
3. Market place:

Market places allow sellers to list items for sale and provide customers with easy tools for connecting to sellers.
The marketplace business model can generate revenue from a variety of sources including fees to the buyer or the seller for a successful transaction, additional services for helping advertise seller’s products, and insurance so buyers have peace of mind. 

The marketplace model has been used for both products and services. Examples: eBay, Tonaton and OLX.

READ ALSO: Will the customer keep you in mind?
4. Franchise:

Franchising is common in the restaurant industry, but you’ll also find it in all sorts of service industries from cleaning businesses to staffing agencies.

In a franchise business model, you are selling the recipe for starting and running a successful business to someone else.

You’re often also selling access to a national brand and support services that help the new franchise owner get up and running.

In effect, you’re selling access to a successful business model that you’ve developed.Examples: KFC, McDonald’s.
“Successful businesses have business models that allow them to fulfill client needs at a competitive price and a sustainable cost.

Over time, many businesses revise their business models from time to time to reflect changing business environments and market demands” he added. 
“When evaluating a company as a possible investment, the investor should find out exactly how it makes its money.

READ ALSO: Your business idea

This means looking through the company’s business model. Admittedly, the business model may not tell you everything about a company’s prospects.

But the investor who understands the business model can make better sense of the financial data” he continued. 
“A common mistake many companies make when they create their business models is to underestimate the costs of funding the business until it becomes profitable.

Counting costs to the introduction of a product is not enough. A company has to keep the business running until it’s revenues exceed its expenses” he explained.
 Criticism of Business Models
Joan Magretta, a former editor of the Harvard Business Review, suggests there are two critical factors in sizing up business models.

When business models don’t work, she states, it’s because the story doesn’t make sense and or the numbers just don’t add up to profits.It’s like carrying a dead goat for sale. 
Consider a comparison of two competing business plans where two companies rent and sell movies.

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Bilth Studio in my mind though, I think I am seeing far. 
Both businesses made Ghs 5 million in revenues after spending Ghs 4 million on their inventories of movies.

This means that each company makes a gross profit calculated as Ghs 5 million minus Ghs 4 million, or Ghs 1 million.

They also have the same gross profit margin, calculated as 20% of gross profit divided by revenues.
But things change with the arrival of the internet and subsequently COVID-19. Company B decides to stream movies online instead of renting or selling physical copies.

This change disrupts the business model in a positive way.

The licensing fees don’t change, but the cost of holding inventory goes down considerably.

READ ALSO: The journey of an entrepreneur

In fact, the change reduces storage and distribution costs by Ghs 2 million. The new gross profit for the company is Ghs 5 million minus Ghs 2 million, or Ghs 3 million. The new gross profit margin is 60%.

Meanwhile, Company A fails to update its business plan and is stuck with a lower gross profit margin.

As a result, its sales begin to slide downwards. Company B isn’t even making more in sales, but it has revolutionized its business model, and that has greatly reduced its costs.
On this note, he concluded his presentation and answered members’ questions. 
Join us every Saturday and Sunday, 7pm for our live sessions. WhatsApp us on +233595863409.

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