Money makes businesses ‘go around’
by Natalia Agathou, Advance London Business Advice Manager
We all know that businesses – whether big or small – run around in circles daily to cater for customers’ needs and desires; so talking about ‘circular business models’ presumably makes a kind of sense to all you entrepreneurs out there. But let’s start with the basics – what are those circular models?
It’s standard practice if you’re in business to have ‘loops’ of activities or processes: including buying materials, applying skilled techniques to them and turning them into a product that you sell for a price that covers your costs as you go through this loop – plus a bit extra so that it’s worth you doing it! Same principle if you offer services. Right?
You also need always to be two steps ahead of everything: your competition, your suppliers, your clients, your employees, the economy (OMG the economy!) – but also yourself. You need to enjoy your business, which for most of us means that it should be an interesting enough challenge to keep wanting to put in the hours. For many of us the motivating factor is money, but for all of us it’s the thrill of making it happen, of factoring everything into your business and succeeding in it.
So how can you, especially as a small or medium-sized business that’s either just started up or has been around for a while, stay ahead of the curve, maintain the stability you need to keep the business running and keep the thrill alive?
How can your business run in profitable circles?
Most people would say that innovation drives business, but I would say it’s just as important to put on your observation goggles and look carefully at your own business as well as the world around you. Could you make your business run in multiple ‘loops’ instead of one? What if, when you drew your business operations for an investor, they didn’t look like this but like this? Is there an opportunity to be more circular and resourceful? Yes, there is!
- Look at the supplies you need to make your product with. Could they come from the wasted resources of another business nearby? Could they come from resources wasted by your clients? Could your product be made of ingredients that offer the same functionality as the traditional ones you used but that can eventually biodegrade? ‘Snact’, a family-run business, saw a market opportunity in producing a fruit jerky out of ugly and unwanted fruit from British farmers that would otherwise have been wasted.
- Look at your product itself. Apart from selling it, could you be renting or leasing it? Could you be offering a service alongside your product? Customers might need to use your product for a short period of time and not be interested in paying for the whole product just to use it once or twice. ‘Rentez-vous’ offers a peer-to-peer and business-to-consumer fashion rental service across London.
- Look at your product again. Is there any way you can design it so that, when one of its parts breaks, then only that part needs to be replaced and fixed? Could you be exploring some additional revenue streams from selling the spare parts needed and recovering the old ones? Fairphone is a modular phone that allows users to replace the part of the phone that needs to be fixed without having to discard the whole handset.
- Look at your manufacturing process (if you have one) and explore the idea of renting your equipment during the idle hours of your operations to neighbouring businesses. They might not necessarily want to take on the investment but they might be willing to rent at a lower cost. Community Clothing is a London-based business that uses the idle capacity of others’ factories to produce stylish, great quality, British-made clothing.
- Look at getting your product back after it has been used. Wouldn’t you want to get hold of those products of yours, bring them back home, refresh them and sell them again? To me it sounds like a way to save on production costs. Could you make your products more robust and repairable so that they last longer and, when they come back to you, you could make them ‘as good as new’ and resell them? Kobo is an e-reader manufacturer that takes its products back, refurbishes and resells them.
- Service a need by providing a commercial platform where people can exchange products or services. I’m sure you have used Airbnb – so in the same spirit, Enviromate has created a platform for allowing people to buy, sell and exchange leftover construction materials.
The most exciting part of all this is that all of these ‘loops’ have been implemented by small and medium-sized businesses. My suggestion is to look around, see what products or resources are currently wasted and get your entrepreneurial spirit on to make money out of them. The opportunities are endless and if there’s anyone that can explore them, it could be you!
Why do I know all this?
Because I have seen businesses in London and around the world making it happen! Our team, Advance London, part of the London Waste and Recycling Board (LWARB), is providing guidance and support to a number of London-based small and medium enterprises. Our aim is to show them how to build those loops into their own business, encouraging them to dare to go even further. More than 35 businesses are currently exploring new markets for all the products and materials being wasted in the city, and are starting to prove to the world that it makes business sense to work in multiple loops!