Brian Handrigan | Crain's St. Louis

In this ongoing series, we ask executives, entrepreneurs and business leaders about mistakes that have shaped their business philosophy.

Brian Handrigan

Background:  

St. Louis-based Traaqr offers an automated "click to call" conversion level tracking platform for online advertisers. By connecting unique phone numbers to specific ads, Traaqr's technology shows its client companies how potential customers found them online. The data helps Traaqr's clients boost their return on investment for online advertising by illustrating which ads and platforms are generating the most successful sales. Traaqr is the latest company that Brian Handrigan, a long-time entrepreneur, has helped found.

The Mistake:

The mistake was building a business based on service and not on scale.

The business model of my marketing agency was: You provide services, you get paid for them, you get more customers. But, every year, you essentially start with zero dollars of guaranteed revenue. And more customers meant more staff, linearly. So we would have to add more customers to keep that going.

It became a vicious cycle, especially with timing, until the house of cards came down. I thought the marketing business was really about delivering great projects to customers. That was an important part of it, but it was just one small piece of the business model.

The business model isn't just a stale document you do as an assignment. When it's done properly, it becomes a true strategic resource for your business.

The Lesson:

A business model entails not just what you do for your customers and how you get paid. A business model, when you really use it to your advantage, helps you understand who your core segments of customers are, not just anyone who can write you a check. Which types of businesses do you really do well with? How are you going to get to those people? What influencers matter? Then there are the financial mechanics of what we do for somebody and how we get paid. It’s about understanding your business in all those different facets to create something, hopefully, that is competitive as well as scalable.

At my current startup, we were very focused on understanding the mechanics of our business model before we launched. For example, we don't provide implementation services. We partner with companies that do, but our business model is a very clear exchange. Our customers subscribe to our platform, they use it and, as we have new capabilities, they may opt in for those. But our ability to service 10, or maybe 1,000 customers, doesn't have a linear staffing headcount associated. While we will need to grow to handle more customers eventually, the nature of our business model is such that we can scale up very rapidly.

I would say I had the real aha moment — where the business model stopped being academic to me — last year when I was a fellow in the Pipeline Entrepreneurial Fellowship program that covers the Midwest. It's a fellowship that high-growth entrepreneurs can apply to. It's pretty amazing. You get feedback from top people — like MIT folks — in small groups and there’s lots of one-on-one. When we covered business models, I thought a business model was one thing. When I left, I really had a different idea of a business model and how it can be used strategically in a company versus making it feel like a homework assignment.

That was probably the moment when the business model actually began to have value for me. So, entrepreneurs just getting started definitely should reach out and participate in and get access to these programs to work with people who can help you. I think part of it is being able to have those one-on-one and small-group sessions where you can really engage with someone. Ask those questions you were afraid to ask or didn't even know you had. And have someone challenge you. Have really great people come in and say, “You describe your business model as X. Where is Y? Who do you need to connect with? Who were the influencers in those industries?”

All those different pieces really help you create a practical plan. My takeaway advice is the business model isn't just a stale document you do as an assignment. When it's done properly, it becomes a true strategic resource for your business.

Brian Handrigan is on Twitter at @next90guy and Traaqr is at @traaqr.

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