Boring is Sexy – Business Model Analysis
I have occasionally had posts on here over the years that reflect my evolving thinking on business and business strategy.
Today’s post I want to reflect on what I have learned over the last 2 years, as I shifted much of my focus to adbank and blade – then came back to do a deep assessment on the health of the other businesses.
This was a unique opportunity for me because I got to come back to some parts of the business with what felt like cold eyes- and really review what was working and what was not working. What businesses stood the test of time, what businesses improved and which ones got their asses kicked!
What businesses Struggled, which were Stable & which Thrived?
- Portfolio of sites – minimal/no management and most struggled
- My personal site (AuthorityWebsiteIncome) – Not posting for 6 months doesn’t help!
- FBA Business without a manager
- Boring SAAS business – listingeagle.com has continued to be stable with 0 effort in years
- Some very evergreen hyper niche content sites were stable
- Evergreen ecommerce business with minimal management
- LightningRank.com – Kelley was able to keep this business stable
- Content Refined – With Madeleine as the manager in place and properly incentivized -Content Refined continued to thrive
- BrandBuilders – Manager in place properly incentivized to grow the business
- FBA Business with a Manager
What is the key Takeaway – Boring is Sexy!
The only projects that survived/thrived were ones that had a manager in place or were boring/evergreen businesses (either SAAS or content).
What does this mean for the future of my online businesses. Here is how this review impacts my plans moving forward by business type…
- Content Sites – Boring evergreen niches or divest other sites that require more active management
- SAAS Portfolio – Focus area for growth with proper management in place from the start
- Productized Services – If the manager is well aligned and the customer acquisition channels are diversified this model can be very stable.
- AuthorityWebsiteIncome – There is a need for my increased involvement – which is great as I really enjoy it!
The key takeaway is that boring is sexy when it comes to long term stable success!
This is not a unique insight and one that is supported by the most successful conglomerates for many decades.
Berkshire Hathaway does not need a lot of introduction. Many people know the basics of how Warren Buffet and Charlie Munger applying a relatively unchanged set of investing principales from Omaha have outperformed pretty much everyone over the last 50+ years and grown it into a monster with them becoming 2 of the wealthiest people alive.
I have long been a fan of everything Berkshire Hathaway and Warren Buffet, I highly recommend reading The Snowball, Warren Buffet and the Interpretation of Financial Statements and Berkshire Beyond Buffet along with his annual shareholder letters.
The key takeaways we can apply to online businesses is a focus on
- Decentralized great management with minimal overhead at main office
- Focus on the very long term
- Don’t be afraid to go against the crowd
Constellation Software is a relatively unknown Canadian company that doesn’t make a lot of noise but has achieved phenomenal results (over 1 decade of stable 30% annualized return on invested capital). They focus on boring low churn B2B SAAS businesses. To get a real sense of the business I recommend the 10 years of president letters (here). The CEO and CFO did a deep dive looking at the high performing conglomerates and shared the insights in the 2016 and 2017 letters which were very telling.
- Decentralized management
- Focus on cost and a few key metrics for operating units (CEO is 6’4” and flies coach)
- Capital allocation rigor bordering on fanaticism – not being afraid to walk away from deals that don’t meet their hurdles and not bending those hurdles for years!
The 3G Way, Dream Big and True Power (tougher to get through) all provide a great insight into the management system and culture behind 3G Capital.
- Fanatical focus on costs (CEO is on the road 200+ days a year and flies coach)
- More centralized than constellation or Berkshire
- Meritocracy with A LOT of responsibility placed on managers
Another similar company to these above many haven’t heard of is ESW Capital (great story in Forbes here) who share many of the same traits but is arguably the most centralized out of the list.
What do all these high performing companies have in common…
- Fanatical focus on controlling/cutting costs but with above market compensation to top performers
- Disciplined focus on a set of key metrics, the metrics are not always the same
- Mostly decentralized with much responsibility to the business managers
Hopefully this honest assessment of what businesses struggled, which were able to stay stable and which ones thrived is useful. The similarity of the traits the businesses that thrived shared with the example companies is very telling.
I look forward to continued sharing on what is working and not working across all my projects.
Hi Jon, Great post! could you elaborate on the compensation model you have with Madeleine as the manager, i’m struggling to find a balanced mutual offer which benefits both parties as manager and owner. Thanks!!
Hi Jake. We do a mix of a base salary plus a % of profit with an ownership piece as well. This has evolved over time based on what interested/motivated the manager. I think there is no one size fits all and the key is identifying what motivates the manager/partner and then aligning incentives such that you are happy when they are making a ton of money because it means you are as well… and vice versa they are not happy when you are not happy.