Morphing business models can boost sales, create jobs

Filed under Innovation, Management
Mojica owns Blue Buddha Boutique

Rebeca Mojica -- photo by Jenna Deidel, courtesy of Blue Buddha Boutique

Like most small businesses, Blue Buddha Boutique started out as a one-person show, with founder Rebeca Mojica making and selling chain mail jewelry.

But Mojica, who created her first pieces eight years ago when she couldn’t find a chain mail belt she liked in the marketplace, soon saw a larger opportunity in selling chain mail supplies to other jewelry-makers. So she adjusted her business model dramatically, launching an online jewelry supplies store that has drawn customers from more than 30 countries and propelled her company’s annual sales to an expected half a million dollars. That’s up 20 times from 2003, when Mojica started as a sole proprietor, she said.

What made the difference was Mojica’s willingness to keep “the door of opportunity unlocked,” she said. “Be flexible, and open to taking your business in a different direction,” she advises other business owners.

Most successful companies have morphed as they’ve grown, said Steven Rogers, professor of entrepreneurship at Northwestern University’s Kellogg School of Management and director of the Levy Institute for Entrepreneurial Practice.  “The reality is, owners must constantly look to evolve,” he said. “The business they’re in today may not be the business they’re in tomorrow.”

When it comes to adapting to change, small businesses often have a leg up over their larger counterparts because they can move more quickly to take advantage of a new opportunity.  “Growth comes from defining your business in a much broader fashion,” Rogers said.

That proved true for entrepreneur John Aiello, who launched the Savo Group as a consulting firm in 1999 with partner Drew Larsen, but later changed the business model when the company developed and sold a proprietary sales enablement software product.  Now Savo uses a “software as a service” platform,  where customers essentially pay subscriptions to use the software without having to buy it outright, Aiello said.

The change provides a lower cost of entry for customers, fueling Savo’s growth. The software strives to put the information that sales representatives need at their fingertips to help advance their conversations with prospective customers. “Once we launched this product, we saw this enormous growth,” Aiello said.

While some businesses are reluctant to change, those that seize the opportunity often reap the rewards, Rogers said. “Once you broaden the definition of what your company does, it can result in great job creation,” he said.

Michael Alter,  president of Glenview-based payroll-service provider SurePayroll, agrees. “There’s more ingenuity and innovation among small businesses” because they’re quick to react to changing needs in the marketplace, he said. That drives growth, which results in businesses adding jobs.

Since adjusting their business models, both Blue Buddha Boutique and Savo Group have been staffing up by recruiting qualified workers. Mojica hired nine workers since incorporating the business in 2007 after launching the online store, she said.

The hard part initially was figuring out which responsibilities to delegate to others, Mojica said. She started the process by putting the business’s operating procedures down on paper.

Next, she figured out what tasks she could offload and what she needed to do herself. “I thought about, what can I do that will bring back the highest return? If I spend an hour doing this versus that, where does the company benefit most?”

In 2008, Mojica hired three workers, more help than she thought she needed at the time. But it worked out well. “These people have grown with the company,” she said.

Meantime, Savo employs 100 workers currently, up from 80 at the start of the year and 25 in 2005, before the company received a round of venture capital funding.  The capital infusion “allowed us to innovate ahead of the curve,” instead of relying on organic growth, Aiello said. As Savo continues to ramp up this year, it will likely employ 120 employees by the end of 2010, Aiello said. Many new hires have been referred by current Savo employees, he said.

Among the company’s recent recruits include Russ Kieckhafer, former vice president of technology and architecture at Orbitz, who is now vice president of software as a service, infrastructure, operations and support at Savo.  “We made a conscious decision to surround ourselves with tremendously strong people who will increase the odds of actually achieving the vision,” Aiello said.

Qualified candidates have been willing to leave their current jobs for Savo in part because of the company’s record of rapid growth.  The company’s sales climbed 30 percent in 2009, Aiello said, and he is forecasting about $25 million in annual contracts this year.

While shifting business models has paid off for both Savo and Blue Buddha Boutique, neither business owner regrets the way they started their companies.  Launching Savo as a consulting firm initially “allowed us to learn about the space first hand and build the product out of a deep understanding for the problem it is meant to solve,” Aiello said.

At Blue Buddha, where supplies sales now represent 92 percent of the company’s annual revenue, Mojica still sets aside time to design her own chain mail pieces, because that’s her true passion, she said. What’s more, she has turned down an offer from a big-box retailer to mass produce her pieces, preferring to keep them handmade. “You don’t want to give up everything you love doing,” she said, “because that’s going to make you resentful.”

You must be logged in to post a comment Login