Santa’s Business Model. Naughty or Nice List?
In a moment of insanity last year, I found Paul deep in conversation with Santa; imagining what score might come out on Value Builder if Santa’s own business model was assessed. Would Santa’s business model be on a naughty or nice list?
The conversation went like this……
Paul : “In terms of Financial Performance, you do expect to see continued growth, underpinned by a growth in the World Population of 1.1%. However, there seem to be a few challenges. Where are the sales? Perhaps your financial records could be a little more thorough?”
Santa :“I am very busy Paul, so I do not focus on the finances as perhaps I should. I am more about bringing joy than earning money. Also being an offshore business within a unique tax regime there are no tax returns to file.”
Paul : “You certainly have an advantage there, so let’s look at Growth Potential. Growth Potential some might say would be limited merely by the fact you already serve most of your market and that there is limited room for cross sales, as you already provide customers with the very present they want.
There’ s also geographical expansion, well where don’t you go?! On the plus side, we can certainly classify you as a thought leader in the delivery sector and you have kept pace with a doubling of the world population since 1970. Fed-Ex would be jealous of this scalability. I also know that you provide the same service to everyone, which must be key to growth?”
Santa : “It certainly is Paul. We have our system and stick to it from inbound mail, through production to chimney delivery. We do it the same way for everybody who believes.”
Paul : “The next area to think about is your Switzerland Structure, i.e. does the business have an over dependence on any key person, customer or supplier?”
Santa : “I think I will do well on this one Paul. We have lots of small customers each receiving a few presents. As regards suppliers, well let’s just say we have lots of differing sources for all our raw materials.”
Paul : “I can see that Santa. Also, your army of elves is very well led and believe in the culture of what your business is all about. They must be a joy to lead?”
Santa : “They certainly are Paul.”
Paul : “Who runs the sales and marketing function Santa?”
Santa : “That is one of my key roles and it does take a lot of my personal time before Christmas. I suppose I am the original one-man brand?’
Paul : “You are Santa, you are seen at many grottos, let alone what you achieve in delivering the presents single-handed. For anybody else this would certainly have stopped business growth a long time ago.”
Paul : “The next area to consider is the Valuation See-Saw, which looks at cash flow. Any normal business would not be able to run the way yours does Santa!”
Santa : “I do have an advantage in not having to think about working capital Paul and as a result, I can continue to serve more people each year without worrying about raising cash.”
Paul : “You do have the potential for an ideal business model for our next factor Santa, Recurring Revenue. If you were anybody else I would suggest a Simplifier Model, such as Amazon Prime. One payment each year and you will sort out the presents, removing the stress and making life easier for customers.”
Santa : “Yes, I see that, but my model is more about giving back, I think they call it Corporate Social Responsibility these days?”
Paul : “You have a perfect score in our next area Santa, Monopoly Control. Your service is unique and your customers certainly do care about what you provide.”
Santa : “They certainly do care Paul, they work hard to be on the nice list, helped by the occasional reminder from parents.”
Paul : “Customer Satisfaction is another strength, not that I expected anything else! One key thing you have achieved is a high level of referrals with parents always recommending you to their children.”
Santa : “We are proud of that Paul and we do retain high levels of customer loyalty for approximately 10 years, which is about the age when our customers move on.”
Paul : “Santa for anybody else I would recommend a customer survey to find out why people stop being your customer, this would help you retain them for longer. However, it’s clear that you have created raving fans and this will continue to help your business move forward.”
Paul : “The last point we should discuss is Hub and Spoke, in other words the extent to which the business revolves around its owner. Your highly motivated team manages production, but you personally answer every letter, deliver every present and if you were not able to work at Christmas then the business would certainly suffer. For most this would be a real weakness.”
Santa : “Ho, Ho Ho, do I know what you mean. It seems I am stuck in the classic owner’s trap of being the expert that all my customers want to deal with. Luckily I do not plan to retire, I am never ill and I really enjoy what I do, so I guess on this basis my business can continue to grow, where most others would not.”
Paul : “Santa it has been a pleasure talking to you. Your business has led the way with many features, such as staff engagement, corporate social responsibility, customers who are evangelists, a strong referral program, excellent levels of repeat work, scalability of the operation and a truly differentiated marketing position that attracts new customers every year.
What is also unique is that it can grow whilst still being reliant on yourself, with no cash flow and poor financial records. How do you do it?”
Santa : “That’s the magic of Christmas Paul, all you have to do is believe. But I must dash away and ensure that all the presents are ready, so Merry Christmas to one and all.”