Business model

What is an impact-driven business model and how can it benefit you?

Opinions expressed by Entrepreneur the contributors are theirs.

When we think of a diverse business model, it’s almost always followed by thoughts of multiple streams of income. It sounds wonderful. Wouldn’t we all like the money to come from many different sources? Better yet, let some of those sources be passive income streams and we can just sit back and watch the money roll in, right? It doesn’t work exactly like that, however.

If you’re like many entrepreneurs, you’re probably spending a lot of your time and energy on parts of your business that you intend to be future income streams that aren’t quite paying off yet. These can be efforts that are not currently making money, but are what you intend to be the future of your business and your main sources of income.

For example, take the consultant-turned-author who aspires to speak on big stages by giving keynote speeches. Now we know it will take time to achieve this lofty goal. In the meantime, a disproportionate amount of time and energy is going to be spent trying to get those gigs when it makes very little money in the short term.

Or take the launch of a new product or service that you are sure will eventually pay off. Maybe it’s marketing efforts like an ongoing newsletter, a podcast, or writing a book, all of which require a huge amount of time and effort before they pay off.

Unlike a revenue-driven business model where you base your decisions on where to invest your efforts in proportion to what brings in money, an impact-driven business model spends your time, energy and resources to the impact you want to make in your business and confident that the money will follow.

This is an important distinction because without realizing the difference, many entrepreneurs and business owners wonder if they are wasting their time because the effort they put in and the time they spend spend far outweigh income. With a traditional revenue-driven model, you prioritize by revenue. With an impact-driven business model, you prioritize the work you want to do and the difference you want to make, even if the income isn’t there yet. An impact-driven business model is especially important today, as more and more people are driven by passion and purpose and need a business model that reflects that.

However, their efforts are not entirely driven by passion, giving up future income. In fact, the intention is that this effort will eventually lead to substantial revenue. The problem is that as long as people believe they should focus on a revenue-driven business model, they’re going to wonder if they’re wasting their time or feel like their business model is broken, because traditionally businesses focus on revenue first. . Don’t get me wrong – Income is imperative to a healthy and profitable business. But today, many more business models seem to be impact-driven. Lead with impact, trust the money will follow.

What’s important about this is knowing where to put your time and effort right now. With an impact-driven business model, it’s normal, even expected, that you’ll put more effort into growing this part of your business than the revenue it currently generates. If you’re focusing on a revenue-driven business, you’ll likely make very different decisions about where to focus your efforts.

This shift from revenue-driven business models to impact-driven business models is likely due in part to those building businesses today: older business owners (middle-aged people, perhaps we say), people who have left their jobs in recent years or the millions who would be considered part of the great resignation and begin their entrepreneurial adventure a little later in life. They are business owners who are driven to make a difference in the world, to impact an audience that matters to them, and to bank seriously because they still have a long life ahead of them. Yet they are also patient. They’re here for the long haul, so leading with impact makes sense. They know the money will follow.

So when planning your year and the future years of your business, it can be a good idea to adopt an impact-driven business model. When presenting your current and future revenue streams, consider that where you are putting your efforts today may not yet be where you expect the most revenue.

I like to think of it as levers on a control panel. Be clear on the levers you want to accelerate and put in more effort, proportional to the impact you want to have. And what levers do you want to moderate or lower, because those income streams, maybe even large income streams, just don’t require that much effort right now? This way you make decisions based on effort and impact and not just income, confident that income will follow. Considering it is a control panel, you can increase and decrease any effort at any time. What I believe this provides is clarity as to where to invest your time, effort, and energy.

If you make all your decisions based on the efforts that bring you the most income, you can make money, but have you achieved your real goals? Did you have the impact you wanted to have?

With an impact-driven business model, you get the best of both worlds: the satisfaction of knowing you had the impact you wanted to have and ultimately being rewarded financially with a strong revenue stream.