What is a Revenue Model and
Why Your Business Will Fail Without One

  • Comments: 5
  • Written on: August 28th, 2009

Most computer repair companies are started by technicians or IT professionals. They are usually confident in their technology skills, have experience serving customers for others, and believe they can earn a significant income if they were only working for themselves instead.

When an IT professional takes the entrepreneurial leap, the immediate focus usually lands on how to acquire clients, customers, or jobs.

As the newly-born entrepreneur sets out to build a business, he or she finds that for some reason they are having a tough time making ends meet even though they are working twice as hard as they did in their previous job.

That single misstep is why many IT professionals will fail to find success within the first year of their entrepreneurial venture and will be pressured back into servitude as an independent contractor or employee.

What good does it do to ferociously hunt new clients and customers if you are not able to have profitable interactions with them when you do find them?

Before you leave your job, before you invest the first dollar in your future, and before you even attempt to get your first client, you need a revenue model.

What is a Revenue Model?

Simply put, a revenue model is how you plan on making money by satisfying your clients’ needs.

Take a moment to think about the businesses you have interacted with today. Why did you buy what you bought?

Gas stations will offer inexpensive fountain drinks, hoping you will grab a bag of chips or a candy bar to go with it. McDonald’s asks you to try their latest sandwich for free with the purchase of fries and a drink in the hope your come back for more. Even my plumber was using a revenue model when he tried sold me a “hydro-scrub” of my sewer line for $50.

The point of a revenue model is to have a basket of products and services available that your customers might need, and then moving them through those products and services in a way that maximizes the profitability of each interaction with those customers.

Components of a Sales Model

Revenue models have 9 basic components. No matter what mix of products and services you keep in your basket, you need to know exactly what they are and how they interact with each other in your revenue model.
Your revenue model needs to:

  1. Have a client (A Customer Who Presents A Problem)
  2. Have a solution that resolves your client’s problem
  3. Bridge that Solution to Another Item in Your Basket of Products and Services
  4. Provide an Opportunity to Investigate for Further Up-Sell Opportunities
  5. Close the Sale With the Customer in a Compelling Way
  6. Back-sell With Customer to Reaffirm Their Decision
  7. Deliver the Products and Services that Were Promised
  8. Back-sell Again in Person to Prevent any Buyer’s Remorse Feelings
  9. Stand Behind Your Warranty With a SMILE if it is Called in

How to Build Your Revenue Model

Building a revenue model is not a daunting task. In recent years there has even been a counter-push against revenue models in light of hyper-successful companies like Google that did not have a revenue model when they started.

The truth is that for every Google there are hundreds of thousands of business failures that a good revenue model might have prevented.

It is easiest to think about your revenue model as the thread that links your products and services together. Just because you offer a Maintenance Checkup, or Anti-Virus software, or memory upgrades doesn’t mean that people will come to you looking for them.

You need to have a planned way to let your clients know what you have that they can use and give them compelling reasons why they should let you solve their problems.
Steps to creating your revenue model:

  1. List all of the products and services you offer. It might be easier to list each one on a note card so you can literally line them up in the order they might happen.
  2. Determine which of your products or services will satisfy the largest number of clients. I creat5ed the Maintenance Checkup because it has a little of everything. Every computer problem touches the Maintenance Checkup in some way. It was a great way for me to get my leads into my revenue model. This is called your gateway offering.
  3. Starting from your gateway offering, develop lines of reason – based on specific problems – that would lead you to recommend each of your other products or services under certain circumstances. For example, if you offer data recovery services, a customer complaining of a blue screen of death may be suffering from a failing hard drive. When this happens what options will your customer have?
  4. Take the model one step further into your product and service basket. Continuing from the example above, does that data recovery customer need a new hard drive? Did the hard drive die because it was being over-used for virtual memory because the computer does not have enough physical memory? Find one more thing that the customer needs (assuming they truly need anything additional) and figure out how you would offer it.
  5. Rehearse your pitch. Nothing sounds worse than a person who sounds like they don’t believe what they are saying or know what they are talking about. Find someone who won’t think you are crazy and role play. Ask your partner to challenge you. This is best done with a non-technician because that is who your customer will be.
  6. Make real-life adjustments. When you are implementing your revenue model there will be times when you have to make adjustments based on input from your client.  Remember that people don’t buy what they can’t afford.

Up-Selling is Not Evil Unless You are Evil

Some technicians find the revenue model – or selling in general – to be distasteful. I even consulted with one business owner whose entire reason for going into business was because other repair shops i town were “always trying to sell something.”

A good revenue model does more than generate profits for the company that employs it. Businesses that are successful in the long-term rely on repeat customers and word of mouth.

A good revenue model is designed to extract as much profit from a customer interaction as possible while at the same time providing superior services that are deserving of a premium price.

Life Without a Sales Model

Consider for a moment how awful your experience as a consumer would be if the companies you visited today did not employ a good sales model.

If the gas station didn’t have the inexpensive fountain drinks, you may have never found what has become your favorite snack. If McDonald’s didn’t get you to try that new sandwich you might have eaten the same old thing every day. If my plumber didn’t sell me that hydro-scrub, the scent of old poop might be wafting up my drains right now.

Superior revenue models deliver good products and services at a price the customer is willing – and in most cases eager – to pay.

Failing to recognize the need for a systematized sales model is the single greatest factor in the failure of small businesses in general. Having a good revenue model will put you 10 steps ahead of most of the IT shops and consultants in your market. Ignore the need for a revenue model at your own peril.

Deposoitions Start in Schrock Innovations Case Today

  • Comments: 2
  • Written on: August 27th, 2009

My morning (and possibly most of my afternoon) today has been tied up in depositions in a case brought against Schrock Innovations by one of our local Lincoln competitors.

One of our local competitors is claiming that I have said things on this blog that have damaged their business.  They are demanding $7,500 in unspecified damages.

We have offered a settlement, which was quickly declined.  We have tried to move this case to trial, but have been thwarted by procedural tactics for almost 4 years by the plaintiff.

On one hand I am annoyed that I have to spend a half day on this, but on the other hand I am happy to finally start moving this thing to a conclusion.

Despite everything that has happened over the past four years between Schrock and this competitor, I hope that one day we can all sit down together peaceably and laugh about all of this.

Follow me on Twitter for up to the minute updates…

Brad Donner Gunning For Top Omaha Photographer Award

  • Comments: 1
  • Written on: August 26th, 2009

Brad DonnerBrad Donner has been an entry level web design employee at Schrock Innovations for a few months now, but many of our customers don’t know that he is an amateur photographer as well.

Last year Brad asked all of his friends and family to vote for his company, Donner Digital Photography, in the KETV viewer survey. And he won!

I work every day with Brad and I know he works hard every day to improve his photography skills.

Take a moment to look at Brad’s best picture and vote for him in this year’s KETV survey.

I happen to have some inside information about KFOR’s Best of Lincoln survey (due out in October) and its only fair that I do my best to help an employee win a consumer award when my employees give their all so Schrock can win one as well.

US Census Warning From Better Business Bureau

  • Comments: 3
  • Written on: August 20th, 2009

One of my readers forwarded me a report from the Better Business Bureau.  The US Census is taking place this year, and the government is hiring thousands of temporary workers to help get the job done.

Unfortunately, the Census also provides a ripe opportunity for identity thieves to knock on your door, ask you personal questions, and use the U.S. Government’s name to compel you to answer.  Here is the waring from the BBB:

BBB Alerts Consumers about U.S. Census Workers:
Be Cooperative, But Cautious!

For years, Better Business Bureau has educated consumers about not giving out personal information over the telephone or to anyone who shows up at their front door. With the U.S. Census process beginning, BBB advises people to be cooperative, but cautious, so as not to become a victim of fraud or identity theft.

The first phase of the 2010 U.S. Census is under way as workers have begun verifying the addresses of households across the country. Eventually,more than 140,000 U.S. Census workers will count every person in the United States and will gather information about every person living at each address including name, age, gender, race and other relevant data.

“Most people are rightfully cautious and won’t give out personal information to unsolicited phone callers or visitors, however the Census is an exception to the rule,” said Steve Cox, BBB spokesperson.

“Unfortunately, scammers know that the public is more willing to share personal data when taking part in the Census and they have an opportunity to ply their trade by posing as a government employee and soliciting sensitive financial information.”

The Census data will be used to allocate more than $300 billion in federal funds every year, as well as determine a State’s number of Congressional representatives. Households are required by law to respond to the Census Bureau’s request for information.

During the U.S. Census, households will be contacted by mail, telephone or visited by a U.S. Census worker who will inquire about the number of people living in the house. Unfortunately, people may also be contacted by scammers who are impersonating Census workers in order to gain access to sensitive financial information such as Social Security, bank account or credit card numbers.

Law enforcement in several states have issued warnings that scammers are already posing as Census Bureau employees and knocking on doors asking for donations and Social Security numbers.
Question is – how do you tell the difference between a U.S. Census worker and a con artist? BBB offers the following advice:

If a U.S. Census worker knocks on your door, they will have a badge, a handheld device, a Census Bureau canvas bag and a confidentiality notice.

Ask to see their identification and their badge before answering their questions. However, you should never invite anyone you don’t know into your home.

Census workers are currently only knocking on doors to verify address information. Do not give your Social Security number, credit card or banking information to anyone, even if they claim they need it for the U.S. Census.

While the Census Bureau might ask for basic financial information, such as a salary range, it will not ask for Social Security, bank account or credit card numbers nor will employees solicit donations.

Eventually, Census workers may contact you by telephone, mail or in person at home.

However, they will not contact you by e-mail, so be on the look out for e-mail scams impersonating the Census.

Never click on a link or open any attachments in an e-mail that are supposedly from the U.S. Census Bureau.

Simple Solutions for Printer Problems

  • Comments: 3
  • Written on: August 19th, 2009

Today, computers are incomplete without their peripherals. These peripheral devices have greatly enhanced the ability of computers and have helped us achieve a lot more. Several new devices have been created that are not only improving the quality of computing, but are also allowing us to phone friends, play games, watch movies, click photographs and much more.

One device that stands out among all these devices and continues to be used most extensively is a computer printer. A lot of businesses and their processes are completely dependent upon printing devices for providing service to their clients. Another big user of printing devices apart from various businesses is the student community.

This important peripheral device can also be a cause of lot of frustration when it gets stuck or generates errors at a crucial time. While most of the large businesses can afford to immediately summon printer experts to resolve the problem, the smaller businesses and common users have to attempt to troubleshoot the printer problems themselves.

DLL errors are also one of the causes of a few PC printer problems. These printer DLL errors are usually a result of obsolete printer drivers. In other cases a newly installed application may also cause interference in the working of DLL files related to printers and prevent the printer from functioning properly. This is evident in case of the hpslpsvc32.dll file which exhibits very high CPU usage if there is problem in driver related to Hewlett Packard All-In-One Series printer.

Other similar errors are hpzimc09.dll error related to the DeskJet printers of Hewlett Packard and zsr.dll which is associated with the 1020 series of LaserJet printers from Hewlett Packard.

Fixing Printer DLL Errors:

You need to perform the following steps in order to fix hpslpsvc32.dll and svchost.exe and other printer DLL errors.

  1. Start with getting rid of existing printer drivers. You may need to uninstall them either by using Add/Remove program utility present in the Control Panel or by using the Device Manager tool.
  2. Delete all files from the directory named Spool Driver. The path of this directory is C:\Windows\system32\spool\drivers.
  3. Next, delete all files with the extension .spl and .shd from the Printers directory. The path of this directory is C:\Windows\system32\spool\printers.
  4. Delete all files from the Windows Temp folder.
  5. Open the built-in Registry Editor (RegEdit) which is provided by your operating system and go to HKLM\SYSTEM\Current Control Set\Control\Print\Printers. However, you must be very careful during this process and take a complete backup of your registry before you begin editing it. You need to remove all entries associated with your printer. If you are unsure, then it is recommended that you use a good third party automatic registry cleaner to scan the errors related to your printer and repair them.
  6. Next step is to rule out any malware infection by performing a thorough scan with a reliable anti-virus and anti-spyware.
  7. Find all the icons related to your printer and its configurations, and remove them from your PC.
  8. Reboot your computer.
  9. Now you can install the new printer drivers. The new drivers must be of latest version and should be downloaded from the official website of the printer’s manufacturer. If you find it cumbersome you can take assistance of a reliable driver scanner tool which will automatically do this job for you.

Malware Makers Begin Attacking “Under Served” Mac Users

  • Comments: 7
  • Written on: August 12th, 2009

For the past few years Apple has had a heyday with ads proclaiming that Macs are inherently free of viruses and spyware because of the superior software they employ.

And for the past three years on my radio show I have said that the reason Mac users don’t get many viruses is because not many people were using Mac.

After Vista’s shortcomings gave Apple an opening to sell a LOT of Macs and their marketshare broke 10% of users in the US.

With more and more people using Macs, attackers are now realizing that Mac users are a very undeserved population.  Many don’t run any security software at all because they believe they are impervious to attack.

Do Mac Users Need Security Software?

In short, if you plan on doing anything important with your Mac, you need security software.  If you are using a Mac to play games for your 4 year old, then you can probably go without.

Before you pack your student up for college and send that Mac off to class, here is a list of security software providers who have products you can use to protect yourself and your identity.

How Not to Respod to a Marketing Campaign
Courtesy of Apple’s Stupid Lawyers

  • Comments: 1
  • Written on: August 1st, 2009

There are a lot of ways to measure the effectiveness of a marketing campaign. You can look at market share gained, revenue generated, or response rates. But sometimes the true measure of an ad’s effectiveness is not in these numbers.

A truly brilliant marketing campaign makes your competitors whine. It makes then call their lawyers. It makes them grasp at any straw to make the bleeding stop.

There is truth to the saying “thou dost protest too much.”  If you get your competitor to respond in a direct way to an indirect advertisement you know you are doing something right.

If Your Competitors Squawk, Keep Doing It

If something in your advertising – a word, phrase or concept – draws the ire of a competitor there is usually something about what you are doing that they are afraid of.

Take this recent example:

Microsoft recently launched a series of TV ads called Laptop Hunters.

These ads illustrate how much less expensive it is to buy a PC than it is to buy a Mac.  This was Microsoft’s counter to Apple’s highly effective “I’m a Mac” TV advertisements.

It seems that the ads were effective.  Last quarter Apple lost market share to Microsoft and also dropped the prices of its low-end MacBook.

It also seems that Apple’s lawyers called Microsoft and tried to put an end to their ads sighting that they were invalid because you could now buy a MacBook for less than $1,000.

Microsoft’s Chief Operating Officer, Kevin Turner said:

“They took like $100 off or something,” he said. “It was the greatest single phone call in the history that I’ve ever taken in business.”
“Microsoft is “just going to keep running them and running them and running them.”

Once you know you are under your competitor’s skin, you know you are doing something effectively and you should continue to do it.

If Their Ads are Working, Shut Up

The same thing goes in the opposite direction.  If your competitor is doing something to you that is highly effective, don’t whine about it.  Focus your efforts and energy on coming up with a response in the marketplace.

Answering your competitor’s challenge is not enough.  Find the weakness in their strength and counter-punch.  Put them on the defensive.

Using the above example, Microsoft never whined to Apple’s attorneys that Macs can (and do) get viruses and malware infections.  They found a weakness (Apple’s price point) in their strength (controlled distribution channel) and exploited it.

Check Your Emotions at the Door

In small business things can get personal very easily.  It is not uncommon for small business owners to make stupid business decisions because they are emotionally compromised in a situation.

Don’t fall into that trap.

When you feel yourself getting angry, sad, scared, or personally intimidated, take a step back and remember that you are not your business.  Your business is a whole separate person.

It’s ok to defend your business in the same way a parent would defend their child against another youth bully.  Its not ok to be the dad that jumps out of the car and smacks another kid for calling your kid fat.

Measure and Revise

The last thing to remind yourself is that you need to constantly measure the effectiveness of your ads.  Remember the Bill Gates & Sinfeld ad flop?

Even Microsoft will quit a multi-million dollar campaign if it isn’t doing anythig positive.

York Computer Repair – A Success in the Making

  • Comments: 5
  • Written on: July 27th, 2009

york_pc_repair_paFrom time to time I do some consulting for computer repair companies outside Schrock’s local trade areas.

Typically these take the form of phone calls about trends or marketing ideas, but York Computer Repair is a whole different story.

Yesterday I received an unexpected thank you letter (yes the postal mail kind) from York Computer Repair’s Owner, Walter Oakhem. Here is what he wrote:

Thank you for all of the help you have given me with starting York Computer Repair.

I especially appreciate the information and advice you have provided, and the contacts you have shared with me.  Your assistance has been invaluable to me during this process.  I just wanted to say an extra thank you for your mentoring and kindness.

Again, thank you so much.  I greatly appreciate your generosity.

What Did I Do to Deserve Such Kind Words?

I have never really talked about Walt, his company, or what I have done to help him get things rolling in York, PA.  Even my employees don’t know the details of what we discussed.  In one of our calls Walt suggested I document our conversations because he felt other computer repair company owners might benefit from them.

I am going to preface this by stating that no consultant, no home study course, and no business model can bring you success unless you are willing to implement it.

From day one, Walt has had a flame of passion that I have seen in few others over the past few years. While this post will name off some of the suggestions I gave to Walt, by no means am I trying to take any portion of the credit for his work.  Anyone can talk, but only an entrepreneur can transform talk into results like Walt has in Pennsylvania.

The Meat & Potatoes of Three Phone Calls

Over the course of our three phone calls we covered topics raging from starting up to scaling to a retail location and everything in between.  Walt and I discussed:

  • The absolute NEED for a sales model (and how easy it is to make one)
  • How to target a small niche in your marketplace and expand outward from there
  • Yellow Pages advertising techniques that are proven to bring in hundreds of new customers each month
  • How to build an inventory of repair components for next to nothing
  • How to hire employees as inexpensively as possible in the first few months
  • How to value your time and get your customers to pay a reasonable price for it
  • Every reason you should NEVER try to be a low-cost leader
  • The need for a work flow management system and where you can get one specifically designed for computer repair shops
  • How you can create brands for your physical products and service products and why it is a VITAL step than is often skipped causing others to fail
  • Who the key low-cost hardware providers are and how to do business with them (if you think NewEgg is your best value, think again)
  • The need to continually remind your customers how wise they are to choose to do business with you

Walt paid me my normal $200 an hour rate over the course of three calls.  With the information he had, he was able to accelerate the growth of his new operation, and had the best month of his company’s history in June.

How Can Just Talking Help a PC Repair Business?

Walt first heard about me and Schrock Innovations from a podcast I did with PodNutz about starting a computer repair shop.  In that podcast I stressed that most PC repair technicians try to penetrate a market as a low cost leader.  That approach dooms them to failure.  I spoke about the need to charge a fair price for your service, not just the hardware you are selling.

Walt heard that podcast and called me for followup.  Because of our three phone conversations his PC repair shop is rapidly growing.  His Q4 marketing plan looks like a home run, and even if it under performs his larger population base in PA will make it a bigger success than the 162 new customers Schrock gets every month by following that same model.

I have made a lot of mistakes, learned form them, and modified my techniques to gain the best return on my efforts.  It is entirely true that another person can learn the same lessons I did the same way I learned them.

However, it is also true that if a person like me existed 10 years ago when I started Schrock Innovations we would have cut 5 years off our growth curve, had an easier time doing it, and would have earned tens of thousands of dollars more.

Does Your PC Repair Shop Need Some Fresh Insights?

In the coming weeks I will be blogging about the bullet points I covered with Walt.  Subscribe to my RSS feed to make sure you don’t miss any of the topics.  If you need more immediate or involved assistance give me a call at 402-212-5393 and let me know what challenge you are facing.  I might be able to give you the piece of advice you have been missing!

The ACLU is Against Obama Health Care

  • Comments: 7
  • Written on: July 21st, 2009

I never imagined that I would be writing this, but I actually agree with the ACLU on something.

I am used to the ACLU defending the indefensible and taking ridiculous positions on issues that inflame public opinion.

But this video is as scary as it gets.  If Obama digitizes health care records as part of his overall socialization of the US health care system, this could be a reality more quickly than you might think.  Way to go ACLU for getting one right this time.

aclu_screencap

Local Insight Yellow Pages Forces Advertising Contract Extensions

  • Comments: 2
  • Written on: July 20th, 2009

local-insight-phone-bookLocal Insight Yellow Pages is informing its advertisers that their contracts are being forcibly extended – at their existing monthly rates – for three additional months. 140 of the company’s 900 directories are being delayed.

While the company says the move is to allow time to install new printing equipment, it is also obvious that the delay will prevent advertisers who wished to cut back their ads from doing so.  In Lincoln, the billing of yellow page directory advertising is linked to your telephone service.  If you refuse to pay the bill, Windstream will cut off your phones.

In effect, the delay will allow Local Insight to delay what would most certainly be cuts in small businesses yellow pages advertising budgets.

A few weeks ago I received a letter form Local Insight Yellow Pages informing me that they were delaying the release of their 2010 book by three months.  Instead of its normal release in November 2009, the 2010 book was being pushed back to February of 2010.

Printing Equipment Delay Does Not Make Sense

The delay of the 2010 book and the subsequent contract extensions from the 2009 book is explained by Local Insight as the need to install modernized printing equipment to print the directories.

However, a January 2008 press release from Quebecor, the company that prints over half of Local Insight’s phone books, indicates that they just upped their printing volume in January of 2008.  Since the Lincoln, Nebraska directory is printed in October, that means that no Lincoln directory has been printed under the new agreement with Quebecor to date.  Why replace equipment you have never used to print a book?

A more likely explanation is that they needed stable revenue and earnings to complete the merger of their Local Insight directory and regatta online directory into their other division, the Berry Company.  Without adverting contracts, a yellow pages company is worthless.

Yellow Page Advertising is Dying – Faster Now than Ever

Yellow page advertising has been losing ground rapidly to the host of online alternatives that are available to potential customers, the need for businesses to advertise online, and their failure to assemble any meaningful online presence themselves.

Local Insight specializes in phone book sin smaller markets like Lincoln, NE.  These smaller markets have been impacted by the recession to a lesser degree, which has helped Local Insight avoid some of the revenue losses that other, larger phone books are encountering.

However, as the recession deepens and extends into those smaller markets, Local Insight stands to lose massive revenue if small businesses cut back their ads or remove them all together to opt for less-expensive online options.

A 90-day delay allows Local Insight to gain an additional fiscal quarter of revenues that business owners based on pre-recession information.  Lets put it this way…  If Local Insight expected businesses to spend more money on the next book, would they delay its publication by 3 months?

What You Can Do To Protest

As I mentioned before, if you are still in business, you have little choice but to pay the bill.  In Lincoln, NE is you fail to pay your yellow pages advertising bill, Windstream will simply disconnect your phones.

In an interview on bizjournals.com, Cincinnati business owner Vicki Bezak said:

“I think they’re really in trouble. The phone book is a dinosaur, and nobody’s using it any more,” said Vicky Bezak, exclusive marketing agent for Satisfaction Yacht Charters Inc. Bezak estimated the directory delay would cost her company $300 a month – if she pays it.

“I’m going to call Cincinnati Bell and tell them that my contract with (Local Insight) terminates on June 1, and I’m not paying the ad costs listed on my current bill because I didn’t renew it,” she said.

Ms. Bezak’s approach might be hit or miss depending on how the telephone company handles the complaint.  Local Insight also has a toll-free number that they invite any customer who fells “they are not receiving value” from their yellow pages advertisement to call.  It is not clear what the company plans to do for those customers.

If you want to give it a whirl anyway, you can call Local Insight’s toll-free number at 888-237-8570.

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