My red flags for business models 🚩
I saw another entrepreneur post about his red flags for businesses he wants to acquire. Here are mine talking about business models in general.
1. Low Ticket.
I’ve been down this road through ecom and it just makes everything a hell of a lot harder. Low margins. High churn. Not the clientele you want to deal with.
2. One-Off Sales.
Right now I’m addicted to software and I’m incredibly bullish on SaaS for SaaS so I’m a bit biased. However, if I did have a one-off product idea, I'd want to supplement with the printer/ink model or the razor/razor blades if you will.
3. Trading Time for Money.
If I can’t scale infinitely (or at least substantially) with just me, I’m not excited about it. There are usually higher leverage activities that could be done.
4. Invalidated Markets.
Odds are, although don’t count me out, I’m not coming up with the next billion dollar industry. If it doesn’t already have a validated market with market pull, it’s not for me.
5. Sponsor/Ad Driven Revenue.
Also did this one back in the day with a couple newsletters. Problem is, it’s a constant sales cycle. Not ideal when you’re trying to scale and definitely not for me.
6. Built on Rented Land.
Is there a single point of catastrophic failure through platform risk? I was building a tool for Reddit last year and in one swing, they crushed my tool since it relied on their api. Not again.
There is probably more to at I can’t remember right now, but those are my big red flags. The others might be negotiable. At some point I’ll do a green flag post, but I figured I’d start with the red flags mostly to remind myself to avoid these at all cost (kicking my past self lol).