Family startup myAgeTechlab.com, episode 2 - Business Model

Upside/Downside is a podcast about value creation and the strategies finance and business leaders can use to grow profits and cash flow.  I'm your host, Matt Cooley.

In this episode, we continue our series about starting the family side hustle, myAgeTechlab.com, and focus on the business model for our Lab Experience.  We envision a constant balancing between supplier portfolio and customer needs and foresee an evolving business model with lots of potential upsides and downsides.  Where will all these variables lead us?

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Transcript

SPEAKER_01: 0:02

Welcome back, everyone. This is Matt Cooley, host of Upside Downside, where we explore value creation and how the actions we take in business drive profits and cash flow. I'm a unit CFO for a large tech company by day and a nerd for value creation and how it impacts companies and everyday people. Last time, we kicked off a series of podcasts about the Age Tech Lab our family is building to help people remain and thrive in their own homes as long as possible. Here with me again are my son, Liam, and my brothers, Joel and Ed. Welcome back guys. Thank you. Great to have you back. So last time we kicked off a series of podcasts about the AgeTech Lab that our family's building. And let's jump into it. Liam, you're on summer break from high school working hard on this business. Today we're talking about business models. What is a business model?

SPEAKER_00: 0:54

Well, a business model is a company's plan on how to mainly generate revenue. And it's a strong point for that business. And it's pretty much what that whole business evolves around. And it seems simple when you first create one, but the further you dive in, the more complex it gets. Also, I did a little bit of research, and I'm a little young for this one, but I saw that business models were originally based around small, simple markets with little to no change. And with the creation of the internet in the 90s or whatever, with the internet today, models have to be more flexible to draw more customers and sell more products. So it's just kind of like adapting and all that.

SPEAKER_01: 1:36

Yeah, that's great insight and a good summary. Excellent. So yes, a business model is how you make money and drive the profits and cash flow needed to keep your company building and growing. And that's excellent, Liam. Wikipedia defines a business model as how an organization creates, delivers, and captures value. And all of that sounds pretty straightforward, right? A simple example would be a company that makes a product and sells it at a profit to its customers. With the AgeTech Lab, we're doing something a little bit bit different. Instead of making our own products, we're curating products and services from multiple age tech companies and giving our customers a hands-on experience in a lab type environment so they can decide what solutions best meet their needs. So the age tech companies are the suppliers and people aging in place are the customers. Age Tech Lab is right in the middle, pulling these two groups together by providing what I would think is going to be a very compelling value-added service, which is a hands-on education about some cool technologies. So that's what we're up to, to our listeners. And today, as we said, we're talking about the business model. So let's jump into some questions that we've been noshing over quite a bit. When we settled on this middleman model, we'll call it, for the AgeTech Lab, we assumed it would come with some challenges. What do you guys think are the risks of this model? I'll take that. I'll take that one, Matt. Oh, great, Joel. Stability issues for one. For example, the suppliers may try to remove the middlemen from the value chain if they deem it more profitable to their bottom line. You mean they're going to kick us out, huh? Possibly. Pretty much. Yeah, pretty much. So we've got to lock the door. And likely our suppliers will change a bit over time, most certainly, as they come and go. And our customers' needs and wants become more apparent to us. Okay. So... What do you think, though? There's still advantages to this model, right? Yeah, there's certainly advantages. Many age tech products are new to the market, and providing a hands-on experience with multiple products is something individual suppliers won't do. Okay, good. So that's one of our value propositions, right? Yeah, absolutely. For sure. Also, outstanding customer service is going to set us apart and be a huge success factor and could be a solid value driver, of course. I appreciate top-notch customer service, don't you guys? Yeah, I think we absolutely. Millions of examples a day. Excellent. So, next question. We debated two approaches for generating revenue with this business, and we decided to use one approach at launch and move to the other one later as soon as it's feasible. Does anyone want to explain what those approaches are and our rationale for doing that? Sure, I'll try this one, Matt. All right. We had two approaches then to generate revenue. One was charging our customers a fee for the lab experience. And another one was earning commissions on the sales of the products to our customers who attend the labs. There's a hybrid option that we haven't really talked about too much, but where you pay for the lab experience and the fee is credited towards the purchase, that the customer might make while we're, you know, doing the labs or even after that. I don't know how you maybe use a voucher or something if they come back later or... Exactly. I mean, you know, details we're going to have to figure out. Exactly. So why did we... Yeah, why did we decide to start with that lab fee? Well, we started with a lab fee because some of the products might not be in production yet and... it was a way for us to generate some income until we actually have enough product to make it feasible to move on to the commission part of the sales. Right. Yeah, exactly. And I think the market, the market's ultimately going to tell us which one is, is the better value driver, but those are good, good points. So, you know, in particular, Ed, you raise a good point about the commission approach to generating revenue. And you hit it at this, you, hinted at this. One of the learnings we have, and it's a speed bump we're going to have to overcome, is all of these companies, because this is a new space, are exploring how to monetize themselves. So many products today aren't actually yet available directly to customers. So you might have to go through your insurance company, or it might be a government program that's distributing these age tech technologies technologies. And in some cases, they're not even manufactured yet. Companies have these nice websites and online ads and stuff, but they haven't actually started producing anything and they're only taking pre-orders. So one of the things we're doing is distilling all of these realities into a business model that we can start using today, we think, right? We'll find out. And do we want to wait for for all these issues to be settled or do we dive right in and get going? And I think we've decided that we're diving in, right guys? Oh, for sure. Dive it in. Yeah. So just curious, open question here. What do we do if our assumptions are wrong about this business model and it isn't generating value? I know for me, I'll probably panic a little bit. Not me. I'll be behind you. Right behind me instead of next to me? Yeah,

SPEAKER_00: 8:06

I

SPEAKER_01: 8:06

mean, I'd be a little

SPEAKER_00: 8:07

scared,

SPEAKER_01: 8:09

right? I'm going to grab a popsicle and hide behind the couch and wish for better days.

SPEAKER_00: 8:13

Yeah. But I'll touch upon this point real quick. And I mean, if our business model isn't like generating any value and it's not working, I mean, we have to find a way to like quickly adapt to our market. And we just have to kind of do whatever it takes to get it back on track. So I think. Excellent. I think that's a good point. Right.

SPEAKER_01: 8:33

And that's regroup, regroup and persistence and all of those things. Actually, Joel mentioned in the in the last, you know, in the last episode. So, yeah. You know, next question. It was important for us to have an e-commerce strategy. And, you know, I think this one is for you, Liam, because you're going to be heavily involved in building the business. What was our thinking about having an e-commerce strategy?

SPEAKER_00: 9:03

So, I mean, building a website, we need to do this to increase our sales because after the open lab, you know, most of our sales will be made on the actual website. So as our reputation grows, yeah, we need to build this and create a good experience online and a good experience in person as well. And with our middleman business model, it's twice the work for the website because we have to attract- It feels that way, doesn't it? Yeah, because we have to attract customers and suppliers. So it's kind of looking at it in a creative approach. And this is a really important part of our strategy to attract everybody in the whole market. And I think building a website, it will be a challenge, but it'll be a good challenge to bring success to our business. All

SPEAKER_01: 9:52

right. I mean, that's good. So while our focus initially is definitely the hands-on in-lab experience, but as our reputation grows, having that e-commerce capability, not only to process sales for people attending the labs, but, you know, word's going to get out and they'll know that these are vetted, curated offerings. Others will be willing, hopefully, to buy straight off of our e-commerce site. So that's an excellent summary there. Okay, good. Well, listen, good discussion today, family, about the nuts and bolts of our business model and building value. I really, really appreciate it. Lots more episodes to come on this as we build the AgeTech Lab. And to our listeners, I want to say thank you for being with us here on Upside Downside. And next time we plan to dive into some of the considerations about product and market fit, where we have more challenges to face and decisions to make. So we'll see you soon. All right. Bye, guys. Take care.