What are you doing?

0:03 Welcome to business purpose and Clarity with patreon your host we talk about startup live insights practical tips mistakes failures and everything between I will tell you a shortcut I will tell you a way to figure out what the other part is doing really quickly so that you don't need to spend time asking endless questions and figuring out what they're really doing because sometimes well I guess they should know but maybe they know but they just cannot tell what they're doing and it takes too long time and no you're busy if you want to figure out what is the other party doing what is the intention what is the actual way of working focus on the business model ask them how they make money because that will reveal pretty much because they can say that they do a lot of stuff or you don't really figure out are they a non-profit or how they.

1:09 Actually earn their living or what's the intention behind it this comes up quite when you're talking with the cooperation Partners you're talking with potential Distributors you're talking about with the investors so you thinking about applying for incubator accelerator or whatever it is what are you doing when you're building your business I run into this question quite often I'm almost every time as confused many years back I was teaching a starter Finance course in the university and I was asking from the students that focus on the money in the beginning of the course ask why the only thing you need to figure out is why why they doing it what is the business model how they make their money why why why and just keeping your eyes on the prize reveals pretty much the whole thing and if you can imagine jumping on their.

2:12 Shoes and thinking the word from this perspective let's take an example of the accelerators incubators because that's uh well it's a favorite topic and I come to that question so often that it's pretty that I mention it here as well so how do they make their money well the business model is a bit complicated for them it's really hard to make cash so in other words the operational expenses with the accelerated incubator because they are taking idea States early stage companies and they are not really swimming on cash most of the times they don't have any and they're actually coming to you as an accelerated incubator to get gas that's the prime motivation or they want to get access to the investor pull what you're saying you're gonna bring to the demo day or something like that but it's not exactly that the incubator accelerators are doing for for the fun of it they are those obviously as well but I wouldn't say that most of them are like that I'm seeing also those who.

3:17 Solve this gas issue for them they operational issue by charting from them companies who take today patch as a access fee or whatever they call it for example they can give you 100k investment in Return of maybe 10 percent of the company or in that neighborhood but you will not get the 100K I I mean it will land on your bank account your company's bank account but they will invoice and you need to pay back 75 or 30 or something but anyways they will actually take the money back in other words you give up 10 percent of your you get only 50K cash which probably goes for the expenses of the accelerator if you have to relocate for different country or do some stuff like that because you cannot really do your business while you educating yourself with uh program so just think about that that's one.

4:20 Model it's not the only model some of them are not taking Equity somebody else is sponsoring what they're doing but that's also important thing about why aren't they sponsoring it what are they getting out of it because nobody does anything without some papers behind it so maybe they are selling your ideas maybe they are getting access to those there's usually something there I'm not saying it's in bad intent but it's just for you to figure out how stuff works following the money reveals that quite often so that was just an example of accelerated incubators if we still keep on being on that topic for a while it's if you think about actually whether you want to actually go in that program There's an opportunity cost as well like I said you have to properly pay for the time you're there either with the money they gave you or with your own time which is away from the other stuff you can do.

5:21 I probably will do another episode where I focus on the opportunity cost so I will not call too deeply on this one here just to remind you where we started what's the business model how do they make money that's the quickest way to figure out how any and every business is actually whether there's a misalignment between what they say and what they really do so keep that in mind and maybe you ask that question first how do you make your.