It is possible to gain business success by giving away value?

It seems as though everyone is giving something away for free
these days.  On the internet, you can free find information and tools to address virtually every need a business or consumer has.  But is anyone making any money? And can a solo entrepreneur employ this strategy to obtain business success?

Most definitely one can be successful with this type of business model.  But financial ruin is also possible.

Much can be learned by the small business owner from the strategies of both Twitter and Skype.

Business Success for Twitter is in Long-term Value Creation

First, the Twitter model.  Twitter, which has millions of subscribers and people using it as a primary business development tool, is free.  In fact, this free service has no advertising on it and, currently, no way to upgrade to a premium service.

Will this model work for the small business?  Definitely not.  The founders of Twitter raised over $20 million in funding to support the development, bandwidth and operation of the service.  Is it a bad business model for Twitter and it’s investors? Not if they are in it for the long haul.  Twitter’s user base and the software applications being developed around it are making it an extremely valuable asset.  Facebook offered to buy it for half a billion dollars and rumors of talks with Google suggest it may be selling for twice that.

Small businesses, or really any business that is not able to raise tens of millions of investment dollars, need business models that will provide cash flow while creating value.

Skype Achieves Business Success Through Premium Services

Skype provides a second example of how business uses free service as a value creation strategy.  Skype offers free calling, voice and video, to its users over the internet.  However, their value creation strategy is not trying just to build a huge user base to sell later.  They offer premium services that appeal to business users.  These business users, perhaps introduced through the free service, are willing to pay for additional services.  This provides cash flow while the user base grows.

This approach to business value creation is much more realistic for a solo entrepreneur to employ.  Newsletters, free teleseminars, articles, blog posts, free reports – these are the types of value you have to give away.  In order to achieve business success, however, you must build a following by giving people an opportunity to stay in touch with you.

Keys to Turn Your Free Offering into Business Success

After you have created some type of free connection with people, in order to use the Skype model versus the Twitter model, you must offer them something they find of value that they can buy.

Here is a summary of the steps that are necessary to create a model for business success:

• Offer something of value for free that will encourage people to repeatedly connect with you.
• Establish a process to be able to proactively communicate with them. You will have a hard time creating value if you have no way, such as through an opt-in email list, for communicate. your messages when it is time for you to request action from your followers
• Create something that is of such value that a subset of your followers will be more than willing to pay for it.

I think I like this new trend of demanding value from businesses before you are sold something.  I believe, it the long run it will cut down on the volume of junk offerings available and will make the internet overall a better place in which to do business.

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