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This chapter is from the book

Business Model

Once the overarching mission for the new PS organization is determined by the executive management team, the target business model, or financial model, for the business unit can be discussed. If the mission is profitability, benchmarks against other profitable service firms can be used to determine the right financial model to put in place. If customer satisfaction is the overriding driver, perhaps a break-even business model is acceptable. In later chapters, we present sample business models, and in Appendix B: Key Financial Models, we offer several business models from the industry. The important point is that the executive management team agrees on the business model to which they are holding the PS management team accountable. If there is disagreement around this topic, or, worse yet, no discussion whatsoever, the newly appointed VP of professional services will be tilting at financial windmills. Does the executive management team want the new VP to chase top-line revenue growth or bottom-line profitability? What gross margins are acceptable for this business? Without agreed-upon answers, the potential for frustration is high. Put a first draft business model in place now. It can be validated and adjusted later, but this specific anchor is a critical prerequisite to success.

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