Traditional Chinese Medicine has a weird business model that can be applied to startups


My wife studies acupuncture and Chinese medicine. One thing I found interesting about acupuncturists is their unique traditional business model:

They only charge money when you’re healthy.

Yep. If you’re an acupuncturist, you probably have several dozen people who depend on your services. These people pay you a certain fee every month — so long as they’re healthy.

And if one of them gets sick? They halt payments. Now, as an acupuncturist, you’d run over and prescribe herbs and treatment. You’d better hope your efforts bear fruit, because if your patient doesn’t feel you’ve helped her get back on her feet, you can kiss that monthly stipend goodbye.

It’s a fascinating business model, and it accomplishes two things perfectly.

1/ It creates an ongoing relationship between the service provider and their clients.

A traditional doctor might only meet their patient once or twice — he isn’t necessarily dependent on repeat business from any specific patient. Repeat transactions facilitate greater trust, transparency and honesty.

2/ It creates an alignment of interests between the service provider and their clients.

A traditional doctor gets paid when his patients are ill. That means there’s an economic dissonance between the patient and the doctor that doesn’t reflect their actual relationship.

There’s also a negative incentive in this business model, though. If a patient is a truly terminal case, it makes sense for an acupuncturist to just leave them be. If a treatment is deemed unlikely to yield a result, the acupuncturist is unlikely to make any money off their work.

This business model can be applied to other types of businesses. Ask yourself the following questions —

Does your business model facilitate repeat transactions? One reason I love Software as a Service is the continuing relationship between the software provider and the businesses the software is intended for. It’s an insurance policy for good software.

Does your business model create an alignment of interests between you and your clients? Many companies charge money when their clients are in trouble. Is there a way to turn the model on its head and charge as long as your clients are happy?

Does your business tend to truly terminal cases, where the chances of success are low? If so, it might make sense to charge your fee up front to balance the incentives.


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