How To Choose The Suitable Business Model
Just because your family loves
the sandwiches you make at home doesn't mean you should run to open a store to
sell them. It would help if you considered many aspects before trying your luck
as an entrepreneur.
Many reasons businesses fail
include poor market fit, lack of marketing knowledge, financial problems, and
lack of a well-defined plan or how the money will be made. Choosing the
suitable business model for your product or service, you will add business listing that
makes money while fulfilling a need and providing value to your customers.
What is a business model?
A business model is a plan
that describes how your company will make money. But there is much more to it
than simply stating how much you will charge for your product. Your business
plan should answer these questions:
• Who is your target audience?
• How will you generate
interest in your products and your brands?
• How will you continue to add
value to keep customers engaged?
• How much will it cost you to
supply your products?
The answers to these questions
will define the model you will use to create and deliver value to your
customers while also providing value to your company. A good business model can
enable new companies to attract investors, recruit talented employees, and
energize current management and staff.
But business models are not
just for startups. Established companies use business models to keep up with or
anticipate ever-changing market trends.
Different types of business
models
Many different business models
can be used for a wide variety of businesses. This means that you do not need
to create your model from scratch. Someone else already took care of most of
the work for you. Please choose the one that best suits your business and adapt
it to your needs.
• Franchises
In this model, an established
company gives you access to their proprietary business model with the
processes, products, trademarks, and names that made them successful. You are
typically charged an upfront fee and then have to pay royalties to continue profiting
from the franchise name and products.
• Manufacturing
Manufacturers make products at
their plants from raw materials. They sell their products directly to consumers
or other businesses to sell to their customers. Any company that wholesales its
products to other companies uses the manufacturing business model.
• Crowdsourcing
The term "crowdsourcing
", translated as "distributed open collaboration", combines the
collective with outsourcing. In this model, individuals or organizations look
to outside participants to support them with ideas, microtasks, voting,
problem-solving, and finances. Crowdsourcing often uses websites to attract
visitors who can accept tasks, submit ideas and solve problems to obtain a
particular result.
• Advertising
This model is used by
companies that make money by selling advertising space or time. Media
organizations use an advertising business model to provide free content to
consumers.
• Affiliate marketing
Individuals or companies using
this model can earn money from commissions if they refer their online visitors
to the products or services of a partner orally. Links on the site encourage
visitors to purchase the products, and the affiliate receives a commission for
each sale referred.
• Merchant/physical store
This is the model
most companies used until the dot.com explosion of the 1990s. Retailers,
wholesalers, and manufacturers sell their products through a brick-and-mortar
store or an office they own or rent.
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