Spoilt for Choice- How to Choose the Right Business Model
Every entrepreneur needs to understand business models, so they can have a plan in place once their idea starts concretizing. If you want to make money, you have to have a plan in place that will allow you to clearly see every part of your business process. So, before taking the plunge, there’s a lot to consider:
Business models can be fairly simple to very complex, but the basics of business models are always the same. The rationale of how your enterprise would deliver and capture value is most important. You’ll have to know what you make, how to market it, how customers can obtain what you make, and how you’ll measure and analyze your finances.
Next, you’ll have to know which business models are out there;
- Products and Services – This is the most common model because it’s used by any company that makes and sells its own items. However, there’s always a definitive way of distribution, so as to bring the products and services in the limelight.
- Resellers – This model is used by companies that sell other companies’ products and make a percentage on each sale. They do often provide additional services so as to keep a good percentage of profit margins, as well as enhance the visibility of the brand.
- Aggregators – If you have a company that sells subscriptions to your services, this is the model for you. This e-commerce based model forge an environment that draws visitors to its useful electronic content, consequently it develops a subscriber base; hence it can prove to be a very effective business model.
- Brokers – Any company that brings buyer to seller would use this model. The transaction fee that they charge is business. This business type is getting popularized day by day and if intelligently dealt with, can go from strength to strength.
These are the most common business models and the simple explanation for each, but implementing them is a whole other process. Still, you have to know each model so you know what type of business you are willing to create.
Deciding on Your Business Model
It’s great to come up with an idea that you really feel will work in the long run, but you’ll have to go over a few things before you commit to any business model.
Keep these things in mind:
- Market Size – The knowledge of the type of market for what you plan on selling is essential. Even if you are entering a newer market with not very much revenue potential (yet), you have to be honest with yourself and your employees early on in the process.
- Competition – Who is your competitor and how much do they sell their products for? Getting all of the information on your competitor will allow you to better understand the inner workings of your particular market.
- Distribution – What is the best way for you to get your products to your customers? You need to know if you plan on shipping your items out yourself or using another company’s services.
- Income Streams – Other than just selling what you make, how else can you make money with your business? There are plenty of ways to cross-promote or simply offer other company’s products with yours for a small fee. Always find ways to make more money.
- Partnerships – What companies can help you get the most out of your business? There aren’t too many companies that can make it without the help of others, so you’ll have to think about this beforehand so you can strike up business relationships that will help everyone involved.
To stand out in the crowd, you definitely need to have some unique selling point that would propel your business and help you excel in your field. Therefore, understanding all of the models, and then choosing the right one that works best for your company, will get you on your way to becoming a successful entrepreneur.
Ronald Alexander is a passionate writer and avid blogger currently associated with Forsyth.co.uk, which provides business services including flexible office space and virtual office services in Manchester.