When strategizing for your business, one crucial aspect to consider is its operational framework and revenue generation, commonly known as the business model. Exploring the various options within this realm will assist you in determining the most suitable approach for your venture. In this section, we will delve into the choices at your disposal, guiding you towards making an informed decision that aligns with your goals and circumstances.
Understanding your options...
Offline retail
Customers purchase goods directly from a physical shop or outlet. The retailer procures or manufactures products from wholesalers or distributors, adds a markup, and sells them directly to customers in face-to-face transactions.
E-commerce
Businesses sell products online through their own websites or on third-party platforms, such as Amazon, which charge a fee for facilitating transactions.
“Bricks & Clicks”
Businesses with a physical store and an online presence use this model. Customers have the option to order online and pick up their purchases from the store or make in-person purchases. This approach allows for larger inventories and provides convenience to customers.
Manufacturing
Manufacturers use raw materials to produce finished goods, which are typically sold to wholesalers (see below).
Wholesale
Wholesalers purchase products from manufacturers and then sell them directly to retailers, who in turn sell to consumers. Wholesalers act as intermediaries in the distribution process.
Direct sales
Individuals sell products directly to customers through methods like product parties or one-on-one sales. Companies such as Avon cosmetics operate through individual agents who earn a share of the profits from each item sold.
Franchise
Established brands (franchisors) grant individuals (franchisees) the right to operate under their brand name, utilize their systems, and sell their products or services.
Licensing
Companies (licensors) allow others (licensees) to commercialize their intellectual property (IP) by licensing their designs, products, or services. Licensors retain ownership of the IP and typically receive royalties in return.
“Freemium”
Some companies attract customers by offering a free basic product or service, with the option to upgrade to a paid, enhanced version. For example, LinkedIn offers a free networking platform with limitations and a premium version that removes these limitations.
Subscriptions
Customers pay recurring fees to access content, products, or services. Businesses such as gyms, dating agencies, media companies like Netflix, and Everything Entrepreneur 😉
“Bait & Hook”
Also known as the razor blade model, businesses sell a basic durable product (e.g., a printer) at a low price to encourage recurring sales of essential components (e.g., ink cartridges) at a higher price.
Advertisement
Businesses generate revenue by selling advertising space on their platform, attracting a large volume of targeted users through entertaining content. Other businesses pay to advertise their products to this user base. Facebook is a prime example of this model.
Agency/Brokerage
Agencies connect buyers and sellers and earn transaction fees from either the buyer, seller, or both. Real estate agents and financial advisors are examples of businesses that operate under this model.
Affiliate Marketing
Website owners promote products from retailers on their site and earn a commission when a customer makes a purchase through their referral.
Subscription Box
This model involves curating and delivering a selection of products to subscribers on a recurring basis. Examples include meal kit subscriptions, beauty product boxes, and book subscription services.
Peer-to-Peer (P2P) Platform
P2P platforms connect individuals or businesses offering goods or services with those seeking them. The platform facilitates transactions and charges a commission or transaction fee. Examples include ride-sharing platforms like Uber and accommodation rental platforms like Airbnb.
Software as a Service (SaaS)
SaaS businesses provide software applications or services accessed and used by customers over the internet. Customers typically pay a subscription fee to access and use the software. Examples include project management tools like Asana and customer relationship management (CRM) platforms like Salesforce.
On-Demand Service
This model allows customers to request and receive immediate services when needed. Service providers are connected with customers through a digital platform, and customers pay for the services rendered. Examples include food delivery services like Uber Eats and home service apps like TaskRabbit.
Crowdfunding
In this model, entrepreneurs or individuals raise funds for their projects or ventures by soliciting contributions from a large number of people, typically through online platforms. Contributors may receive rewards or equity in exchange for their support. Kickstarter and Indiegogo are popular crowdfunding platforms.
Sharing Economy
The sharing economy model enables individuals to share or rent out their underutilized assets or resources, such as cars, homes, or equipment, to others in exchange for a fee. Examples include car-sharing services like Zipcar and home-sharing platforms like HomeAway.
Coaching/Consulting
Businesses or individuals offer specialized knowledge and expertise to clients seeking guidance in specific areas. Services are typically provided on a one-on-one or group basis, and fees are charged for coaching or consulting sessions. This model is common in industries like business coaching, career coaching, and financial consulting.
Combining business models
Combining business models can be a powerful strategy for entrepreneurs looking to create innovative and competitive ventures. By integrating different business models, entrepreneurs can tap into synergies, expand revenue streams, and offer unique value propositions to customers.
Let’s explore the concept of combining business models. We’ll provide valuable insights and advice on how to effectively blend and leverage multiple models to drive growth and success.
Understand the synergies
When combining business models, it’s important to identify and understand the synergies between them. Look for ways in which the models can complement each other to create a unique value proposition and competitive advantage.
Choose compatible models
Select business models that are compatible and can seamlessly integrate with each other. Consider how the different models can work together to enhance customer experience, increase revenue streams, and streamline operations.
Leverage cross-promotion
Take advantage of the combined business models to cross-promote products or services. Use one model to drive traffic or customers to the other, creating a mutually beneficial relationship that maximizes exposure and sales potential.
Adapt and innovate
Combining business models often requires adaptation and innovation. Be open to exploring new ideas, processes, and technologies that can optimize the integration of the models and deliver a unique value proposition to customers.
Focus on customer needs
Always keep the customer at the center of your strategy. Ensure that the combined business models address their needs and offer convenience, value, and a seamless experience. Understand how the models can work together to provide a comprehensive solution or address different aspects of customer requirements.
Test and iterate
Combining business models may require experimentation and refinement. Test different approaches and gather feedback from customers to identify what works best. Continuously iterate and improve the combined models based on customer insights and market dynamics.
Evaluate financial implications
Consider the financial implications of combining business models, including the costs, revenue potential, and profitability. Assess the investment required, potential revenue streams, and the overall financial viability of the combined models.
Seek expert advice
If you’re unsure about how to effectively combine business models, seek guidance from industry experts, consultants, or mentors with experience in similar integrations. Their insights and expertise can help you navigate the complexities and make informed decisions.
