A business model is designed to answer the questions “how does this business work?” It focuses on three sections of a company. Everything the company makes, everything the company does to sell the product or service, and everything the customer does to pay for the product or service. There are seven business models for small businesses to consider.
BUSINESS MODEL 1: The manufacturer
This is model is based on a company making the product from raw materials or assembling premade parts into a new product. They would sell directly to their consumers or they would sell to a middle man. This is the most basic business model.
BUSINESS MODEL 2: Bricks and clicks
This model is designed for a company which has a physical and an online store. The customer can either purchase the product in-store or they can order it online and collect it directly from the store. This model offers the company a larger customer base to target as they are doing business online and offline. An example of this is Cape Union Mart and Romans Pizza.
BUSINESS MODEL 3: Advertising
This model is based on creating content which people would like to consume and then offering advertisers space on your platform to advertise their product. We can see this model used on YouTube, many blog sites which have advertising on the side of the blog, and in podcasts. The advertisers pay to have their ad on your platform. The only drawback to this model is that your consumers may become frustrated with seeing the advert. Therefore, you need to ensure the adverts on your blog, podcast or YouTube channel are relevant to your product or that you offer a paid-for ad-free experience.
BUSINESS MODEL 4: The marketplace
The benefit of this model is that you don’t need to have any inventory. You are simply the place which brings the supplier and the buyer together. The most successful company at the moment is Airbnb. In this model, the marketplace owner earns their profit from asking a processing fee.
BUSINESS MODEL 5: Subscription
This model looks at offering a consistent service to a consumer at a monthly fee. The benefit of this model is that you know on an ongoing basis how much money you should make each month. The most common example are subscription boxes or on-demand TV like ShowMax.
BUSINESS MODEL 6: Direct sales
This model has been around for a while but it has gotten a new modern overhaul. People are looking to improve the product which is sold. An example is a company who offered designers the opportunity to design their own t-shirt and sell it online within their platform. The company is called Teespring.
BUSINESS MODEL 7: On-demand
With more consumers wanting instant gratification, the on-demand model has become more popular. An example of the on-demand model is Uber or the local company, Hailer. These companies satisfy a client’s need for instant transportation from one area to another. This model allows small business to mix new technology with existing infrastructure. Another benefit is it works well with the movement of people wanting to become freelancers.
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