Whenever meeting new or existing entrepreneurs, you are bound to hear the term ‘Business Models’ somewhere in the conversation. But just what are business models? Which ones work best and why? How do you know if your start-up business has the right one?
A business model explains which customer need or want your start-up chooses to fulfil, why your solution works better than competing ones and what your potential customers will be willing to pay for such a solution. Defining your business model is how you:
- Identify your market
- Define and differentiate your solutions
- Get and keep customers, creating value for them
- How you get to market through promotion and distribution
- How do you define what’s to be done
- The way you will set up your resources
- How you’re going to do all this at a profit?
Following are some of the Top Business Models you can consider:
#1 Home-based Business Models
Less risk and lower start-up costs – allow you to test the entrepreneurial waters without spending money on assets, employees and other initial expenses. Easily scalable, you can make your home-based business as big or small as you’d like to suit existing commitments, such as parenthood and a day job. Outsourcing is a great strategy to keep things simple at home. You can contract with other companies for your public relations, warehousing, shipping, website management, and manufacturing.
#2 Brick-and-mortar Business Models
Allows you to work face-to-face with people. A physical location may attract walk-in traffic to supplement traffic you gain through your marketing efforts, depending on your type of business. Gives you a dedicated space to go to work each day and become mentally and physically immersed in running your business. Higher risk and start-up costs. If your concept is retail-oriented, you must acquire inventory to merchandise your store.
#3 E-Commerce Business Models
As with a home-based business, this is a lower-risk, lower-cost business to start. You don’t necessarily need lots of personnel, inventory and facilities. You can choose to do it full-time or part-time.
Easily scalable – you can make your e-commerce business as big or small as you’d like to suit existing commitments, such as parenthood and a day job. You can tap into a national or even global customer base through the internet.
#4 Other Business Models
Lead Generation business models are those where a company uses the web, or some other mechanism, to generate a large number of leads, and sell them at a higher price. Direct Sales business models use sales personnel and are one of the most expensive ways to pursue customer acquisition. Research shows that for every five salespeople hired, typically between one and two fail and never reach the quota.
Unfortunately, because of sales personnel’s long orientation and training, it typically takes six to nine months to detect and terminate which individuals will fail. Recurring Revenue or Annuity Income business models can be highly predictable over time as you have a better idea of the revenue you will receive, thus reducing the stress of having no revenue. Think of consultants that charge a monthly retainer to a client or a gym charging a monthly membership fee.