Business model; what’s that?
I remember how this got me confused years back. Actually got the best of my nerves.
It still does sometimes because consumers are unpredictable, uncertain and mostly unsatisfied; so businesses always have to be on their toes to find means to provide solutions to the problems faced by consumers. If the “big” businesses constantly have to work on this “business model” or review it, what must the startups do?
Quite a headache, yes right!
The business model is at the core of every successful startup business. You can have the best of ideas or even the most unique ideas ; if you do not have the right business model for your startup business, there is no business.
If the question is thrown at you about what business model are you using for your startup business, am sure you will be left wondering and beating around with no clue. I’m not assuming all startups are clueless in regards to the topic but most startups are just running a business without models, at least from where I come from.
So let us ask the hard questions:
What’s a business model?
What do you know about business model?
What model are you using for your startup business?
How do you determine the right model for your business?
If you adequately answered the above questions, then bravo. You are just on right path to hitting the millions.
To the benefit of all, let’s have a look at those questions.
What is a business model?
A business model is that strategy you run your ideas on to making good incomes for your business.
That is basically what it means in the lay man’s understanding. You may have heard quite much about a business idea being viable. Yeah, that question people often throw about randomly. “Viable” what is that again? Simply, profitability.
Business model is a plan for the successful operation of a business, identifying sources of revenue, the intended customer base, products, and details of financing. It’s also the conceptual structure supporting the viability of a business, including its purpose, its goals and its ongoing plans for achieving them.
Still don’t quite get it? It’s simply how your startup business can achieve, fulfill its purpose, it’s goals or the reasons for which it was established. What was or is the purpose for starting your business?
How you run (operations) your business successfully to achieve that purpose is called the business model. But that plan which you need to put in place to achieve that purpose must be structured, must be something proven or tested (a model that’s known to have achieved results)
We have heard this name a number of times on management- “Peter Drucker” , according to him your business model should answer these questions:
1. Who is your customer?
2. What does the customer value?
3. How do you deliver the value at a reasonable cost?
Note that. Business model is mainly targeted at the financial goals but sustainability and organizational culture have also in recent times been integrated into the plans. An organizational culture and a business sustainability plan is a key to your financial goal. (Do not forget that).
Importance of Business Model
The importance of a business model is essential to your growth as a business as well as your financial goals being mainly key.
Why it is important?
It serves as a roadmap to your business success.
Improves operational efficiency
Competition advantage and gives
You control and consistency
A look at some popular business models you can consider for your STARTUP Business
The middleman model is a common model for startup businesses which was introduced by “Warby Parker” in 2010. This model gives you the startup good control over the quality of services or products. It also give you the negotiations power with distributors.
Value-added reseller model
Just as the name implies. With this model, business makes products which are resold by other businesses but with modifications which add value to the original product or service.
If your business falls under a sector that adds value to already made products or services, then you can take a look at this model. With this model, you would need to develop a value added network. Commonly used in the technology industry.
Direct sales model
Direct selling is marketing and selling products to consumers directly, away from a fixed retail location. Sales are typically made through party plan, one-to-one demonstrations, and other personal contact arrangements.
Franchise is where another business have the right or given the right to use another business’ model which is successful. We have seen very successful businesses which have the right models for their businesses. The franchisor’s success is the success of the franchisees.
Sourcing business model
This model allows the networking of several companies to be successful. I guess you certainly do have an idea of how sourcing works. This Model is applied specifically to business relationships where more than one party needs to work with another party to achieve their purposes or goals. It can be compared to one of our (Commec Ghana Ltd) models where we provide startup solutions in partnership with other companies that have those services as their core services.
Freemium business model
This is very common these days and used by startups. This model provides free services while premium features are charged at a cost. Eg is the websites services such as WordPress among others. This model is also common with the bloggers.
To just add a few other popularly used models:
1. Subscription model
2. On-demand model
3. Premium model
4. Auction model
5. Loyalty model
6. Professional open source model
How do you know which model is right for your startup business?
Well, that would be a too good to be true decision to make on your behalf. A business model is tailored or developed to your business idea or business services or products. I can not advocate which would be best for your startup business without any fair idea of your business. (If you want me to take a look at your business idea and suggest which model could obtain a result, you can reach me via the details below. My coaching and consulting services are now available via thestartupreneurs.com)
Follow these few lists to determine which model could be best for your business.
1. What is the service or product
2. Who is the target
3. What is the value
This is fairly just about what business model is all about; not all there is to it though. Nobody said it would be easy, but it can be done. It will be a deception to say, it’s pretty much easy to develop a powerful business model that can carry your business to the next level.