Business is an indispensable part of the economic development of organizations and businesses. However, choosing a suitable business model is difficult, especially for individuals just starting a business. So what is the business model? How does it benefit us? Let’s find out with us right here.
What is the business model?
It is known that the business model is the company’s core strategy for a profitable business. In other words, it is to identify the products and services they sell, including the target market as well as other expected costs for Marketing.
Business models are very important for small, medium, and large enterprises. It helps new companies/enterprises attract investment and motivate employees. Particularly for long-established companies/enterprises, this model helps them predict current and future trends and challenges.
All the business processes and policies they apply are part of the business model.
What benefits does the business model bring to the development of the business?
The business model is the direction of the company’s present and future development strategy. Moreover, it helps businesses optimize resources and meet the best products and services for consumers. Businesses can also accurately predict the revenue they will receive each month, which helps you have a broader view of the company’s strengths, weaknesses, or resources.
A business model is ideal when it is unique and not easily copied. That is also why managers are always concerned about the formation and construction.
The benefits that the business model brings to businesses are:
- Identify short- and long-term product/service business strategies.
- Identify the main customer segments that the business is targeting.
- Create a premise for setting up a plan to serve your customer segments.
- Identify channels to reach and provide your products/services to users.
- Establish and maintain relationships with customers.
- Focusing on developing the main resources of the business such as capital, human resources, technology, etc.
- Expanding market development opportunities that businesses can take advantage of, offering solutions that benefit customers
In short, the business model plays a very important role in determining the success and failure of a business. It helps managers decide how businesses, operate to make money efficiently.
Essential components of a business model
Each business model will have its own characteristics and functions. However, they all include the following basic components:
- Value Proposition: A specific feature that makes your product/service appealing to customers
- Target market: Each specific group of consumers who need the product
- Competitive advantage: A unique feature of a product/service that competitors cannot easily copy.
- Cost Structure: Includes the fixed and variable costs the business requires to operate. And how do those costs affect pricing?
- Key metrics: Ways your company can measure it
- Resources: Includes the company’s physical, intellectual, and financial assets
- The problem and solution: Your target customer’s pain points and how your company intends to respond
- Revenue Model: A framework for identifying viable income streams to pursue
- Revenue Streams: Include ways your company can generate income
- Profit margin: The amount of revenue that exceeds the cost of doing business.
This is necessary to create a true business model; of course, only some businesses can form that idea based on these components.
So, you will have to write a business plan for them to become more visible through the business model. That gives the vision and the main direction for your business idea; over time, you can change it to suit the company’s long-term business strategy.
Some potential business models
For the popular business models in the world, investors apply and bring a lot of success. However, there are still models that many people still need to learn, but in the future, the potential that it brings is very high revenue and profit.
- Mobile business model: This business model has been encountered in the past few years, but very little. This model works independently, often without the need to register a business. In simple terms, it is a commercial activity without a fixed location. This model is expressed through integrated sales of moving vehicles such as motorbikes, trolleys, minivans, etc.
- Pet care hotel: This model was born to meet the needs of many people to take care of pets. In Europe alone, up to 200 million pets are kept by households. However, this model has only begun to be seen in big cities. But in the future, this model will certainly develop more strongly.
- Highest auction model: This model gives customers access to the best products/services through the forms; whoever offers the higher price will own the product.
Top most popular business models today
This model is based on selling products/services to receive recurring monthly or yearly subscription revenue. It can be applied to a traditional business or an online business.
For example, on Netflix, users must pay annually or monthly for the right to use and access.
This is a hybrid business model, where companies sell two or more products simultaneously as a single unit at a lower price than they charge for selling individual products.
Using this model, companies will have more opportunities to generate larger sales volumes and provide difficult product and service markets. However, businesses that sell products at low prices will often have narrower profit margins.
It describes a company that offers basic or limited features to users for free and charges for additional or advanced features.
You can also understand simply as you want to access an application or software to access and use certain features. To use this feature, you need to pay for one registration.
Razor blades model
Razor blades are a business model in which an item is sold at a low price or given away for free to drive purchases and increase sales.
Product as a service model
This model provides the same products for the maximum number of people, over and over. The model is an alternative to the established “buy and own” approach, including a lease-to-use agreement. Strictly speaking, this is a model that allows customers to buy services instead of buying main products.
The rental model represents a company buying a product from a seller and then allowing another company to use the product for a recurring fee. This business model works best when items of great value, such as manufacturing medical equipment or real estate, etc.
This model allows companies to tap into talent networks everywhere without hiring employees to work in the office. Rather, it hires employees to work remotely by exchanging and receiving work information via the internet or other media.
This model allows the company to save time and money and market to highly skilled people nationwide.
This is a business model for startups, developed by Blake Mycoskie, in which each purchase will receive an additional necessary item. This model is feasible to create commercial value today.
Of all the types of business models mentioned above, this one is considered the most familiar on the market today. The franchising model describes how individuals/businesses/collectives allow others to sell products under their brand name and charge a fee for a certain period.
Three levels represent this model. Includes: manufacturers, wholesalers, and retailers. It acts as a distributor to bring manufactured goods to the market.
This model refers to businesses that make products from raw materials and then sell them directly to users or through intermediaries. Rather, another business will be in charge of bringing products to customers.
This model describes the activity of buying products from large manufacturers, wholesalers, or retailers and reselling them to users. It can be seen that retailers are the final link in the supply and purchase. Goods from distributors are then sold to customers at a price just enough to cover costs and make a profit.
Above are some content related to the business model that will help you have a more comprehensive view in identifying and choosing the right business model. I hope the above sharing has helped you understand a business model. Remember that only some industries can adopt a business model. Good luck.