In this article you will know what a business model, the advantages of having a business model and 11 examples of business models that will inspire you.
Being able to execute any task requires following a plan and detailed steps. Even the simplest activities like bathing, eating or using your computer; they involve following a series of instructions that will allow the task to be carried out successfully.
In the same way, after having a business idea, be it a product or a service, a vitally important step follows: Defining the business model.
let’s see first What is a business model.
What is a business model.
The business model is the structure that clearly defines the following aspects:
- What is the product or service that is going to be offered to the market?
- How will it be manufactured and offered?
- Who will be the buyer?
- How will it be sold?
- How will the income be generated?
Also read: The Canvas business model (What it is, examples, + free course)
A few years ago, it was enough to manufacture a product, the customer went to the right place and the sale was made.
Today, globalization has transformed organizational processes; forcing entrepreneurs to constantly innovate adapting to market changes.
As a result of this, there are many business models that are currently found, and day by day the new needs that arise give rise to variations of existing models and new models.
Advantages of having a business model.
Some advantages of having a defined business model, according to Alan Gleeson, CMO of Texuna, are the following:
1. It makes it easy to obtain financing.
Any potential investor will want to be clear about what he is going to get into, and a concise way to explain what is seen in the panorama is to be clear about which business model is chosen.
2. Innovate.
Knowing which is the most convenient business model makes it easier to see from another perspective and determine what things can be innovated. (It can be the product or even the business model)
Having an open mind plays a very important role, market conditions can change at any time and a change or adaptation in the business model can be the difference between success or failure.
3. Analyze the competition.
Having a clear business model, you can analyze the market and know what a good idea it is to enter it in the way you plan to do.
The analysis of the Porter’s 5 forces It has been a method used to find out how attractive industries are in relation to investment opportunities and profitability.
The basis of its methodology lies in analyzing these 5 factors:
- Bargaining power of buyers and customers.
- rivalry between companies.
- Threat of new competitors.
- Bargaining power of buyers and sellers.
- Threat of new products.
Once you know the advantages of having a business model, it is time to learn about some examples adopted by large companies worldwide. But first, we want to know if you found this content interesting. Just vote from 1 to 5. Thank you!
Types of business models.
1. Long-tailed model.
Chris Anderson, CEO of 3d robotics and author of the book The long tail: Why the future of business is selling less of morecreated this name in 2004 that refers to the sale of many low-cost items that are in low demand, but can generate a large income due to the large number of items.
Clear examples of this model are companies like Amazon or iTunes.
If you want to know incredible phrases from the creator of Amazon, click here.
2. Information model.
There are many people who need information in specific areas, so faced with this need, several companies generate profits by providing the information that millions of users are looking for.
The CBinsights portal provides all the information related to large companies. Who are your investors, what do they invest in or what markets do they compete in; it is part of the information that paying users have access to.
Remember that your knowledge is very valuable to other people; so you can monetize it.
3. Multilateral Platforms.
It is the model used by many blogs.
On the one hand are the users who have access to the content for free and on the other are, for example, companies that pay to advertise on said blog.
Since blogs already have the public’s attention, goal of many companiesthey save them the work of going out and looking for them to show them their products or services in exchange for a certain sum.
Best of all, creating a blog is easier than you think.
4. Fractionation.
A clear example is the “timeshare” provided by companies such as RCI, where the partial use of a good is sold to the user for a certain time.
5. Freebie Marketing.
For this model to happen, the company needs to bring a cheap or even free product to market, with the aim of selling additional accessories that will allow them to get more out of it or continue using it.
The clearest example is that of Gillette razors. The machine is bought and over time the user will buy blades.
6. Higher price.
Some companies have the luxury of navigating markets that have very little competition; or even have no competition at all.
This allows them to sell at a much higher value than manufacturing, and due to the “desperation” that customers have and the lack of supply; the sale is certain.
7. Lower price.
On the other hand, some companies in the face of great competition look for ways to reduce costs in some areas; in order to sell the same products at a much lower price.
8. Reverse auction.
In a normal auction, the seller bids on a product and the buyer with the highest price buys the product.
In a reverse auction, the buyer expresses his interest in a product and the seller who can give it to him at the lowest price wins.
Services like Skyscanner allow users to select the destinations they want to travel to and are shown the different prices offered by airlines.
The final decision is made by several factors other than price. Although generally the cheapest tickets sell faster
9. Intermediation.
In this business model, a space is created where buyers and sellers can negotiate; and profits are generated through small commissions for each transaction.
Companies like eBay or Mercadolibre invoice through this business model. They also have added values by providing a certain level of security to users when making transactions through Paypal (or similar services).
10. Franchise or license.
It occurs when a company, generally with a successful product or service, allows third parties to use its brand image in exchange for royalties.
Thus, a person who considers that a successful product can be just as successful elsewhere; you can take it and start a “new” business.
If you want to know how to start a franchise and what you should take into account, click here.
11. Subscription.
The user pays an amount every certain time, in exchange for content (newspapers and magazines) or for example, access to the use of Prezi software.
In this business model, as in many others, there are model mergers.
For example, the company charges a subscription for the use of the basic functions of an app. But if the user wants to have access to more things, they are charged an extra amount.
Within the subscription model is the model FREEMIUM.
In this business model, the user can subscribe without any charge, but as in the previous example, if he wants to have access to better functionalities, known as PREMIUM, he must make an extra payment. Examples of this model are the Deezer or Spotify platforms.
Conclusion.
There is no “right way” to do things and that gives rise to innovation.
It is possible that your product suits some business model directly. But it is also possible that by creating an amalgamation of different models, your startup will obtain much more potential.
If you want to know more, this is for you.
And remember, if you are really interested in creating your own business and want to find more information on this subject, buy our book “How to create a company while working: Discover how to manage your time, manage your money and motivate yourself while creating a company and working for another” , where you will find all the information you need to found your own company, without having to leave your job.
