Contents
- 1 What is a Business Model and How to Choose One
What is a Business Model and How to Choose One
Selecting and outlining your business model answers this question.
Let’s go over the basics, common types, and how to choose the right option for your business.
What is a business model?
A business model describes how your company plans to make money. It outlines what you sell, who you sell to, and your expenses.
For new businesses, a business model determines if your business idea is viable, attracts investors, and guides your overall management strategy.
For existing companies, it serves as the foundation for forecasting and reviewing your business plan.
What are the key components of a business model?
A business model can be broken down into three parts:
- Everything it takes to make something: Design, raw materials, manufacturing, labor, etc.
- Everything it takes to sell that thing: Marketing, distribution, delivering a service, and processing the sale.
- How and what the customer pays: Pricing strategy, payment methods, payment timing, etc.
Types of business models
Start with a common or industry-specific business model and adjust to your needs.
17 common business model examples
Advertising, affiliate, brokerage, concierge, crowdsourcing, franchising, leasing, pay-as-you-go, and freemium are examples. Learn about these and eight other common business models.
Subscription models
Learn what it takes to set up a subscription-based revenue stream for your business.
Online business models
Consider the best business model options for your fully online business.
If you’re starting a social media-focused business, explore these common business models.
How to make money as a freelancer
Discover your best revenue-generating options if your business revolves around your abilities.
How to choose the right business model
Create a business model that aligns with your goals and the needs of your target customers.
1. Revisit the market and your competitors
Focus on how your business can provide value in the market. What features will help you stand out and sell more?
Thoroughly analyze your competitors. Look for opportunities to do something new, different, or better.
Review how they sell their products. Is it successful? Are there business models in other markets that could work here instead?
2. Understand how your customers buy
Align how you sell with customer needs and expectations.
Deeply understand your customer’s purchasing behavior.
- Do they prefer one-time purchases or subscription models?
- Online or in-store?
- Free trials or money-back guarantees?
Tailor your business model to align with established buying habits.
3. Focus on the problem and your solution
Every successful business solves a problem.
Clearly define the problem and how your product or service provides a unique solution.
- What makes you different?
- How does that affect costs? Pricing?
Consider “what is the best way to deliver your solution?” to develop a business model that aligns customer needs with your business goals.
4. Experiment and test multiple business models
Try different models. Start with a hypothesis, test it in the market, gather feedback, and refine it.
Through trial and error, businesses often find the model that fits best. Ideally, you’ll end up with multiple revenue streams that can strengthen your business performance.
How do you know if your business model will be successful?
A successful business model must collect more money from customers than it costs to make the product. This is your profit.
Remember, you don’t need to invent a new business model. Instead, take an existing business model and tune it to fit the needs of your customers.
Once you do, you can dig deeper into the next step for starting your business—selecting a pricing strategy.
Resources and tools to create your business model
One-page business plan template. Use this template to consider all aspects of your business in just 30 minutes.
Build a roadmap for success with LivePlan. This all-in-one solution helps you create a plan, outline operations, and analyze the impact of revenue and expenses on your business.
Hello!
I’m Andrew Brooks, a seasoned finance consultant from the USA and the mind behind phonenumber247.com.
My career is built on a foundation of helping individuals and businesses thrive financially in an ever-changing economic landscape. At phonenumber247.com, my aim is to demystify the complex world of finance, providing clear, actionable advice that can help you navigate your financial journey with confidence. Whether it’s personal finance management, investment strategies, or understanding the nuances of market dynamics, I’m here to share insights and tools that can propel you towards your financial goals.
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