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Published On: Fri, Aug 24th, 2018

Business Models that Work

Central to any successful startup is a business model. Without a business model, your idea will not have a means by which it can generate money. Many prospective entrepreneurs may throw around the term “business model” when they are attempting to articulate their purpose and planning the strategies for their business venture, but it’s important to know what options are available for you as you being the process of writing up a business plan. Business models are a “conceptual structure that supports the viability of a product or company and includes the purpose and goals of the company and hot it intends to achieve them. All the processes and policies that the company adopts and follows” are part and parcel of a business model.

photo/ OpenClipart-Vectors

The business model you choose needs to address issues of how to get the product or service to your consumer and exemplifies a system that will work better than the competition’s current system. Even if yours is a very original idea for a product or service, it’s best not to attempt to reinvent a business model or create a new way of doing things that “has never been done before.” It is much better, especially in the eyes of potential investors, to utilize a business option that has already been proven to generate revenue. Your job, as a burgeoning company owner is to determine which of the business models will work best for your business.

If you don’t know how to begin, here are a few potential models to consider that have proven to be successful for many startup and business ventures around the world.

Become a middleman. A middleman is essentially a broker. His job is to bring together two opposing people to benefit both individual sides, as well as himself. The two opposing people need one another, and it is the middleman’s business to put them in touch with one another. Some recently successful examples of this include transportation providers like Uber and Lyft, where the drivers need paying passengers and people need transportation.

Some business ideas lend themselves naturally to a middleman business model, and developing a middleman startup is unique in that it requires very little startup capital. Many middleman businesses provide products and services at a reduced rate than larger corporations attempting to monopolize a particular market or industry. This means they can provide their consumers with large savings while also capitalizing on it at the same time.

Become a marketplace. One of the fastest growing business models that has shown itself of continued effectiveness is becoming a marketplace. Essentially, this means that you are bringing together supply and demand, and there are several advantages to this type of business model. By using drop shipping wholesalers and partners, you can have little to no overhead and have to manage no inventory. You can run the company from your home office or conduct business digitally anywhere in the world. Manufacturing a product involves manpower, raw materials, and personal risk. Inventory that you manufacture and invest in will need to be sold for you to turn a profit.

But when you are the marketplace, your job is to bring together the sellers and the buyers and facilitate a transaction, from which you take a small profit. As such you give sellers a place to make a profit and reach a wide consumer base, and customers are happy to purchase the product, usually at a discount, that sellers are offering.

Become a subscription business. There is currently an explosive growth in subscription-based services and products that consumers can easily access, set up, and continue. Based primarily in the popularity of mobile payments and a desire for a simpler, hassle-free type of shopping experience, consumers who enjoy subscriptions want to set up their product or service delivery and then not worry about it. From Blue Apron, a home meal delivery service to Dollar Shave Club that sends out razors on the regular to men looking to save money and avoid running out, there are many subscription companies out there doing it right.

This business model provides a balance of value to both the startup and the customer. For consumers, it’s simple and convenient and takes the work and worry out of the purchasing process. For startups, the value lies in the company’s ability to predict revenue through recurring sales, increasing not only sellability but viability and sustainability for the business.

Which of these business models are right for your startup venture? Feel free to comment below.

Author: Veselina Dzhingarova

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