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Management

Getting started in business

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When you are thinking of starting a new business, one of the first things you need to ask yourself is what business model your company will adopt. Your business model is your company’s blueprint for making a profit. It explains what product or service your company plans to sell, how you will market your product or service, how much your business will cost to run, and how your business will turn a profit.

The best business plan is the one that allows you to fulfill your clients needs at a reasonable cost, while still remaining true to your company values and objectives. Three good questions to ask yourself in the business model planning stage are:

  1. Do you have a unique value proposition that makes your product or service valuable?
  2. Who is your target market, and do they have a need for your product or service?
  3. What makes you different from your competitors? Will your business model be difficult to copy?

Without these essential elements, you don’t have a way of generating revenue for your business. Some other elements to ask yourself when selecting a business model include: cost structure, key metrics, resources, problem and solution, revenue model, revenue streams and profit margin.

Some of the most popular business models include the manufacturer model, which is utilized by Dell Computers and Hewlett-Packard. This business model sees a manufacturer convert raw materials into a product. Another popular business model is the retailer model. Retailers purchase goods from distributors and then sell them to the public. Stores such as Nordstrom and Target have seen great success in this space.

Even companies that are innovating the business world tend to adopt characteristics from more traditional models. For example, Netflix has transformed the way you watch shows and movies but their company essentially runs on the subscription business model. This model asks customers to pay a monthly fee in order to utilize the product or service. In the case of Netflix, you pay a monthly fee to access their app.

You should start writing your business model in the beginning stages of your business plan. This way, you answer some of the most important questions about your business right out of the gates, rather than realizing at the end of your planning stages that profitability is not an option.

There are twelve main business models for you to choose from. Once you’ve found one that fits your business needs, you can begin to adapt it and make it your own. The right business model for you depends entirely on what you are selling, how much it costs to produce, and who you plan to market it to.

If you don’t know where to start, the visual below details the main business models explained with coffee.

Let me know if you have any questions!

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