How To Pick Your Business Model To Support Growth
You need to establish a business model that will support your plans for growth. If your business strategy changes, you may need to modify your business model to align with it. Here’s how to pick your business model to support growth:
“Show me the money” is the mantra and your business model describes how you use your resources to deliver value to customers while maximizing your profitability and ability to scale.
Questions to consider when deciding on your Business Model
- Who are your customers?
- How do these customers use the product/service?
- What are the available distribution channels (think outside of the box!)?
- What is your sales strategy?
- What operational processes do you need to underpin the delivery of the service or product?
- What are the resource requirements?
- How do you make money?
- Which of the business functions/processes can be outsourced? Visualise and write down all the business processes. Take your product/service/business process and list its attributes. For example, shape, size, design, materials, equipment, functions, technology and cost. Then take each attribute and try to find as many alternatives to it as possible.
Attribute Listing
- Split your business process in the smallest parts possible
- What are the elements of your product/service/business process?
- What are the alternatives?
| Financial | Last year | Previous year |
|---|---|---|
| Sales | ||
| Gross profit | ||
| Net profit | ||
| Your own salary | ||
| Total promoters/management team remuneration |
Examine which of your business functions and/or business processes can be outsourced
Businesses that sell the same product or service can have quite different business models and new business models can have devastating effects on the competitors that operate in same markets.
Look at companies such Dell, Ryanair, Skype, Amazon as examples. What is your model, is it profitable and can you scale it? Can it be improved?
Different business models
You could have one or a combination of these.
The bricks and mortar model
The classic shop.
The subscription model
Where your clients sign up and pay a monthly/annual fee.
Lock in model
You sell the hardware cheaply and lock in the need for the supplemental products. This model is implemented with products such as cell phones and airtime, printers and ink cartridges, and cameras, film, and prints.
Multi-level marketing model
You create a group/network of independent distributors who buy products from you and sell the products on to consumers.
Direct sales model
You take out the middle man and sell direct to customers.
Service model
Where you deliver added value directly to customers
Collective business model
You create economy of scale and pool resources for a fee.
Online delivery model
You have digitised your business and deliver it over the net
Internet brokerage model
You bring buyers and sellers together for a transaction fee.
Internet advertising model
You provide free content services and make money by selling advertising.
Information portals
You sell content and information to distributors or end user.
Software rental service
You rent out software
Web communities
Where you build a community online. Word of warning on internet: more than 99% of all web 2.0 properties will never make a dime and 95% of the web is not monetisable according to some of the experts. It is also an ever changing web environment with new models developing all the time.
Over to you now. How did you go about picking the business model for your company? Tell us your experience in the comments below.
Source: business-achievers.com
