How to Choose a Business Model That Will Give Fuel to Your Startup
Every startup begins with a product and a vision, but without a realistic plan, it’s going nowhere. This is where a good business model comes in. If you’re thinking about opening your own online business, it might feel intimidating to start, but don’t worry. Here are some of the basics to start building with.
To illustrate the process for choosing a business model, imagine a musician who wants to start an online business. He must ask himself two simple questions: What am I selling: a product, a service, or information? And how will I sell it?
Once he knows exactly what he’s selling, he can then choose an appropriate method of selling.
Let’s say that our musician decides he wants to sell CDs of his original music as well as t-shirts and merchandise showcasing his brand. These are considered physical products that have to be designed, manufactured, warehoused, shipped, and distributed. Because of the nature of these kinds of products, it comes with certain risks, and some business models will work more successfully than others.
A traditional method of selling physical products is through the Merchant Model, for example, through wholesalers and retailers. But online businesses are increasingly using the Manufacturer Model, in which the manufacturers of a product can sell directly to their buyers through platforms like Amazon or Etsy in order to reduce the distribution channel and maximise profits.
Maybe in addition to selling his CDs, our musician decides that he also wants to start teaching music lessons in his local city. This would be considered a service, an intangible act that is performed at the point of sale. The most common method of selling services like this online is through websites. Sites can be used for marketing offline services, or they can be used to directly sell services. The most traditional model here is the Advertising Model, where the site provides content combined with advertisements (typically banner ads). But our musician used the Brokerage Model, where he used the website to bring him (the seller) together with students (the buyers) interested in taking his lessons (the service).
Let’s say our musician decides that he wants to start a Youtube channel and publish his own website that offers exclusive content in exchange for a monthly subscription. Both of these would be considered forms of selling information. In the case of the Youtube channel, it would be a Community Model of business in which revenue is generated through voluntary contributions from viewers and from advertisers. In the case of the website, exclusive and valuable information could be repeatedly exchanged for periodic profit–the typical Subscription Model.
Even if you’re not a musician trying to make it in online business, the above principles still apply. Once you choose a model for your business, there are steps you can take to ensure that it succeeds. Be proactive in building and protecting your business; learn more about business models and services that can boost your distribution and shipping.
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