A business model is a way you run your business. It is usually a part of your business plan, which is developed before you actually start your business and implement all the strategies that you plan for it.
In your initially built business model, you might miss out on certain areas that you plan to carve out as you grow your business. These areas are about your business expansion, which you can only plan out properly once your business hits the ground. Your first draft of your business model is, therefore, just the basic infrastructure of your business that you intend to start out with. It is modifiable and changeable, based on the circumstances, opportunities, and competition which you can constantly keep checking as part of your SWOT analysis.
In order to develop an effective business, you need to ask yourself several questions.
- How much would it cost to start the business?
- What will be your initial marketing strategies?
- What customers would you be targeting?
- Where do you see your business in the next 5 years?
If you have the answers to these questions, you probably have the best business model in place. But what are the common business models? Let’s have a look at them one by one.
The 10 Most Common Business Models
In order to come up with 10 types of common business models, we have to do a bit of business model study. What is business model study? It is light research that we conducted for looking into the various ways in which businesses these days structure themselves for optimizing their sales and growth. Here are the different business models we came up with.
1. Subscription Business Model
A subscription business model is one in which you get your customers to pay you a recurring amount on a monthly basis, or sometimes at a different but specified timeframe, for getting access to your product or service. This model can apply to both an online business, such as selling consumer products via an e-commerce website, or a brick-and-mortar business, such as a boutique run via a retail outlet.
Image taken from Strikingly user’s website
When a subscription business model applies to a website, the company running the website either ships the product via mail or gives access to its digital service or digital product to the customer via email.
2. Bundling Business Model
The bundling business model applies to businesses that sell one or more of their products together, bundled in a package and at a discounted total price. This is a way to upsell your products when you expect your sales to be lower if each of those products is sold separately. The price of a bundle is often lower than the total price of all the products that are included in the bundle.
This business model can generate larger sales volumes from products or services that are relatively lower in demand when sold separately. Even though it forces a business to shrink its profit margin, it helps businesses to clear excessive stock and free up resources for products that are more in demand.
3. Freemium Business Model
This business model has gained popularity in recent years, where almost all businesses are trying to build a solid presence online. This is the best business model for SaaS (Software-as-a-Service) business websites run by software companies.
This business model works when a software company offers free access to its users for a proprietary tool hosted by the company. The tool can an app, an online platform, a cloud-based service, or some other tool suite. The company would normally limit or withhold the use of certain key features that require the users to upgrade to a paid version to access.
An example of a business using the freemium business model is Strikingly. Strikingly is a website-building platform that offers a free plan, whereby our users can develop a website with all the basic features that are good enough to showcase your products and services. But if our users want added features, such as having extra bandwidth, building multiple web pages, adding site memberships, or customizing the checkout sequence, they need to upgrade to our Pro Plan.
Image taken from Strikingly
4. Product to Service Business Model
Imagine a business that makes and sells scooters. They get a customer who needs two metal pieces welded together. The business would need to contact another company that could weld the two pieces together if it doesn’t want to purchase a welding machine for itself. But if that business bought a welding machine, and started offering welding services along with selling scooters, it would apply a product-to-service business model.
If a company allows customers to purchase the result or product after applying a service to the product, it is running on a product-to-service business model. This is among the most common business models for those who are always looking to expand their product line and services.
5. Crowdsourcing Business Model
The crowdsourcing business model involves receiving information, opinions, feedback, or work from the public via the internet or social media, and using it to run your business. This is the best business model for companies that want to take help from a vast network of skilled people, resources and talent, without having to hire full-time or in-house staff. These companies often make use of freelance websites to look for the talent they need.
6. Franchise Business Model
This is among the most common business models because people are familiar with it, even if they are not entrepreneurs or entrepreneurs. The way it works is there is a business blueprint that’s well-established, and it’s purchased by another entity that’s referred to as the franchisee. The franchisee reproduces the business blueprint, while the franchiser helps the franchisee with the marketing, financing, and other business operations. The involvement of the franchiser makes sure that the franchisee runs the business in the exact way it should be run, in order to keep the brand image intact. The franchiser also takes a percentage from the profits earned by the franchisee.
7. Distribution Business Model
This is a very simple business model. A distribution business is one that takes and delivers manufactured products from the manufacturer to the market. This is the simplest among the different business models discussed in this article.
8. Retailer Business Model
A company running on the retailer business model is the last link in the supply chain. Retailers are businesses that purchase finished products from distributors, or sometimes directly from manufacturers and sell them at a price that helps them cover the running expenses and buying cost, and also make a profit.
A boutique that buys its stock of shirts and pants of different brands from its distributors, and sells them from its retail outlet, is an example of a business running on a retailer business model.
9. Online to Offline Business Model
The O2O (online-to-offline) business model is one that runs on O2O marketing strategy. This is a marketing strategy that connects your offline services to your online customers. It is a way of attracting customers to your outlet or office by advertising your products and services over the internet. Examples of such marketing means could be social media marketing, email marketing, or simply promoting your shop or outlet on your website.
Image taken from Strikingly user’s website
10. Business to Consumer Business Model
A B2C (business-to-consumer) business model is one in which there is a very short supply chain. This is a business model in which a company manufactures goods, or buys them from a manufacturer, and sells them directly to the end consumers. There are no distributor businesses involved in between. The end products sold by a B2C business are meant for use by individuals, not by business entities.
Things to Consider for Choosing the Best Business Model
Now that you know about the different business models, let’s look at the factors that you need to consider before coming up with the best business model for yourself.
- Align the business model that you will choose with the needs and preferences of your target customers. For example, if your customers are more into online shopping, you might be better off running your business via a website. If you are selling digital products or services, you might consider the freemium business model.
- You should choose a business model, keeping the competition in mind. For example, if you go with the retailer business model, the location of your retail outlet would matter a lot. The fewer competitors you have in your surroundings, the easier it would be for you to sell your products from your retail outlet.
- Always consider your value proposition before deciding on your business model. What is it that makes your business and your products stand out? For example, if you have an online store, are you offering any features to your users that make it more convenient for them to buy from your store than from any other?
- Consider building multiple revenue streams. An online to offline business model helps you do this. If you are promoting your products via a website, and you notice your site is attracting a lot of traction to it, you can set up a simple store on your website and start selling your products online as well.
If you are looking to build a website for your business, or want to add a store section to a simple website you have, consider using Strikingly.
Image taken from Strikingly
Strikingly is a platform to develop a website, where you wouldn’t need to hire a web developer or write any code on your own. We offer complete support in all technical matters involved in creating a website, and provide you with tons of ready-made website templates for you to choose from.
By building a website on Strikingly, you can apply any of the business models discussed above. Not only that, you can further grow your business by using our added or premium features under our Pro Plan, as and when it suits you.
