(Newswire.net — November 16, 2020) — When it comes to founding a new company, on many occasions we do not stop to reflect on the importance of choosing your business model well. Worried about other aspects such as the name or the economic costs, we forget to think long term and analyze what our business model is going to be.
The business model is, to put it simply, the structure of the company. Not understood in terms of staff or personnel management, but in how it manages to generate profits and through what strategies. Whichever model is chosen, it must be accommodated by the appropriate business model template.
For example, a company may choose to make a few very high-quality, very high-cost products. Another, however, may choose to make an immense number of low-quality products to reach more people. In the end, in both, the important thing will be the profit margin.
Types of business models
1. Mass selling business model
In this case, it would be a business model in which we would need to sell an immense number of products. Also, the profit margin for each of the units we sell would be very low. This case is that of fruit or vegetable producers, and also the one followed by companies that manufacture low-quality, low-cost products. The main stumbling block with this business model is that it requires a large amount of sales.
2. Specific sale or consulting
If you intend to set up a market research or image consulting company, it is very likely that you have very few clients but that they pay you very well. In this business model, we have to understand that it is necessary to have a very long business cycle. That is, it can take months, even years, from when we start a business contact with a client until we finally close a sale.
3. Freemium
The freemium (synthesis of free and premium) business model is based on offering a base product completely free of charge. This product, being free, is very easily acquired by a large number of people. Once we use that product, we want to improve it through actions that do have a cost. For example, this business model is the one used by many mobile video game manufacturers, who offer us a totally free game and if we want to unblock ourselves we have to pay.
4. Low-cost business model
When it comes to generating profits, it is clear that we have to generate income. However, low-cost business models allow us to generate profits at very little cost. It would be a question here of those businesses in which it is not necessary to invest in large premises, in many salaried people and so on. For example, business models on the Internet often follow this pattern.
5. Franchise business model
When we opt for this business model, what we do is open our own establishment using a license to use another brand. In this way, we benefit from the good reputation and knowledge that this brand has to attract customers to our premises.
This business model has the benefit of already having a large number of people who know the name of our company at our disposal. The main disadvantage would be the fact of having little freedom of action over our company and, also, the fact of having to pay royalties to the owners of the brand.
6. Bait and hook business model
To some extent, this business model closely resembles the freemium model. Instead of offering a product for free, it is offered at a very low cost. However, accessory products or spare parts are offered at a high cost.
Also, it would be the business model used by many telephone companies in which they give a very low cost of a mobile phone in exchange for signing a permanent contract.
As you can see, business models and being clear about yours are fundamental aspects to make your company work. And you, do you have yours clear?