The retailer model is the most common style of business. In this model, the consumer interacts with the retailer and purchases items directly from them online or in a physical store. Retailers typically buy their products from wholesalers and resell them at a markup.
Examples of this business can range from clothing and food sellers to department stores, auto dealers, and e-commerce sites.
This business model is one of the most straightforward to establish and understand. However, it is also the most competitive. You are likely to encounter many businesses selling similar products. You will need to compete with them on price, quality, or brand identity.
The manufacturing model involves the production of goods from raw materials or ingredients. This model can involve handcrafted goods or items mass-produced on an assembly line.
These businesses require access to raw materials and the skill, equipment, or labor force to make enough goods to be profitable. Manufacturers typically rely on wholesalers and distributors to sell their products.
The subscription model is newly popular, though it has long been used for publications like magazines and newspapers.
Subscription businesses provide an ongoing product or service to end users for a set price. The subscription could be daily, weekly, monthly, or yearly.
Digital companies like Netflix and Spotify use this business model, as do software and app providers, and online service providers. The advantage of this type of model is that you can get ongoing revenue streams without having to repeat sales.
Product-as-a-Service (PaaS) model
The Product-as-a-Service model (PaaS), also known as Product Service Systems, bundles services with products that consumers have already purchased.
A good example of this business model is an auto retailer offering an annual service membership for maintenance on a newly purchased car. The key advantage is to ensure sustainable income while also enhancing the customer experience. This business model can offer extra income streams to retailers.
The franchise model is another popular type of business framework. Many popular brands are franchises, including KFC, Dominoes, Jimmy John's, Ace Hardware, and 7-Eleven.
In this model, you develop a blueprint for a successful business and sell it to investors or franchisees. They then run the business according to the franchise brand identity.
In a sense, they are purchasing the brand and the blueprint and running the business. The attraction for business owners is that they do not have to worry about daily operations. Meanwhile, franchisees have a blueprint for success, which limits the risk of owning their business.
The affiliate model is when a business relies on third-party publishers to market and sell its product or service.
Affiliates are responsible for driving sales. They receive compensation, usually in the form of a commission (percentage of the entire sale), from the seller or service provider. With affiliates, a business can enjoy an extensive reach and get customers from markets they would otherwise be unable to penetrate. The business typically provides free marketing materials to affiliates so that they display the proper brand identity when marketing.
Freelancers provide services for businesses or organizations. They typically work on a contract basis.
While it is possible to operate as an independent freelancer, you can also learn how to scale a freelance business. You can hire other freelancers or subcontractors who can work on your contracts. With a scaled business, you can take on more contracts than you can handle alone and split the revenue between yourself and your subcontractors.
The attraction of this type of business is the low overhead. You do not have to hire your subcontractors. You simply pay them after the client pays you.
Designing your business model
Business model examples are very different, but you can follow the same steps when designing your plan and tailoring it to the unique needs of your business.
- Start by defining your product or service, the need it meets for consumers, and who can benefit from using it.
- Once you have an idea of who will use your product or service, you can define your target market and research how they make purchases and how other companies in your sector market and sell to them.
- Come up with business models that could potentially work with your company. There could be more than one option.
- Create prototype designs for each possible business model you choose. You can then see potential issues and roadblocks with each plan and find the model that is best for your needs.
You also need to create a proper business plan. What is a business plan? It details how to structure your business and how the business model should work to achieve the desired level of success.
Mailchimp offers resources to help you learn how to write a business plan.
Choosing the right business model
When you design your business model, you should also define goals and list key performance indicators (KPIs) that will show whether your business is on the right track toward success. The business model you choose will offer the straightest path to these benchmarks.