Setting up a business without identifying the products and services to sell and make profits is pointless. Every business has its own special plans for making profits, and for that to happen, they need to choose the product or service it will be selling to a targeted audience. This is where your business model comes into play. But before settling down for one, you might need to know what the different types of business models are and, from there, decide on which suits your market more. For a more definite insight, this article will lay basic emphasis on different types of business models under diverse categories in e-commerce and startups among others.
What is a Business Model?
A business model is simply the plan or strategy your business has for making money. It is an expression of how capable you are of delivering value to your audience at an ethical price. A business model is essential for any business, regardless of how long the corporation has been in existence.
While composing your business model, you should not fail to explain the products and services you tend to offer, production costs, marketing plans to reach out to your target audience, all revenue streams, and a sales plan. Having known this, let’s analyse what the different types of business models are and how to make the right choice.
What are the Different Types of Business Models?
Everything has been made so easy that you do not have to spend hours on end designing a new business model to use in your company. A vast majority of business owners pick up existing business models and customise them to their specifications to find a competitive edge. You can do the same using these winning business model examples below.
#1. Affiliate
Another popular business model that is mostly found online is affiliate marketing. It works by using affiliate links embedded in online content rather than opting in for visual advertisements. It is from this function that revenue is generated. When the advertiser then gets a click on the product, they will earn a commission from the company in response to the referral. There are review websites, like The Wirecutter and Nerdwallet, that makes use of this business model.
#2. Freemuim Business Model
Freemuim is one of the popular types of business models for startups. Businesses that use this type of business model normally offer basic services to their customers for free and then charge a particular fee for them to access a premium service. They stipulate specific plans for their premium services that range from higher packages to lower ones, depending on the amount a customer is willing to pay. The basic package comes with certain restrictions, while the higher packages have unlimited features. This business plan is widely adopted by different companies.
#3. Crowdsourcing
Crowdsourcing is the process of inviting a large number of people to create and contribute content to your site. You can use this business model together with other business and revenue models to provide a unique experience for the user and also generate revenue. Businesses that make use of this business model are reCAPTCHA, Duolingo and Wikipedia among others.
#4. B2C (Business-to-Consumer)
B2C is one of the popular types of business models in e-commerce that specialises in selling products directly to consumers or end users. It is also a form of the traditional retail model, where a business builds a strong presence online and then sells to individuals through that same channel. You should also know that this form of business model does not require a physical presence to commence.
#5. Marketplace
Just as the name implies, a marketplace business model gives individuals or business owners a home base to list and sell their products. They are normally seen as third-party websites because they pose as middlemen between buyers and sellers. They are also guided by a policy to enhance the protection of both parties. Popular companies that make use of this type of business model include StockX, Poshmark, Craigslist, Esty and eBay among others.
#6. SaaS-Based Business Model
A SaaS plan is a cloud-based software programme and is one of the leading types of business models for startups. It involves building a type of software or web application that consumers can pay a monthly or yearly membership to access. This type of software, like Adobe and EveryDollar, is likely to be used by diverse corporations
#7. Brokerage
This brokerage business model is somehow similar to the marketplace because it also serves as a channel that connects buyers and sellers. They deal in higher dollar transactions and, in return, charge a fee for each transaction performed by either the buyer or seller, or even both. There are multiple types of brokerage businesses, but the most prominent one is a real estate agency. Real estate agencies like relax and RoadRunner.
#8. B2G (Business-to-Government)
Just as the name implies, business-to-government is one of the most prominent types of business models in e-commerce that requires a business to market its products and services directly to a government agency, which can either be at the federal, local, or state level. The product in question can be ammunition or rendered engineering services. But for you to practice this type of business model, you must have some level of alliance with the government.
#9. Brick and Mortar
Brick and mortar is a traditional business model that involves the whole production cycle, including retailers, wholesalers, manufacturers, and consumers. They make use of physical storefronts when they sell their products. They also get products directly from distributors and then sell them to consumers. Most of the businesses that practice this business model operate both online and in physical stores.
#10. Subscription-Based Business Model
This business plan is also one of the most popular types of business models for startups. When businesses employ this model, then they will get to charge a particular subscription fee to their customers before they get access to a service. This business model comes in the form of software that renders online services to its audience. Popular companies that adopt the model include Netflix, Comcast and Salesforce among others.
#11. Advertising
The advertising business model is one such ancient model that has been in existence for decades, and this definitely defines its credibility. It works by creating content that your audience would love to see and then displaying advertising to them. While doing this, you will need to satisfy your viewers and your advertisers because they are the source of your revenue. There are popular companies that make use of this business model, including YouTube, The New York Times and CBS among others.
What Business Model is Best?
According to recent statistics, the best business model to currently working with includes:
- Subscription model
- Direct sales
- Franchise model
- Freemium model
What is a Simple Business Model?
You can define a simple business model as the type that can address a specific value offered through a specific product or service. It does not need to work with more than one unique product to perceive how best it can create value.
How do You Identify a Business Model?
To identify the model that best works for your business, you need to undergo some basic processes. The first is to specify your target audience to understand their preferences, and then proceed to define the problem your business model will solve. The next step is to recognise your offerings, take note of your needs, select your key partners, fix your pricing, and test your model. There you have it!
Types of Business Models in Healthcare
When it comes to the healthcare industry, there are multiple types of business models to choose from, and they are not limited to telehealth, patient experience benchmarks, care-anywhere networks, medical transport on-demand, and a host of others. These healthcare business models are also largely categorised into on-demand health models, on-demand on-site, marketplace models and curation models.
Which Business Model is Best for Beginners?
As a startup business, there are some business models that you should give more focus to while setting up your business. They include:
- Reseller model
- Virtual good model
- On-demand model
- Marketplace model
- Freemium model
What Business Model is the Most Profitable?
While there are supposedly endless types of business models used by large and small businesses today, some models appear more profitable than others. They include:
- Product and service model
- Reseller model
- Ad-Based model
- Subscription-Based model
What is IKEA’s Business Model?
IKEA does not just specialize in the production of candles, this company also designs and sells ready-to-assemble furniture appliances and home accessories. Its secret sauce and business model includes accessible suburban stores, unique products with sophisticated European design at a low cost, global sourcing of components and various in-store extras.
What is the New Business Model?
The new business model can be categorised as an interdependent business model that guarantees that each part of your business is capable of generating value. To achieve this, new roles will be assigned to the firms’ employees so that they can work in a union and enhance the growth of the company.
Final Thoughts
To attain the highest level of growth in your business, you should carefully think about the type of business model that would make the most sense for your corporation. While doing this, you need to consider the structure of your business, including the sales, operational, and production sectors. When you have a clear view of the necessary specifications, then go ahead and employ a business model that corresponds.
FAQs
What skills are needed to develop a business model?
To develop a business model rather than choosing from the already existing ones, you need to possess some essential business skills which include communication and negotiation, leadership, financial management, customer service, problem-solving and networking among others.
How many business models are there?
There are uncountable different types of business models in existence, and aside from the already existing ones, business owners can also decide to structure a business model themselves.
This is a more technologically advanced business model, which stands for Software-as-a-Service. This type of business model is software that is operated through a web browser and then makes a profit from businesses that are interested in using the software.
