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There are as all kinds of business models out there, different ways of defining a business model, and a single business can operate under multiple models. To understand a business model, focus on the following questions:
- What is my product?
- Who is my customer?
- How is my team organized?
Below are some of the most common models. You’ll see the above factors come into play, and I’ll highlight the defining attribute for each:
- Manufacturer – You take resources or raw materials and create a physical product. You may sell as a wholesaler, a retailer, or both. Subaru manufacturing cars is a good example.
- Wholesaler – You could be a manufacturer, or you could be a “middle-man” who gets product from a manufacturer and distributes it to retailers or the end-user. Subaru dealerships are an example.
- Retailer – You purchase products from a manufacturer or wholesaler and sell them to the end-user. Retailers utilize their presence and network. For example, Amazon buys or sources from many places and sells to the public.
- Franchise – You could be any of the above three. You purchase the right to use an established brand, product and process, run your own business, and pay royalties to the parent company. McDonald’s is a classic example. Individuals purchase the right to operate a McDonald’s restaurant.
- Multi-level Marketing – These companies are generally retailers, but the organization structure is different. You earn a percentage of anything you, or any of your recruits, sell. So, you are rewarded for recruiting. Amway is a famous example.
- Subscription – You provide a software service or a content product and individuals pay to receive it on a recurring basis. Newspapers are a good example.
There are more ways of looking at this as well, so consider your product, customer, and team. My favorite is #6, because the customer can pay as long as they are receiving value, and the business can predict its revenues easier.
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