The business model is a process, which creates an innovative idea to develop an infrastructure for the business and also building blocks for the activities. This model includes activities, ideas, strategies, people and products that are considered to earn money. The business model defines what a business does and how it works to earn from the business. Moreover, the business model includes the components and functions to prompt the business process to a new height of success.
The business model is falling under the various categories of business, whether it is manufacturing or sales or production. If you are managing a business on a large scale then you should have to manage the various departments of the firm in a well mannered. The business model could be simple or very complex, and firms try to capture the value of their business.
Need of Business Model
It is important to create a strategy before making any decision on a large scale. First of all, you need to set your goal and focus on it by creating a model or schema. It will create value to generate economic value for the firm or organization.
A Business model is a way to sell out companies’ products and generate revenue. So, the need for various types of business models, in such manner, many companies use to generate revenue. Hence, there are various types of business models that companies follow to earn profit.
This post introduces a unique type of business model that will help your business.
Types of Business Models
There are various types of business models around the globe such as personal proprietorship, company, partnership, Manufacturer, Distributor, and Retail outlet. If you want to take your business to the top level then you just need to follow the strategy of the market as well as capture the need of the users.
Manufacturer
The manufacturer uses raw materials for making the products. Basically, different companies provide several parts or raw materials for the manufacturing of a single product. For example, a motorcycle company would be considered a manufacturer because it built its motorcycle from parts that cater for other companies. A manufacturer can choose to represent its products directly to its customers, or it can outsource sales to another company.
Distributor
It is the second stage of the business model, where the distributor (wholesaler) purchases products directly from the manufacturer, and then resale either to retail outlets or directly to the public. One of the best distributors is Wal-Mart, which is basically known as Best Price in the country. This firm purchases products directly from the manufacturing companies and then sells directly to the buyer.
Retail Outlet
The retailer is basically known as the shopkeeper, which purchases products from the wholesaler or distributor and sells directly to the public. Department stores and marts like big bazaar, Wal-Mart and reliance stores would be considered retail outlets.
Company
Companies have extensions like Private Limited or Limited. If the company is managed by two or more two people, then this type of company is called Private Limited. All companies are registered under the Company Act, of 2013. The owner of the company is known as the shareholder. The employees could join and leave the company without any restrictions in the private limited company. Overall, the Private limited company helps the clients or any other person in dealing with the company.
Partnership
A business is started by two or more two people that business model is known as a partnership firm.
There are three methods to create a partnership firm
- Normal Partnership Deed
- Registered partnership under state law
- Limited Liability Partnership
Normal Partnership Deed
This is known as a partnership agreement when two or more people are managing a business with a common capital or with the common motive of earning a profit. Normal partnership deed on stamp papers as per state law.
Registered Partnership under state law
For a registered partnership under state law, you just need to follow the same procedure as a normal partnership deed. And we must register this partnership under state registration. This option must discard the very complex procedure and take very little time and money.
Limited Liability Partnership
This partnership firm is registered according to LLP Act, 2008. Now the firm is putting LLP at end of firm names. For example – ABC LLP. And, this partnership firm is also registered with the Ministry of Corporate Affairs of India. Now open the website of the Ministry of Corporate Affairs of India www.mca.gov.in checks the details about the related limited firm. This a very basic concept in India, but day by day LLP registered firms increases. A big difference between LLP and Tradition partnership is that LLP Partner liability is limited according to their contribution but in traditional partnership firms all partner liability is unlimited. Click here to know about a real example.
How can a Business Model be Designed?
Businesses do not follow a one-size-fits-all business model in the same way. For example, a yoga studio that bundles classes and sells products in its lobby may combine elements from several models.
By just answering the following questions, one can design his business model:
- How money can be made? The different ways your company intends to generate earnings should be outlined in one or more revenue streams.
- What can be considered key metrics? To measure your company’s success, you’ll also want to identify other means by which you will evaluate your business, An example would be how much it costs to acquire a customer or how many repeats, customers there you will have for sure.
- Who can be considered the target customer? It is also important to consider your potential customer base when planning your business model, as your product or service must be the solution for a tailored client to meet the needs of a specific group of consumers.
- How the benefit from your product or service can be eligible for your customers? To be uniquely attractive to customers, your business model must have a clear value proposition that cannot be easily copied by competition.
- What expenses one would incur? Decide what prices you need to charge so your revenue exceeds those costs, and figure out the fixed and variable expenses that your business needs to function. Keep in mind that your company’s physical, financial, and intellectual assets will cost you money as well.
Writing a business plan can help you clarify how each of these components will look for your business from the start.
Researching similar businesses may also reveal things you want to imitate, as well as market gaps your business can fill. This market research may also reveal things your business can do to stand out from your competitors.
Your strategy will be able to be adapted and changed as you learn as your business grows and your business model informs your operations.
