Emerging

Picking your Business Model

Created on Friday, 07 November 2008 04:04 Last Updated on Friday, 06 May 2011 11:37 Published Date Written by Small Business Can Hits: 2176

You need to establish a business model that will support your plans for growth. If your business strategy changes, you may need to modify your business model to align with it. “Show me the money” is the mantra and your business model describes how you use your resources to deliver value to customers while maximizing your profitability and ability to scale.

The questions to consider are:

• Who are your customers?
• How do these customers use the product/service?
• What are the available distribution channels (think out of the box!)?
• What is your sales strategy?
• What operational processes do you need to underpin the delivery of the service or product?
• What are the resource requirements?
• How do you make money?
• Which of the business functions/processes can be outsourced? Visualise and write down all the business processes. Take your product/service/business process and list its attributes. For example, shape, size, design, materials, equipment, functions, technology and cost. Then take each attribute and try to find as many alternatives to it as possible. Use this to help:

ATTRIBUTE LISTING

• Split your business process in the smallest parts possible?
• What are the elements of your product/service/business process?
• What are the alternatives?

Examine which of the business functions and/or business processes can be outsourced.
Businesses that sell the same product or service can have quite different business models and new business models can have devastating effects on the competitors that operate in same markets. Look at companies such Dell, Ryanair, Skype, Amazon as examples. What is your model, is it profitable and can you scale it? Can it be improved?

Consider the following models or a combination of models:

• The bricks and mortar model; the classic shop
• The subscription model; your clients sign up and pay a monthly/annual fee.
• Lock in model; you sell the hardware cheaply and lock in the need for the supplemental products. This model is implemented with products such as cell phones and airtime, printers and ink cartridges, and cameras, film, and prints.
• Multi-level marketing model; you create a group/network of independent distributors who buy products from you and sell the products on to consumers.
• Direct Sales model; you take out the middle man
• Service model; you delivering added value directly to customers
• Collective business model; you create economy of scale and pool resources for a fee.
• Online delivery model; you have digitised your business and deliver it over the net
• Internet brokerage model; you bring buyers and sellers together for a transaction fee.
• Internet advertising model; you provide free content services and makes money by selling advertising.
• Information portals; you sell content and information to distributors or end user.
• Software rental service; you rent out software
• Web communities; you are building a community
• Word of warning on internet: more than 99% of all web 2.0 properties will never make a dime and 95% of the web is not monetisable according to some of the experts. It is also an ever changing web environment with new models developing all the time. We have seen nothing yet.
• Bookbuzz recommends you read Web 2.0 heroes. The book contains 20 interviews with 20 experts on web 2.0 in an attempt to define what web 2.0 is. It has some of the biggest thinkers on this subject discussing web 2.0 and their take on it. Very different, interesting views and concludes that there is no one definition. The book will give you an overview of the new concepts that are being developed and will bring you up to date on web 2.0 at a conceptual level.