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Where to Start When Starting a Business: Business Models 101

Where to Start When Starting a Business: Business Models 101
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You have a great business idea. All you need is some seed money to get started and your business will be off and running. You could start by applying for a business loan, but your raw idea alone won’t convince anyone of the viability of your proposition.

You need to outline a business model that demonstrates your value. Sound complicated? It’s a large task but it can be boiled down pretty easily into identifiable steps that are based on businesses you surely know already.

To help you get started with selecting a business model, this infographic from Fundera uses the metaphor of coffee to outline some of the most typical business models. They also identify some current companies that use these models effectively. Read on to learn more about some of the most common business models and decide which one is best for your business.

Infographic code:

Please include attribution to www.fundera.com with this graphic.

business models through coffee

Step 1: Logistics: Invest some thought into how your idea will really feasibly create success.

Investors and lenders will have a number of questions and in order to demonstrate why you deserve financial backing (and that you have a plan on how to reimburse that investment), you will need to outline a solid business plan.

This will require some soul searching and writing up answers to serious questions that go beyond the initial stroke of genius.

Some questions you will want to ask yourself include:

  • What do you consider your value proposition? That is, what is it that you offer that people want?
  • What kinds of people are looking for what you are offering? Who is your target market?
  • Why will your business succeed over competitors? What is your competitive advantage?
  • What are ALL the costs you will incur? Where do the profits come in?
  • What does success look like for you? If you can’t identify it, you’ll never achieve it!
  • What resources do you have in place — either intellectual or physical capital? What else do you need to be a success?

Most common models include:

  1. The Manufacturer Model

Manufacturers take raw materials and craft them into a product, similar to how a car company like Toyota puts parts together to make an automobile. Even if some of the parts come from another company, they still are considered the manufacturer.

  1. The Distribution Model

Distributors are the part of the supply chain that delivers products to where it can be purchased by consumers. Companies like Sysco Foods or Reyes Distributors, bring products to where they can be consumed.

  1. The Retailer Model
    If you are considering selling directly to a consumer, you are a retailer. In order to make a profit, you will have to think about setting a price point that is more than the costs you incur from distributors, manufacturers, and overhead. Stores like Target or JC Penny work on this modeling.
  1. The Franchise Model
    If you are interested in buying into a franchise, you can take an already established model, with all the logistics and branding already in place, and then pay a percentage of profits to the original owner. Starbucks, McDonalds and Subway, sell franchising licenses.
  2. The Freemium Model
    Gaining in popularity due to apps with “in-app purchase” options, the freemium model offers part of a service at no charge but then requires payment for many often used features. Companies like Linkedin or Facebook offer this kind of service.

6.The Subscription Model
This makes use of a regular payment or monthly fee, often to give users an unlimited service. Netflix and Zipcar have used this model very effectively.

Obviously, these models are templates to consider — but once you understand and identify your business model, you can look at how similar companies have achieved their success and what you can do to make your own mark on your chosen industry.

Where to Start When Starting a Business: Business Models 101

You have a great business idea. All you need is some seed money to get started and your business will be off and running. You could start by applying for a business loan, but your raw idea alone won’t convince anyone of the viability of your proposition.

You need to outline a business model that demonstrates your value. Sound complicated? It’s a large task but it can be boiled down pretty easily into identifiable steps that are based on businesses you surely know already.

To help you get started with selecting a business model, this infographic from Fundera uses the metaphor of coffee to outline some of the most typical business models. They also identify some current companies that use these models effectively. Read on to learn more about some of the most common business models and decide which one is best for your business.

Infographic code:

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<p><strong>Please include attribution to www.fundera.com with this graphic.</strong><br /><br /><a href=’https://www.fundera.com/blog/what-is-a-business-model’><img src=’https://assets-blog.fundera.com/assets/wp-content/uploads/2019/03/12163414/business-models-over-coffee-infographic-2x-1.png’ alt=’business models through coffee’ width=’750px’ border=’0′ /></a></p>

Step 1: Logistics: Invest some thought into how your idea will really feasibly create success

Investors and lenders will have a number of questions and in order to demonstrate why you deserve financial backing (and that you have a plan on how to reimburse that investment), you will need to outline a solid business plan.

This will require some soul searching and writing up answers to serious questions that go beyond the initial stroke of genius.

Some questions you will want to ask yourself include:

  • What do you consider your value proposition? That is, what is it that you offer that people want?
  • What kinds of people are looking for what you are offering? Who is your target market?
  • Why will your business succeed over competitors? What is your competitive advantage?
  • What are ALL the costs you will incur? Where do the profits come in?
  • What does success look like for you? If you can’t identify it, you’ll never achieve it!
  • What resources do you have in place — either intellectual or physical capital? What else do you need to be a success?

Most common models include:

  1. The Manufacturer Model

Manufacturers take raw materials and craft them into a product, similar to how a car company like Toyota puts parts together to make an automobile. Even if some of the parts come from another company, they still are considered the manufacturer.

  1. The Distribution Model

Distributors are the part of the supply chain that delivers products to where it can be purchased by consumers. Companies like Sysco Foods or Reyes Distributors, bring products to where they can be consumed.

  1. The Retailer Model
    If you are considering selling directly to a consumer, you are a retailer. In order to make a profit, you will have to think about setting a price point that is more than the costs you incur from distributors, manufacturers, and overhead. Stores like Target or JC Penny work on this modeling.
  2. The Franchise Model
    If you are interested in buying into a franchise, you can take an already established model, with all the logistics and branding already in place, and then pay a percentage of profits to the original owner. Starbucks, McDonalds and Subway, sell franchising licenses.
  3. The Freemium Model
    Gaining in popularity due to apps with “in-app purchase” options, the freemium model offers part of a service at no charge but then requires payment for many often used features. Companies like Linkedin or Facebook offer this kind of service.

6.The Subscription Model
This makes use of a regular payment or monthly fee, often to give users an unlimited service. Netflix and Zipcar have used this model very effectively.

Obviously, these models are templates to consider — but once you understand and identify your business model, you can look at how similar companies have achieved their success and what you can do to make your own mark on your chosen industry.