3 Types of Business Models to Fit Your Business Concept
As an entrepreneur, you may be wondering what type of business model will be best for your budding company. You know that there are a number of different options out there, and you want to be sure that you choose the best fit for your small business.
In order to answer this important question as accurately as possible and get your company off to a solid start, let’s look at three common types of business models and how they may mesh with your business concept. After you have a solid grasp of these classic examples, you may have a better idea of what will be best for you and your company:
Business Model One: Product/Service
The most common business model involves producing and selling your own products and/or services. For example, if you are the owner of a small organic cotton clothing company, you create and sell stylish tops and pants directly to your customers. If you design websites, you charge for your creative services. You can sell your products or services as a one-time purchase to your customers, or you can offer an on-going subscription; for example, if you are a personal trainer you can sell clients 10 workout sessions at a time.
Business Model Two: Direct Sales
The direct sales model involves selling products to your customers, but in a non-retail setting like at home or online. Amway is a well-known example of a company that uses this business model. The company partners with Independent Business Owners who sell their nutrition, beauty and home products directly to consumers. IBOs work their own hours and make money based on what they sell. Sometimes confused with pyramid schemes, Amway debunks ‘is it a scam’ rumors on its website by clearing laying out its business model for others to learn from.
If partnering with other people to sell your products without having the overhead of owning your own store sounds appealing, this model might be best for you. You could hire people to work for you selling your wares and fill orders as they come in, paying your team a commission on each sale.
Business Model Three: Broker
Another type of business model is the broker. He or she brings together a buyer and a seller and usually takes a commission on a completed transaction. The broker can also provide a service that makes a transaction go much more smoothly, as in the case of a real estate agent or a party planner. PayPal is a well-known example of a company that uses a broker business model. PayPal provides a payment system for buyers and sellers to settle their transactions online, often taking a fee to help complete the transfer of funds. If you are planning on launching your own real estate agency, this model is probably the one you want to go with—you will receive a commission after your clients buy or sell their homes. The same is true if you wish to launch a car insurance rate quote website; you could charge a fee once a driver selects an insurance company based on your recommendations.
One Size Doesn’t Fit All
While there are other types of business models out there, these three are common and classic examples that fit many companies. To choose which one is best for you and your company, assess what product or service you are selling and where you are selling it and go from there.