5 Types Business Model You Should Know

5 Types Business Model You Should Know

A business startup will require a lot of preparation, including business knowledge where you can learn many things relating to business, such as understanding customers’ needs and business models.

The purpose of this is to gain profit both in a short-term and long-term business. Before we start a business, it will be good if we understand the business model you will use. 

Definition of Business Model

Business model refers to the concept, basic model, or structure about how a product can be seen by customers. Through this model, customers are able to understand how we produce our products and deliver it to them.

It will shape customers’ value perceptions. Business models make a business more focused and the target market will be well targeted.

Business model is different from the business plan, it focuses on a way to gain profit from the business and make our business distinct from existing competitors. 

Therefore, in this case, the company does not only need to decide what kind of product they should create, but also the value the product will provide for the customers so that they will love the product. 

Simply put, a business model must have several parts including the type of product that has been produced and the availability of employees, marketing strategies starting from distribution to sales, and pricing strategy.

Component of a Business Model

Business model has its functions, types, and different forms. But, they have the same component.

These components are crucial, without them we never know whether the business will generate profit or not. Here are the components,

  • Target market, it is a group of people or customers who are attracted to our products.
  • Value proposition, the things that make our product valuable and attractive to our customers. 
  • Cost structure, it is expenses and other variables needed in operating a business. It will later affect product prices. 
  • Competitive advantage is a unique feature of products or services that can not be copied easily by competitors.
  • Resources, it is a financial asset, physical asset, and intellectual asset owned by companies.
  • Key metrics are a component used by companies to measure their achievements. 
  • Problem and solution are some issues that occur in a  business and solutions that can be performed or implemented to deal with the problem.
  • Revenue model is a way to identify potential sources of revenue. 
  • Profit margin is the total revenue or income which exceeds the operating cost.
  • Revenue streams are ways in which companies can increase revenue or profit.

Benefit of Business Model

A good business model will make your business exceed the competitors. Although customers love the product, investors will also be more likely to invest in the business.

Then, what are the other benefits of the business model? Here are the benefits of it

Superiors to competitors

With a well-tailored business model, your products and services will stand out among your competitors.

When you own an online store and offer payment methods that can be paid by installments or deferred to the next month, surely those payment methods will make your store stand out from the rest.

Attract investor attention

By having unique and attractive products, it will attract investors to fund the business since there is a great opportunity there.  Generally, investors do not care if a company is a startup or an established company. 

Well-organized  financial management

Thanks to the business model, financial management will be more manageable. Through this model, businesses can identify production budgets and other budgets in detail. 

By having well-organized financial management, the business most likely is able to last longer even with growth. 

Types of Business Model

We can say that there is no business model without reference to other models. Hence, understanding the types of business model is needed if you want to create a model. Here are several model that can be reference when you want to set up a business,

Franchise business model

Perhaps, you often heard about this business model. Franchises have become popular several years ago and small businesses are mushrooming in Indonesia. 

This model is often used by culinary industries, but  services industries also implement this business model. By using this model, one who wants to establish a business does not need to start it from scratch.

This is due to the existence of business concepts provided by a certain brand, so they can run the business using existing business models from companies they partner with.  You will be able to do this business model by simply paying compensation costs for the partnership.

Dropship business model

It has been applied not only to the marketplace model but also to the online model. You do not need to own physical stores when using this dropship system.

You only need to have an online store, but the products will be delivered from other parties namely agent or stockist. People who carry out this business model are called as dropshipper.

Even though the profit from this dropship is quite small, it’s perfect for those who don’t have enough money to start their own business.

Subscription business model 

In this model, businesses charge subscription fees for the use of their services. The time for subscription varies depending on the company’s decision ranging from monthly, three months, a year, or certain time. The example of this business type is Spotify, Netflix, and so on. 

Manufacture business model

It is one of the standard business models in which a company creates a product, then sells it for profit. Merchants or companies will sell the product directly to the customers or through third parties. 

Optimize Your Business with LOKASI Intelligence

If you want to set up a new business, the first step is to understand what type of business model you will use. Business model itself focuses on how a business is able to generate profit, therefore the business model consists of marketing strategies, distribution, selling process, and more.

With a business model, businesses are able to understand what kind of products that will be launched and the target market for the product. To do so, businesses need to determine their target market.

Identification of the target market can either be easy or difficult as if it is done manually, it will take a lot of time and cost. However, if it is done using technology, the process will be quick.

LOKASI Intelligence is a platform that combines business intelligence with machine learning, assisting businesses to locate their target markets.

Information such as people’s ages, social economic status, customer behavior, people density, customer preference, customers origin, their lifestyle, and so on.by having those data, companies are able to create the best marketing strategy.

Find out more about how LOKASI Intelligence can assist businesses to find and identify their target market by contacting sales@bvarta.com or chat at 087777977731. 

Above are the explanations about the business model you can use before you start a business so you can maximize profits and extend the life of the business. We hope this information can be useful for you

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