Understanding and Different Types of Business Models
Created on 10 July, 2024 • Scale Up Business • 126 views • 2 minutes read
If you're serious about starting a new business, choosing the right business model is crucial. A well-chosen model can significantly increase your profit potential by aligning with the resources you currently have. Make sure your resources can support
Understanding and Different Types of Business Models
If you're serious about starting a new business, choosing the right business model is crucial. A well-chosen model can significantly increase your profit potential by aligning with the resources you currently have. Make sure your resources can support the model you choose.
In this article, we’ll cover the essentials you need to know about business models.
What is a Business Model?
A business model consists of two parts: "model" and "business."
According to the Indonesian dictionary (KBBI), a model is a pattern, example, or reference for something that will be created or produced. Business is a commercial endeavor in the world of trade.
So, a business model is a reference or example for creating a commercial enterprise in trade.
Based on this definition, the models worth referencing are those that have proven to generate significant profits. By following the examples mentioned in this article, you can choose one that fits your resources, making your business journey smoother since there’s a proven model to follow.
Types of Business Models
In this section, we'll discuss various business models you can choose from. Essentially, if narrowed down by partnership relations, there are three primary types:
- Business to Business (B2B)
- Business to Consumer (B2C)
- Customer to Customer (C2C)
From these, we can further develop specific models such as:
- Franchise
- Distributor
- Affiliate
- Freemium
- Subscription
Let's delve into each one.
Franchise
First is the franchise model. When starting a business, you can opt for a franchise where everything is already organized and systematic. From operations to production and marketing, everything is set. You just need to pay the license fee and run the business.
Distributor
The second model is being a distributor. You can start a business by acting as an intermediary between the market and the producer. You don't need to create your own products; just buy in bulk from the producer and market these products to your local market.
This model suits those with substantial resources like capital and a team. If your resources are limited, this might not be the best choice.
Affiliate
The third model is affiliate marketing. Often referred to as brokering or middle-manning, this model doesn't require you to produce or stock products. You simply market the products to your audience, and if a sale occurs, you earn a commission.
Freemium
Fourth is the freemium model. As the name suggests, combining "free" and "premium," this model offers basic services for free, with limited features and service quantities. To enjoy full features and services, customers need to upgrade to a premium version.
Subscription
Lastly, there's the subscription model. If you use prepaid phone credit, you're familiar with this. When the credit runs out, you need to top up to continue using the service.
These are some of the business models you can choose from when starting your business.
Conclusion
Choosing the right business model is essential for the success of your new venture. From franchises and distributorships to affiliates, freemium, and subscription models, each has its own requirements and benefits. Evaluate your resources carefully to select the model that best aligns with what you have and your business goals. This will help ensure a smoother path to profitability and growth.