Business Model – Types & Components

A business model is a company’s plan for achieving profit in business. It depicts the fundamental assumptions regarding a new business or venture. Business model contains company’s purpose, goals, target and measures of how to achieve them. It basically holds the key of systematic functioning of business for long-term basis. Business models are made to create and deliver value through products and services offered by the business.

Business model signifies the focus, vision and path of a business. Direction of success for a business is designed and presented via business model. It is used by various established organizations which plan to enter new market or introduced new line of products. The accountability of employees is kept by business model, as it contains information regarding the time taken and resource utilized by them for any task. It focuses on the customer’s needs and requirements and works to deliver best value to them.

Business model mainly consist of a business plan that should be self-written by the owner or management of an enterprise. Business plan is a fundamental approach on how to create best value for its customers, employees and partners. Below mentioned are the key components of a business model:

Key resources: Physical, financial and intellectual assets are considered to be the key resources of a company

Identify specific customer base: Most important component of a business model is identifying target customer base which company needs to sell products or serve with their services

Identify customers’ problems: Business models contains issues or problems faced by the customers that the enterprise plans to sell products and services

Provide solutions: Company needs to resolve all the problems faced by the target customer base and must have the measures to meet the customer’s requirements

Creating sales channels: This activity will have plans on how to reach their target customers by following defined techniques in the business model

Establish business activity: Identifying the core business offerings and ways to provide service, consulting or shipment for their products

Determine business partners: Determining partners and suppliers is essential and considered to be one of the key components of a business model

Revenue model: Revenue model will focus on ways that company become profitable at the earliest

Cost structuring: Costing is mandatory and a key component of any business. This comprises of all the different types of company’s cost. Cost structuring defines pricing of products and services of an enterprise therefore should be performed cautiously and thoroughly.

Manufacturer: Manufacturer model is a type wherein manufacturer produces finished products from raw materials and sells it directly to customers, enterprises or companies which sells the same products to the customers

Retailer: Retailer sells products directly to its customers after purchasing it from wholesalers or distributors

Distributor: Distributor purchases products from manufacturer and sells them to customers or retailers

Franchise: Franchise do not create, manufacture or produce new products, whereas it just uses the already existing products from the parent company and sells it to customers

E-commerce: Selling products online after creating a web portal is ecommerce trade. The prime examples of e-commerce companies are Amazon and Flipkart

Aggregator: Trending and recently developed business model in which company ties-up with various service providers and sell their services under their own name/brand

Online Marketplace: This business model is a part of ecommerce business model in which sellers come under one roof to compete and sell the same products at competitive pricing

Agency-based: Agency-based business model is majorly for partner companies dealing in advertising, digital marketing, public relations, etc. in which these partner companies outsource their work to other companies

Affiliate Marketing: Affiliate marketing is a commission-based business model in which affiliate develops business by promoting a partner’s products and services in their own name and gets paid by the parent company

Network Marketing: Network marketing is a multi-level marketing that works on network of people who promotes and sells a company’s products and form a multi-level chain of people to earn more profit

For start-up enterprises, traders, manufacturers, retailers, MSMEs , partnerships , sole proprietorship, MFIs, limited liability companies, NGOs, large enterprises, etc. creation of business model is highly recommended, whether these entities want to start a new enterprise or introduce a new line of products. Business model also helps in getting business loans from financial institutions and they require business plan to be presented before any loan sanctioning. For information regarding business loans offered by banks and NBFCs, customers can visit paisabazaar.com and can check and compare among best available business loan options.

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