Are you wondering what a business model is, what its types, and what examples are?
A business model is a plan to generate revenue. There are different types of business models, such as retail, franchise, and manufacturing. Choosing the right type of business model can help you succeed in your business and generate revenue.
In this article, you will learn what a business model is, types of business models, and examples of business models.
A business model is a company’s profit-making plan, which defines the products or services it will sell, its target market, and any expected costs and expenses to run the business.
There are several types of business models, such as retail business, manufacturing, subscriptions, franchises, and more.
Why are business models important?
A business model provides you with a roadmap or outline to achieve your goals of selling products and generating revenue. There are different types of business models that you can choose from.
A business model also helps to attract investment and provides information to investors to evaluate the company. It also helps to update companies’ business practices and hire new talent to make their businesses more successful. Regularly updated business plans are extremely useful for companies to face new challenges and cope with new trends.
Types of Business Models and Examples
Now let’s talk about the different types of business models and examples
1. Dropshipping
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2. Retail
A retailer model is the last link in the supply chain. Retail businesses purchase finished goods from manufacturers or distributors and sell them to their customers for a price that will both cover expenses and turn a profit. Retailers may specialize in a particular niche or carry a range of products.
The retail business model is the most famous, and there are plenty of examples of retail models, such as Walmart and Kroger. These are the business people interact most and buy stuff regularly.
Examples of Retail Business Models:
The most common examples of retail business models are Walmart, Kroger, and Costco Wholesale.
3. Manufacturing or making
A manufacturer is a business that produces goods and products from raw materials and then sells to retailers, distributors, and wholesalers. A manufacturing business is usually a product one product, for instance, a glass manufacturer.
Examples of manufacturer business models:
The best example of a manufacturer is Ford Motor Company, which only makes motor vehicles.
4. Wholesale
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Examples:
- Grocery store
- Pharmacy
- Florists
5. Distribution
In the distribution business, a company buys finished products from the manufacturer and then sells them to retailers. Distributors buy products in bulk and then distribute those products with a profit margin.
Examples of distributive business models:
Common examples of distributive business models are salons that buy products in bulk and then distribute those products to other salons that are interested in purchasing individual products to keep their inventory.
5. Print on Demand
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Examples:
- Grocery store
- Pharmacy
- Florists
6. Digital Products
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Examples:
- Grocery store
- Pharmacy
- Florists
7. Direct to consumer
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Examples:
- Grocery store
- Pharmacy
- Florists
8. Subscription
A subscription business model allows customers to use products or services with recurring payments. The customer can use the product or services unless they have a subscription to use the product or access the services.
The most common examples of a subscription business model is online software or products that you use while paying the subscription fee. Another example is that one you buy a newspaper subscription for one year and you get the newspaper daily by mail or by delivering to your home address.
9. Fee-for-service
A fee-for-service business model works by providing labor and service for an hourly rate or fixed fee for the project. In this business model, companies offer services for a fee because they retain specific knowledge about the product and train their employees to fix the product.
Examples:
A typical example of fee a fee-for-service business model is when you hire a company to repair electric supplies like an oven, air conditioner, or others.
10. Freemium
A freemium business model is one in which customers can get free parts and services, but they have to pay for advanced features or parts.
Examples:
The most common example of a freemium business model is Spotify, where you get free access to the content but with advertisements, but if you want to use Spotify without ads, then you need to buy a subscription.
11. Affiliate
An affiliate business model is one thin which a company promotes products or services of another company in return for a commission or fixed price for promoting and marketing the product or service.
Examples:
The best example of an affiliate business model is social media influencers who promote products or services to get paid a commission or fixed amount agreed upon by both the influencer and the company.
12. Razor Blade (and Reverse)
A razor blade business model is one in which a company offers new products instead of replacing an old one. For instance, replacing a razor blade will cost more than buying a new one.
Often, companies offer high-margin products to their customers to buy them and also offer low-margin products with high-margin products. This process is now a reverse razor blade model.
Examples of Razon Blades Business Models:
The most common example of a razor blade business model is buying a printer from an HP company and then buying specific ink from HP to use in your printer.
13. Franchise
In a franchise business model, an established business sells its branches or franchises to a franchisee on a shared profit. In this business model, the franchise owner helps run the franchise business in marketing, financing, and other operations so that the franchise operates as it desires.
Examples of franchise business model:
Domino’s, McDonald’s, and other fast food chains are excellent examples of franchise business models.
14. Brokerage
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Examples:
- Grocery store
- Pharmacy
- Florists
How to create a business model
1. Understand your audience
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2. Identify the problem you are solving
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3. Create a business plan
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Conclusion
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FAQs
1. What is the meaning of the business model?
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2. What is an examples of a business model?
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2. What are the 4 types of business models?
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2. What are the 3 types of business models?
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3. What is the main purpose of a business model?
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4. What is a business model vs business plan?
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5. How do I explain my business model?
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6. How can I write a business model?
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