On startups, a business plan shows how a total investment could yield cumulative net profits over (total) over a while and average monthly sales of (some amount) while maintaining adequate levels of liquidity. The purpose of this plan is to secure additional funding from an investor and a bank to cover the cost of upcoming companies.
A business plan has the potential to convince investors to finance the business, persuade employees and partners to join the company onto serving as a roadmap to guide the launch and growth of the new business. A new business plan is an opportunity to carefully reminisce through every step of starting a new company so that the owners can prepare for success. It allows a budding business to discover its strengths (S), weaknesses (W), opportunities (O), and threats (T). It will help you identify challenges that are likely to arise.
A business that follows this model sells services or products at a low price and makes money with complementary products. If they sell it for free, it is called a freemium model. However, it might take some time to setup up the brand and pull profits.
Why is this model suitable for evolving companies?
It works with a basic budget and entry point for customers to purchase the product/service. E.g. Bait (Razor) and Hook (Blade, Printer). So when users consume the complimentary product that has a lifetime, they require additional services (new blades, new ink).
Some agents sell products on behalf of the business. This model poses low inventory risks, requires few salespeople and reduces the cost to hire workforce. Here resellers represent a company’s brand and turn profits by promoting their offers to your target audience. Affiliate marketers are a sub-category of this business model. Primary revenue comes from commissions that they get with each sale of the affiliate product that they generate.
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The idea behind this is to provide free products and services and rely on revenue. The profits here come from advertising services that the business offers to companies/brands. The number of clicks on advertisements listed on websites determines the number of people that reach. The calculation of profits is proportional. Example – Facebook in which ads attract a lot of people.
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How often do we tend to believe that hiking the price of one or more products or services that a business offers have a ripple effect on demand? The supply remains neutral, just the prices sky-rockets. It makes emerging companies control a vast majority of the market. And the price is set as high as the customers are willing to pay. Example: Many companies like Rayban, Oakley follow this approach.
This approach makes their loyal customers subscribe to their offerings and offer them for a reasonable price. It generates recurring revenue as monthly payments instead of a one-off purchase. This model facilitates the buying decision with a relatively low initial cost. If the customers enjoy this service, they won’t need much convincing to renew their subscription.
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The starting business needs to provide a premium quality product/service to keep customers interested and continuously pull in substantial revenue on a monthly/yearly basis. E.g. Netflix, Salesforce, Google Apps, Spotify, Magazines, Online Content
It involves getting services and products on demand by making a few clicks. Online businesses that track consumer behaviour offer multiple services on-demand. It is convenient, saves time and very popular globally.
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It lowers the cost of operating a business and removes risk factors while offering the services. E.g. Uber, Airbnb
Brokers capitalize on the physical distance between the sellers and the customers. Brokers facilitate the interactions amongst buyers and sellers. Example: Amazon, PayPal.
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Amazon connects global sellers and buyers to make the purchase extremely convenient, while PayPal allows users to transfer funds safely.
This model involves newly formed companies asking bigger businesses to invest in their venture and repay it in chunks when they start earning profits. Businesses that work on sponsorship business models make money from sponsors. Here users do not have to pay. Examples: YouTube, Wikipedia, Gmail, Football teams, Sports Associations.
Businesses that work on the freemium business model absolves charges from certain features; while making the other features exclusively available to premium (paid) users.
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Here the core product is free but is with limited functionality. The premium license offers more advantages. Example: Vimeo allows uploading videos free but simultaneously limits the amount of data you can upload in a week. Paying for the premium gives users password protection, collaboration, limits/adds functionality to the video player. Businesses find ways to convince their users about the potential benefits that a premium subscription brings. Other examples are Gmail for Businesses (Google Apps), Adobe PDF Reader.
Franchisees (the borrower) pay some amount/royalties/percentage of revenue to an established brand/master franchise to access operations. It works best for location-restricted businesses or capital-restricted businesses. It brings in some additional sources of income without the need to invest in additional capital. Example: fitness centres like Talwalkers, Gold Gym, coaching centres like Byju’s and fast food chains etc.
Businesses that follow the marketplace business model charge a transaction fee via a platform for buyers and sellers. It is least expensive as it connects current supply with demand instead of dealing with inventory. Example: Amazon, Uber
It allows agents to use their branding. Therefore, upcoming companies focus on their product development, manufacturing and lower the risk of damaging the brand. Example: Godaddy, Talwalkers.
It involves renting out costly assets on high margins like homes, cars, jets, office space, parking space. Example: GoCar (Malaysia), Jet Timeshare, Castle Timeshare etc.
The businesses that follow this approach sell before the product is delivered to keep the cash flowing. Having cash up front is always good for a business. Business order materials from suppliers, knowing the demand ahead of time. Example: Tesla, Nintendo, Online Jewellery Businesses, Online Flower Businesses
It is also known as Cut out the middlemen business model. It reduces a lot of costs for the end-user. Here the new companies do not have to rely upon mediators and thus have a competitive advantage over the traditional businesses. Example: Dell, Tesla, Xiaomi, Walmart, Alibaba, Amway, Avon
It is known as the Pay you go business model where-in the business collects money upfront for users over time. Customers only pay when they have to use it, so it is a lot easier. Example: Telco’s Phone credits
The businesses that follow this revenue model take a commission on trades where sellers competitively bid to offer services/products to buyers. Example: Freelancer.com, Elance.com
An entrepreneur business model facilitates budding businesses to know the various ways to earn revenue. They prioritize highly scalable business models that allow them to generate maximum ROI with minimal investment. We have expert developers to help startups with legitimate solutions. Contact us for details.
Manish Jain is the co-founder and Managing Director at Konstant Infosolutions. He is responsible for the overall operations of the company and has played a major role in bringing Konstant up from its humble beginnings and, with his immense energy and drive, transforming it into a globally trusted name in IT solutions.
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