<h3>Business models explained</h3> <p>A successful business model is a revenue collection strategy, often determined by the nature of your business and by your own choices. For example, the key components for making money with a retail business plan are to rent space in a high foot traffic area, buy products from a wholesaler, add a margin and resell in-store. Brick and mortar stores have increasingly needed to abandon traditional business models to remain profitable, such as selling online and adding services.</p> <p>Different business models exist, with most companies choosing to generate revenue from models that fall under one of these categories:</p> <ul> <li>Direct sales at a brick-and-mortar location.</li> <li>Manufacturers that utilise raw materials to create products to sell through the wholesaling distribution channel.</li> <li>One of the most direct ways of generating revenue is providing services and charging an hourly rate, most often with professionals or trades.</li> <li>Tech companies that allow access to software or services in exchange for a recurring fee (ordinarily monthly or annual subscriptions).</li> <li>Online businesses that sell products and consumables online without a physical presence.</li> <li>Online marketplaces where businesses post products for sale, reaching new audiences efficiently and at a low cost. Trade Me and Amazon are good examples of a low touch business model which requires minimal human intervention.</li> <li>The demand and supply business model is prevalent in agriculture and fishing, where primary produce is bought and sold in markets.</li> <li>Delivering services with fixed-price contracting, often in building and construction.</li> </ul> <p>While you'll find several business model variations and examples, the common business model will likely fall under one of the above categories. And, depending on your recent success, it's often prudent to stick with the business model that works.</p> <p>But, if you want to gain a competitive advantage, chances are you'll want to have more than one way to reach your target market.&nbsp;</p> <h3>New ways of selling</h3> <p>Consumers have been moving more and more of their lives online. This, combined with the ease and low cost of technology, has led to business model innovation, such as:</p> <ul> <li>Dropshipping, where you on-sell someone else's products without having to buy or hold the stock. The simplest example is creating an online store, then when a customer buys a product, you as the owner instruct a third party to ship it to the customer. Direct-to-consumer brands mean you never touch the product, making a margin along the way. This opens almost unlimited opportunities to widen your product list. Due to the absence of intermediaries in the supply chain, you can have thousands of products for sale and never have to buy, store or ship them.&nbsp;</li> <li>On-demand business model companies like Uber or Lime Scooters charge customers for a product or service only when they need it. So, for example, instead of owning a scooter, a customer pays for usage only.</li> <li>Sharing business models like Airbnb, where the business relies on the sharing, reusing, or rotating resources between individuals or other companies.</li> <li>Online advertising models where you might give away information or services for free in anticipation of converting free users into paying customers or picking up online advertising revenue. It's increasingly popular with activity apps like TikTok, Snapchat, WeChat and social media platforms (Facebook, Instagram etc.).</li> </ul> <h3>Finding a new business model</h3> <p>If you're concerned about missing the next wave, dedicate a few hours each month to research and discover new trends. Keep your company's business model up-to-date with the best new industry apps, and make an effort to attend industry events, webinars and conferences to find out what's happening in your marketplace. In addition, connect with other small business owners to learn how they're solving issues and keeping ahead of the technology curve. One way is to check out any apps that might apply to your company from the <a title="Xero" href="https://apps.xero.com/nz" target="_blank">Xero</a> or <a title="MYOB" href="https://www.myob.com/nz/apps" target="_blank">MYOB</a> online marketplaces to see what technology is introduced to your industry.</p> <h3>When to change your business model</h3> <p>New business modelling can be challenging to implement. But, if you're wondering if you've got a good business idea, see if or how your competitors (or similar established businesses in other countries) are shifting their business processes. It may be a sign it's time for you to consider adapting your business model, also. Then, check if your target customers change how they prefer to buy, so you time it with demand and supply. If they both lineup, you may need to create a new value proposition and invest in operating infrastructure.</p> <p>Of course, before you make the shift, it's always a good idea to test your business model first. Then, start implementing your business strategy slowly to try and amend cost structure and revenue streams before you rely on a brand-new model to drive your business forward.</p> <h3>Taking the plunge</h3> <p>Many companies are constantly implementing new and improved business models using data-driven decisions. So if your key customers start to show they too want to change how they buy, you should adjust your business model.</p> <h3>Next steps&nbsp;</h3> <ul> <li>Start investigating which other business models could benefit your business, then test and iterate as you go.</li> <li>Collect evidence or proof of demand before you switch entirely to a different business model. Remember, it's most likely you'll keep your existing model, at least for a time.</li> <li>Look at other industries to identify anything you can adapt. For example, if you're a retailer, investigate what retailers are doing (even on a global scale).</li> <li>If you need finance or want to talk about accessing online payment facilities to upgrade your existing business model, <a title="Enquire online" href="https://www.asb.co.nz/small-business-banking/small-business-banking-options.html#contact-us" target="_self">enquire online, visit a branch</a>, or call <a title="0800 272 222" href="tel:0800272222" target="_self">0800 272 222</a>.</li> </ul>