Best Business Model For Your Business

2013-11-11 14:25

Even very experienced business owners and investors debate on what is the best business model. This topic can be debated for a long time. But the real answer is that the best business model for your business is the one that gets you the most profit overall. In this article, I will explain what a business model is (it is a term that is often used incorrectly), the difference of business models vs. revenue models, an example of a business model, and tips on how you can come up with a business model for your business that will earn you the most money.

What is a business model

According to Wikipedia, a business model is "a design for the successful operation of a business, identifying revenue sources, customer base, products, and details of financing."

As you see from the definition, the business model takes into account the entire scope of the business. It is literally the model for your business. Here is a video tutorial explaining what a business model is. The video also makes the concept of a business model a little simpler to understand.

Difference between a business model and revenue model

The term business model is often confused with “revenue model” or “revenue stream.” The way you can think about it is that a business model can contain one or more revenue streams. Here is a video explaining this common misunderstanding, so that you don’t make it when thinking about your business model.

If you enjoy these video tutorials, please feel welcome to subscribe to my business channel on YouTube and get all my business tutorials for free.

The 3 Most Important Components Of a Business Model

As some of the videos point out, the business model can get quite complex. Let's simplify it. It doesn't have to be complicated. There are three components in every business model that are very important. If you get just those three components, you are in great shape. Those components are 1) your product 2) how you will promote that product and 3) and the overall finances of your business.

Everything starts with the product or service that your business provides. This is the section of the business model I like to leave up to the entrepreneurs. It is their responsibility to create a worthwhile product. If this component isn't in place, then there can be no business. Here is a tutorial for how to create and improve your product, but overall, the expectation is that you are creating this business because you have expertise in the field, and can create it to a very high degree of quality.

And in case you are looking for business ideas for products, here is a tutorial for how to come up with business ideas.

After the product, the next part of the business model is the marketing. In our journey to understanding how to create a great business model, this is the first chance we get to brainstorm it together. The marketing strategy must be crafted with an eye for what your product is, and who are the potential users for this product.

Without knowing who our target customers are, it is very difficult to make a great product for them, and to market to them. So here is a tutorial explaining how to identify your target users.

Once you know who the target customers are for the kind of product you have, you can begin to advertise in places where those people can be found.  And here is a tutorial with an introduction to marketing. It discusses some very important components of your marketing efforts such as scale, targeting, cost, and eventual conversion of people you have marketed to into actual paying customers.

Once you have a product and are able to promote it and sell it, the last thing you have to do is to make sure that all of this can happen in a way that makes financial sense, and that you are able to earn a profit from all this.

There are a few concepts that will help you get the most profit from your customers. The first is the idea of the Lifetime Customer Value. It is explained in detail in this video,

 Here is a blog post with some tips on how to increase the lifetime customer value by taking advantage of techniques like having a subscription-based service.

To understand the customer lifetime value, you have to be able to determine your profit. Here is a video tutorial for how to calculate your profit margin.

And here is a tutorial on how to price your product:

And here is a somewhat intimidating and to some people boring, but very necessary tutorial on how to create a cash flow statement.

These tutorials should give you a sense for how to get a clear picture of the finances of your business. Once you have a clear financial picture, you will be able to determine whether you are able to create and market the product in a way that is financially profitable. If you do, then you have quite a nice business model there!

Business model example

One of the most popular and successful business models is the Freemium business model.  Here is a blog post on why Freemium may be the best set business model that there is. And here is a video explaining how even if Freemium is not a fit for your business, you can take elements of it to incorporate it into your business.

Further Help

Since my recent articles, I have gotten quite a few emails from entrepreneurs, asking for business help. Even though I try to help as many people as possible, due to the high volume of demand, I am forced to prioritize and help people on my mobile apps first and foremost. I give quite a bit of free advice on my business channel, which you are welcome to subscribe to. To subscribe is free and I never charge on my YouTube channel. Plus, I encourage you to write in, and ask questions. I'll make videos answering those questions. And if you feel like you may need even more help with your business, please take a look at some of the Android business apps or the Kindle business apps.


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2010-11-21 18:15

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