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business growth & Development

Choosing the right model for your small business

Choosing the right business model

Choosing the right business model

Developing a business model can be quite a daunting task for the new Entrepreneur, however, that doesn’t mean it needs to be difficult or complex. Let’s start off by looking at some of the most common business models:

  • Bricks & Mortar
  • Home based business
  • e-Commerce

Bricks & Mortar Business Model

This model is probably the most traditional and better known out of all of the above. This business relies on a physical presence in a dedicated facility – whether it’s retail, wholesale, service or manufacturing.

Advantages

1. This model gives you the opportunity to work face-to-face with people and become more involved in your community.

2. Having a physical location could attract “walk-in” customers which could supplement any customers you gain through marketing efforts (however, this depends on the type of business you operate – e.g. shop).

3. Having a dedicated facility in which to operate in allows you to become immersed both mentally and physically in the running of your business.

Disadvantages

1. Higher risk and start-up costs. For example, renting/purchasing the property from which to operate, setup costs, utility bills, etc.

2. This model requires a full-time commitment upfront to get the property ready for business as well as the staff to run it.

3. If the business is retail-oriented you must have stock to merchandise your shop.

Home Based Business Model

This type of business model is becoming more and more popular amongst new businesses due to the ease of implementation and day-to-day operation.

Advantages

1.Reduced risk and lower start-up costs as it allows you to test the entrepreneurial waters without having to spend capital on additional property, employees and additional utility bills, etc.

2.With this model you are able to scale the size of your business to suit any existing commitments such as childcare and day jobs.

3.Outsourcing allows you to keep things simple at home as you can contract other businesses to manage areas such as web management, public relations (PR), exports, etc.

Disadvantages

1. Working from home can be quite distracting – noisy kids, demanding spouse or Television are all examples of this.

2. Working from home could also interfere with other domestic duties such as childcare, cleaning, house maintenance, etc.

3. If face-to-face meetings with customers are necessary for the continued operation of your business, the home might not be the best place to conduct business from. This is why those entrepreneurs who do work from home have a dedicated area (i.e. converted garage to a dedicated office) to conduct business from.

e-Commere Business Model
This business model is gradually becoming the most common amongst retailers as it’s proving to be the more affordable than having a “bricks & Mortar” shop-front from which to operate. It’s also important to note that without an e-Commerce website it is becoming much harder to succeed in the retail industry.

Advantages

1. Lower costs and associated risks to start as you do not have to have lots of staff, stock or facilities.

2. The company can operate either part or full-time.

3. The business can be scaled as big or as small as you want (or need) it to be. This is very useful as you can adapt it to suit your life-style and existing commitments such as childcare, day jobs or household duties.

4. Using the internet you can effectively tap into either a national or global customer base – giving your company the scope for significant growth should you want it.

5. Due to the types of computer and communication technologies available you can effectively work from anywhere in the world. You don’t need to be tied down to a place of operations.

Disadvantages

1. Stock purchase, shipping, storage and credit card processing can become very difficult is you don’t do them right. It is important to ensure all these processes are in place before starting an e-Commerce business.

2. Marketing can be very tough on the internet and it can prove to be quite a challenge to encourage people to visit your website let alone encourage visitors to buy anything. It is important to consider your web marketing strategy before implementing e-Commerce systems.

It’s important to remember that just because a set business model works for one person – doesn’t mean that it will work for you.

You should consider adapting existing business models to suit yourself and your business. For example, just because you have an e-Commerce company does not mean that you shouldn’t have a store-front.

Other useful links:

Starting your own business – a mini guide

Build a business model template

And for the more academic amongst us:

What is a business model


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Photo by Francesco Marino

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Discussion

6 thoughts on “Choosing the right model for your small business

  1. New entrepreneurs, both young and old, are choosing not to pursue traditional employment, but are defining their career paths as business owners. Business Week

    Posted by Business Week | December 22, 2009, 6:42 pm
  2. As a small business owner, wholesale credit card processing rates are key to lowering an owners credit card fees, thats when I decided to go with Merchant Solutions IQ (based in Torrance, CA) and love the service!

    Posted by Wholesale Credit Card Processing? | February 1, 2010, 7:18 am

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