Many people dream of becoming entrepreneurs, but they don’t know what business model to use. The fact is there is no one business model that is right for every business owner or for every product or service. However, for many new entrepreneurs, the direct sales model provides the right balance between the autonomy to be their own boss and the support of an established company or brand.
Bricks and Mortar
Back in the day, brick-and-mortar shops and storefronts represented nearly all businesses catering to consumers. Brick and mortar shops are well suited for businesses such as bookstores and clothing stores, where consumers like to see items before purchasing them. Restaurants and entertainment venues are also a natural fit for a brick and mortar business model. Many brick-and-mortar businesses have adapted to the rise in online shopping by adding an online component. This model is sometimes known as “bricks and clicks.”
Direct Sales
The direct sales model provides business owners with an established business framework along with products and services with a proven track record. Rather than being located in brick-and-mortar locations, direct sales operations rely on a network of salespeople who execute orders directly with individual customers.
However, some people are skeptical of the direct sales model. They erroneously believe rumors about an Amway pyramid scheme or other misleading stories about legitimate direct sales operations. Nonetheless, many entrepreneurs enjoy working within a direct sales model because they can concentrate more on interacting with their customers and less on getting a company up and running.
Subscription
Businesses that operate within a subscription model operate by providing customers or clients with the right to use a product or service for a specific period of time Payments on a subscription model occur on a regular schedule — either monthly, quarterly or annually. Software companies and credit monitoring services often operate on a subscription model, such as Adobe’s Creative Cloud photography plan or TransUnion’s Credit Lock Plus program.
Franchise
Franchise operators purchase a turnkey business operation while remaining responsible for day-to-day operations of their businesses. Franchise owners have the advantage of working with an established business model and proven products, often coupled with marketing help. However, franchisees also face limitations on how they can operate their business. They must also pay licensing fees to the parent company in addition to turning over a proportion of their sales revenues. Fast food establishments like McDonalds and Subway are among the best-known franchise operations in the United States. The licensing fees on huge brands like these are quite expensive, so if you want to start small the best thing you can do is search for less known franchises that will always be needed. For example, being a part of a home services franchise might not look as promising as McDonalds, but with their lower licensing fees, and your good timing, it could be a great investment.
E-Commerce
Since the mid 20th Century, the internet has had a fundamental impact on nearly every aspect of life, and commercial enterprises are no exception. E-commerce operates through interactions of customers or clients with online storefronts or websites. While support may be available by phone, real-time chat, or email, e-commerce is largely impersonal. Companies like Boeing have large business-to-business (B2B) e-commerce operations. Amazon is a business-to-consumer (B2C) giant. Consumer to consumer (C2C) e-commerce operations such as eBay or consumer to business (C2B) organizations like Upwork allow individuals to participate in the e-commerce market on a larger-scale basis.
Choosing a Business Model
There is no one-size-fits-all business model. Although many entrepreneurs enjoy building a business from the ground up, others prefer working within the established business framework of a franchise. Unlike brick-and-mortar operations, businesses built on subscription and e-commerce models require few or no face-to-face interactions, which may appeal to some prospective business owners. Finally, for many entrepreneurs, the direct sales model represents the best of all worlds, allowing autonomy and the opportunity to interact personally with their customers. In the end analysis, the best business model is the one that works for each individual entrepreneur.
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