The Best Business Models and Their Pros and Cons
Choosing the best business models to further your entrepreneurial aspirations is extremely necessary for a lasting solution.
As a budding entrepreneur, it is imperative to focus your energy on the right type of business model.
It is one of those factors that can actually bring about the ideal combination of passion and enthusiasm. It helps channelize your entrepreneurial drive in the right direction and bring about strong potential for excellence.
By referring to the best business models, we do not mean the ones that are most lucrative but surely the ones that can help you earn maximum profit.
That’s not the only benefit of deciding on the best business models. This also enables an individual to
- Look for appropriate and long-term source of funding
- Create avenues that can become profitable driven by your entrepreneurial enthusiasm
- Motivates you to work towards realizing your dream
- The right business model also enables selection of appropriate team
- It increases efficiency and overall output
- Boosts profitability and helps you break even at a faster rate
- Fans you personal talent pool and helps you excel your own targets as well.
That said, the question that remains crucial is how you choose the appropriate business model. Well, I would say that it is one decision that continuously differs and totally depends on an individual’s capability and preferences. In other words, a great business model for you might not be the best business model for another person.
Keeping that in mind, we have created a list of most promising business models and carefully considered the pros and cons of each one. It will help you understand and work towards giving more power to your entrepreneurial ambition and help you achieve significant gains.
However, I recommend you to read about our business model after learning about the ones that are listed below, because I believe our business model is currently the best and doesn’t have the cons that the other business models have:
- Following a Proven Business Plan Is the Success Key
- What Is the Best Business to Start with a Low Budget?
Retailing through Physical Store
In other words, this is also known as brick and mortar retail. One of the easiest and most preferred route to kick start your business ambitions; it is ideal for people who envisage themselves running a store and retailing stuff locally. This can comprise of pretty much anything from local grocery to unique state of art creations or craft items that you source from others or make yourself.
The possibilities of stuff that you can sell through these types of establishments are enormous. Often the local demand, the supply prospects and of course your personal choice is what decides the products you eventually sell. If you aspire to be on your own without any specific choice of core product in mind, this could well be one of the best business models for you.
Some of the biggest advantages include:
1) You have a physical presence and can connect to your customers on a one on one basis
2) More effective form of selling and helps boost prospects through the personal connections that you make
3) The staff follows your approach, and even they gradually learn the art to connect with customers
4) You can easily attract customers by calling them aloud or interacting with them personally
5) You have the opportunity to put up a stall at events that might attract a lot of potential customers and easily reach out to a larger number of people.
But every coin has two sides, for every benefit; there is also a concern area that also needs to be addressed.
1) First and foremost creating a physical store entails a huge initial capital from buying or getting the store at lease to putting up infrastructure to make it habitable.
2) Cost of maintenance is relatively higher, and you need sufficient sales volume to keep the profit margins intact
3) Often there is no set working hour and you need to work continuously for long stretches
4) The scope of expansion becomes extremely limited as it is totally dependent on creating more retail stores. Obviously, they mean more cost and are totally out of the question till the cost of running one store is properly covered.
5) One of the biggest challenges in this business model is, therefore, creating a continuous demand flow and ensuring that customers keep coming back again and again. This is important because that is the primary growth driver in this case.
For any entrepreneur who is looking for some quick fix solution to deal with the earlier problem, often resort to e-commerce retailing. That seems like a fairly straight forward move. It is a remote retailing model, involves very little infrastructure expense and can often yield very high returns. Given the low investment prospect, a lot number of people are tempted to latch on to this investment module to realize their entrepreneurial dreams over the longer term.
It is perhaps one of the best business models for you if you are looking at a low investment and little model that have the potential to yield high returns for you. While the sale of products through an online store can be a highly lucrative option, the fact remains that it is also a very competitive platform.
Some of the biggest advantages involved in this form of retailing include:
1) The prospects of returns and profit margin is significantly higher
2) Dropshipping enables a direct transfer of the goods to the customer’s house
3) Unlike selling in physical retail stores, you do not need intuitive skills to connect and sell better to customers
4) There is no set open or close time; it is accessible to customers worldwide and at all times. Your online store could be making some good profit even while you are sleeping.
5) All you have to do is create content that is search engine optimized and then the internet helps you with rest of the work.
1) However, SEO can be a problem too. If the website is not optimized appropriately, it can really harm business prospects. As a sudden change in settings or server algorithms can result in significant losses for you as well.
2) You need to be fast in accepting orders and delivering them fast to the client and might have to hire additional employees
3) If you do not have your own website, getting other retailers and creating visibility there could be an issue.
However, the biggest challenge is to compete with established players and make a mark for you. That, no doubt, remains one of the biggest concern areas and most entrepreneurs need to put additional effort in this context.
Freelancing is the best business model for you if you are deft at networking and comfortable working from home. If you are looking at creating the perfect balance between career and home, this is often the best bet to depend upon.
The key benefit, in this case, is you are working on your terms and within the construct of your key area of expertise. Without losing the comfort of working along familiar lines, you are now able to work independently. It not only gives you a greater sense of achievement but stands to prove the extent of your abilities even to your own self.
You are no longer restricted by a small geography to reach out to
1) Given the innumerable power of the internet, you can even access clientèle from anywhere across the world.
2) It helps you highlight your biggest assets and get work on your own terms
3) You are no longer dependent on anyone to create job prospects
4) You can work on multiple projects at the same time and, therefore, improve your earnings prospects
5) You can work at your own convenient hours without the bounding of a 9-5 job
1) Often a freelancer has to strive very hard to get rates at par with established organizations
2) Competition in this arena is very steep, and they have to put in significant trouble
3) Poor productivity planning and lack of appropriate marketing ability can also be major concern areas
4) More likelihood of a trap that can totally destabilize the overall business model.
The extent of money that you earn remains the biggest challenge however for freelancers. So, if you are looking at this model for business, ensure that you make the right kind of assumptions in terms of effort and rate that you charge. Often freelancers end up doing a lot more work for a lot less money making the entire model quite un-viable.
The growing dependence on cloud and the huge thrust on information marketing have created scope and opportunity for this unique business model, i.e., e-books. If you have a flair for writing, the tenacity to carry on with the teething troubles and the ability to market your efforts appropriately, this could well be among the best business models for you.
As a writer and entrepreneur, you can choose to sell your e-books through Amazon/Kindle or even create your own website to market them effectively. Writing on your own can be both very satisfying and extremely profitable as well. This gives you the dual satisfaction of being independently and being able to channelize your creative qualities.
1) It is far easier to create e-books as compared to their conventional printed versions
2) Those who can make great sale copy, writing ebooks would come naturally to them
3) Low investment cost ensures higher profit margins and almost 100% profit in the longer run
4) You also have the option to use affiliate marketing to be able to sell your book better
1) However, the choice of subject and style of writing is very crucial. Badly written books will never make the cut and would hardly translate into sales
2) You need time for the right combination to click. You must have sufficient resources to support yourself until that time
3) Pricing can be a major challenge. Pricing it too high would mean there would be very fewer takers and pricing it too low would undermine the book’s actual worth. Often this could mean that the customers may not take it that seriously.
Therefore creating the right reach for your ebooks remains the key challenge for your entrepreneurial dreams to succeed. In the longer run, it is this very fact that can help distinguishing a success story from a not so successful one.
Online Classes & Course Launch
The virtual marketplace or the internet is currently buzzing with opportunity. I would term this as one of the best business models because it helps an individual identify their strongest point and capitalize on it. So if you think you are an expert on a subject, the easiest option to translate it into an entrepreneurial success is to create an online class.
Whether you create an online teaching module for crochet or computer science, it does not matter. What matters is how good you are able to market this as a unique business product. This is ultimately the key factor that will help you realize profit and gain from the entire endeavor.
1) Unlike membership based business model or the subscription type of products, online courses are easier to sell. They do not require regular payment. These mostly need only one-time payment but continue to yield returns with every new purchase
2) As an entrepreneur, you not need huge resource base to set up online courses. You could even look at using your WordPress plugin or personal blog and eventually transform them as a platform to conduct your online classes
3) You can even look at uploading your online course on the website that encourages this kind of content like Udemy.
But then you must ask a question as to what could potentially limit the prospects of online course/classes from becoming the best business models for many entrepreneurs. I guess it would be the fact that
1) You need to make significant investment in advertising or using affiliate marketing for furthering the prospects and reaching out to the right clientèle
2) Sites like Udemy where a lot of these courses are uploaded can be very competitive
3) It is particularly a challenge for beginners looking to make their mark in this world of very steep competition
4) Marketing of content that will actually motivate and convince buyers can be very challenging at times. This is the key factor that often forces entrepreneurs to give up their dream and even completely change track.
Therefore, when you are looking out for the best business models to give wings to your entrepreneurial dreams it is very important to carefully consider the following factors:
- Your personal abilities and potential
- Your mastery in marketing yourself
- Your passion and the greatest motivation to take forward your entrepreneurial dream
- The content or the product that you seek to launch and its overall acceptance
- In-depth study of the market you are catering to and the inherent demand outlook there
In the long run, it is very important to understand the success of a business model. It is deeply dependent on the aptitude of the entrepreneur and how well he can take forward the core concept.
All of these elements can help you zero down on the best business models effectively and figure out the most sustainable form of conducting business. This alone enables you to decide what works best and what you can make the best use of. Learn more: 10 Reasons Even the Best Business Models Fail