Finding a Business Model: Which One Is Best For Your Business?

What Is a Business Model?

A business model describes how your business works, how you sell your services and how you generate profit. This includes all measures that help you create value. This includes the realisation of an idea as well as the question of getting your offer to the target group.

What Does a Business Model Consist Of?

Regardless which business model you choose: There are a few fundamental questions that you should address in advance. When it comes to developing business models and finding sales channels, for example, the ‘Business Model Canvas’ is a good choice. This strategic approach allows you to present each of the following points individually, identify gaps and make changes where necessary - it is best to use a whiteboard or post-its to visualise your thought processes. You will look at a total of nine points to gain a comprehensive picture of your business.

Who Are Your Customers?

Describe your target group as precisely as possible. Analyse who uses your products or services most frequently.

• Who is your offer intended for?
• How do the people or organisations that are supposed to buy from you live and work?
• What challenges do they face? What age, gender, income and needs does your clientele have?
• Do you want to define your target group regionally, nationally or internationally?

If your business has been established for some time, you may want to adapt your business model to new circumstances. In this case, you can draw on existing customers to obtain more information about your target group.

What Benefits Do You Promise (Value Proposition)?

Here it's all about the ‘why’: Why do your customers buy from you? The question here is not so simply what your customers get, but where the added value of your offer lies. Identify the important features and benefits of your offer. How do you solve the problems of your target group? What do you do differently from the competition? Formulate your value proposition clearly, concisely and appealingly - this is how you convince potential buyers.

How Do You Create Added Value?

This aspect deals with the question of providing your service. What is necessary for you to create value through your offer? What processes do you need to establish? Visualise the most important processes of your business. This will help you recognise how you use your resources and skills to provide a high-quality offer. This also includes the question of how you control your costs and optimise processes. This will create added value for your customers.

How Do You Earn Money?

The focus here is on how you generate revenue with your business. Do you sell products at a certain unit price? Do you charge usage fees? Include pricing in your considerations. Are there specific fee structures or subscription models? Perhaps you offer your customers different payment methods. Or you may also be upselling or cross-selling to generate another income. Finally, you need to assess the profitability of your revenue model - this is the only way to determine whether your business will be successful in the long term.

How Do You Reach Your Customers?

The best offer is useless if you don't reach your target group. So ask yourself: Which channels do you use to reach your target group? Where do buyers spend their time? Then look at your marketing strategy: What measures do you take to advertise your offer? How do you tailor your advertising messages to the target group?

In this article, we have some ideas for you on how to acquire new customers: 5 Tips for Freelance Client Acquisition.

How Do You Maintain the Relationship With Your Customers?

In order to retain customers once they have been acquired, you need to invest continuously in the relationship with them. This can be achieved with various measures:

1. Communication:

Keep regular contact with your customers via various channels such as email, telephone or social media to inform them about news, offers or relevant information.

2. Customer Service:

Provide outstanding customer service to respond quickly and professionally to enquiries, complaints or problems. Show your customers that they are important to you.

3. Customer Feedback:

Ask for regular feedback to understand needs and wishes and adapt your offer accordingly.

4. Customer Loyalty Programmes:

Offer incentives such as loyalty programmes, discounts or exclusive offers to strengthen loyalty to your company.

5. Community-Development:

Create opportunities for customer interaction, such as online platforms or events, to build a community around your brand and encourage customer loyalty.

Which Resources Do You Need?

Depending on which business you run, you need to have different resources available. It's not just about capital for rent, electricity or marketing. For an online shop, for example, you will need a certain amount of stock. Almost all self-employed people also use office supplies and basic electronic equipment in the form of a computer or laptop. If you manufacture products, you cannot do so without materials. You and your employees are also part of this equation - after all, your business only works with the right skills. Don't forget the resource ‘time’. You will only achieve your goals if you utilise your working hours efficiently.

Which Partnerships Are Important To You?

Your business has a much greater chance of success if you get the right partners on board and cultivate your network.

• Reliable suppliers not only ensure a stable supply chain, but also guarantee the quality of your products.
• With the right sales partnerships, you can tap into new markets and target groups, increase your reach and generate more sales.
• Utilise opportunities for cooperation! This will bring you new orders. In addition, all parties involved can join forces and find solutions together.
• Membership of industry associations keeps you up to date with the latest trends and gives you the opportunity to exchange ideas with colleagues.

There is one thing you must never forget: Worthwhile contacts work both ways. Do members of your network a favour from time to time - it will pay off for you in the long run at least.

What Costs Are Incurred In Your Business?

Every business incurs costs. You must always keep an eye on them to ensure the profitability of your business. These include:

• Fixed costs such as rent, electricity, insurance
• Variable costs such as expenses for materials, sales and marketing
• Personnel costs such as salaries, training costs or social security contributions
• Administrative costs such as IT systems, office equipment, office supplies

Business models are dynamic and it may be necessary to adapt your model from time to time. If you change one aspect, this automatically has consequences for all other components. So always take a holistic view of your business model.

Which Business Models Are There?

There are many business models. Which one is suitable for your business depends on the industry you are in, the goals you are pursuing and who your offer is aimed at. Below we look at the most common ones:

Direct Selling

With this model, you sell directly to end consumers. There is no diversions via the intermediate trade. This has two main advantages:

• A higher profit margin for you and
• Better prices for your customers, as the distributors do not also demand a share of the profit.

However, you also have to invest more to place your offer - this is possible, for example, via your own online shop. You are also solely responsible for the marketing of your products. This business model is well suited to the sale of goods, especially if they require personalised advice or individual solutions. Here you can cater specifically to the wishes and needs of your customers.

Cross Selling

Every business benefits from returning customers. To keep buyers coming back regularly, it's a good idea to supplement your offer in a meaningful manner. In this way, you can increase sales and strengthen customer loyalty. Do you sell laptops, for example? Why not also sell accessories such as mice, mouse pads or cables? Or do you offer additional services for an extra charge?

In general, cross-selling makes sense if you want to expand your product or service range, strengthen existing customer relationships and increase the average value of every order.

Subscriptions

With this model, users pay a certain amount each month and receive a service in return. This can be done under different conditions - for example, the duration and scope of the subscription vary depending on the contract you conclude. This allows you to plan your sales more precisely and retain customers for longer. Customers are spared the hassle of individual renewals and do not have to constantly remember to take out further subscriptions. Such models are primarily known from magazines. However, with the advance of digitalisation, the whole thing has also shifted to electronic media - if you offer online publications or host a podcast, for example, this model is a good option for you.

Licences

The advantages of this business model become clear in a simple scenario: Imagine you are programming and developing software. Instead of selling it in the traditional way, your customers pay a fee and receive a licence to use it. But even if you work in the media industry, you can benefit from this model - for example, by granting licences for your videos, graphics or music. Generally, such licences exist for a certain period of time, after which they must be renewed. It is important that you clarify the exact terms of use in advance. In this way, you can protect your intellectual property and earn a living at the same time.

Add-Ons

Services that follow this business model offer a particularly favourable basic price. The revenue is generated by so-called add-ons. These are optional extras that improve the basic offering. This means that customers only pay for what they really want. You can increase your turnover in this way. The model is suitable for various sectors, from software companies to e-commerce and tourism. The idea is always to offer customised solutions to your target group and thus increase the added value of your service.

Implementing add-ons can help companies to offer personalised solutions to their customers, increase the added value of their products or services, generate additional revenue streams and improve customer satisfaction. It is important to plan add-ons in a strategic and customer-centred way in order to achieve sustainable business success.

eCommerce

This is all about selling your goods and services via digital channels. Companies can enjoy reduced costs here. Buyers will be able to shop from the comfort of their own home at any time. This model works for both the sale of physical goods and services. You can advertise the latter for example via a specially created website.

E-commerce offers companies a number of advantages. These include the ability to sell 24/7 and worldwide, lower operating costs, better customer accessibility and the option to strengthen customer loyalty with personalised offers.

Dropshipping

Dropshipping is an integral part of eCommerce. Here, too, online trading takes place, but sellers neither produce the goods themselves nor do they have them in stock. If a purchase is finalised, the order is instead placed via a large-scale producer - who sends the goods directly to the buyer.

The fact that you have no production or storage costs yourself means that the costs are low. But there is also a downside: you have less recourse if your customers are unhappy with the product or if there are general problems with the quality - so rely on reliable dropshipping partnerships. This allows you to expand your product range, minimise risks, reduce operating costs and start selling products relatively easily.

Affiliate

This model is based on commissions for the sale of a product or service. An example: You blog about your travels. A link takes readers to the website of an organiser. This organiser offers trips to the regions you blog about. If someone books a trip via this link, you receive a commission of a predetermined amount.

This model is a win-win situation: you share in the tour operator's turnover and they reach more customers. However, this only pays off if you as a blogger or website operator have a corresponding reach.

Success With the Right Business Model

Every business needs a well thought-out business model. You need to know how you create value, who it affects and all the resources you need to do so. This allows you to keep an eye on all the important aspects of your business and adapt quickly to new circumstances if necessary - because your business model should be just as dynamic as your environment.