As there are just so many different kinds of businesses out there, business strategies are always constantly changing and while we will discuss some of the more common ones below, there really is no one-size-fit-all strategy that can be applied to any given industry. The key thing to remember is that if it works in one place, it may not necessarily work in another, and what may work well in theory may not work at all. However, there is one key concept that all business models have in common: they attempt to create a profit for the business by reducing the cost of production or service.
The less money spent, the higher the profit.
The key to understanding business models and creating a profitable model for your business is to understand and evaluate the decisions that you make from a financial standpoint. How does one determine whether the resources available are being used effectively? Are there better alternatives that could be made? How do the choices that you make affect the long term profitability of your business?
Understanding and evaluating the decisions that you make from a profitability standpoint, is the first step to making a profit.
If you make the wrong choices, then all of your efforts will be wasted and the results will be disappointing. When it comes to business models, the choices that you make regarding the distribution channel and marketing channels will have the greatest impact on the amount of profit or loss. The distribution channel refers to who your customers will be able to buy your products from. Marketing channels, on the other hand, refer to the methods you use to reach out to your customers in order to bring them about your products.
Understanding and evaluating the decisions you are making regarding distribution and marketing channels can be very complex.
For example, if you are in the manufacturing business, then you will need to decide whether you will sell directly to the customer, through a distributor, or via a middleman such as a middleman broker. There are both advantages and disadvantages to each decision. Distributing goods directly to the end user, can lead to lower overheads and therefore higher profits, while using a middleman can provide an opportunity for you to cut costs without compromising your strategic positioning. As with any high-level decision, it is important to weigh the benefits versus the drawbacks.
When it comes to business models, there are three major types that are currently used in business today: the sales cycle, the sales process and the sales model.
Each of these three key elements is crucial in determining the overall profitability of a company, and the importance of each can be determined by looking at how other companies have managed their business models. In the sales cycle, for example, there are six distinct stages: development, sales, pricing, service, operations and finalization. Each of these six stages can have different implications to the profitability of a business depending on which of the elements it focuses on.
The development stage involves the building of the business model itself.
This includes developing plans and policies related to product development and launching and testing and analyzing the idea to identify any defects. At this point, you may also want to consider implementing project management methods such as risk management, financial modeling, and business development. Pricing includes the implementation of pricing principles and policies, and the establishment of payment methods for services rendered. Operations includes all processes involved in running a business such as accounting, purchasing, inventory, production, distribution and customer service. At this stage, smart companies make use of financial modeling, process optimization, and business development strategies to determine the cost effectiveness of their business model.
The sales phase represents the actual delivery of the product or service to the customer.
At this point, smart companies make use of financial modeling and business development strategies to determine the optimal number of sales and the cost-effective methods of reaching those sales. Pricing, on the other hand, involves the establishment of competitive prices and promotions, as well as the introduction of customer loyalty programs. Customer service typically involves the management of customer service issues. In addition to these major decisions regarding business models, small businesses must also face many consequences that result from their choices.
One of the biggest threats to small business is the threat posed by competition. Smart companies take many types of steps to ensure they don’t fall behind or get left behind. They go-to-market, establish strategic alliances and invest in research and development. As competition increases, the opportunities for growth also increase.