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Let's dive in to these examples in greater details. The business model of production It's the most basic business model, the company sales the products and services it produces.
In order for that business model to be viable, the company needs to generate enough sales to cover its productiondistribution, and storage costs.
The advertising business model Here the goal is to generate revenues by selling advertising space. On the Internet this model can be segmented based on the type of advertising: CPM cost per thousand: CPC cost per click: The amount paid can be fixed or established through an auction process.
CPA cost per action: An action can be a sale or a lead for example.
The amount can be fixed or set as a percentage of the action value. This business model is already slightly more complex than the production one given that the company first need to invest in order to create a large audience before it can attract advertisers.
Business model based on commission or distribution The company acts as an intermediary between the seller and the buyer and takes a cut of every sell it helps generate. This business model is generally less risky than the 2 previous ones and therefore less profitable as the level of investment required can be minimal.
The subscription business model The company receives revenues from its subscribers at regular intervals. This business model has one clear advantage: The flip side is that it often takes several months to recover the subscriber acquisition costs leading to a lower cash generation at the beginning of the cycle.
The freemium business model The company offers 2 versions of its product. A free version with a limited set of features which goals are either to raise awareness about the product or to create a network effect.
And a paid version, comprising more features, from which it can generate enough margin to cover the cost of the free users. The keys to success with this business model are to be able to generate huge network effect example: The accessories business model The company offers one product for free or at a price close to its production cost and generates a profit on the sale of accessories.
The classic example of this business model is the sale of razor blades: This list of business models is far from being exhaustive, and if you have questions regarding a business model in particular feel free to ask it using the comment form below.
Business plan and business model: For more information on business planning, you can have a look at our series on how to write a business plan or try our business plan software.Business plan, the blueprint of your company, covers all the important aspects of your business and shows how the business will be successful.
If the business planning isn’t done properly, it can lead to quite expensive corrective measures later on. Réalisez simplement un business-plan: pour remettre à votre banquier ou présenter votre projet à des investisseurs.
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Montpellier Business Plan provides you with a complete method that enables you to forecast your activity in a simple and comprehensive manner.