Different types of Business Models

Different types of Business Models

Business strategy is main key point of any company's growth; on other end company's business model is a presentation of company's core business practices.

Independent of size or industry of business, a business model suggests how the company creates and delivers products or services to their customers.

In the current business environment, business models come in a variety of forms that include direct sales, franchise, freemium and subscription models.

There are mainly 4 types of business models in existence in theory:
Direct sales, franchise, freemium and subscription models

Let's have a quick detailed discussion about each of 4 business models.

1. Direct Sales:
Salespeople or sales person or sales team is key part of this direct sales model, because these persons or this team need to interact with the direct real customers.
There is no fixed retail location exists for direct sales business model. While individual salespeople are connected with parent company and company would have given the tools / presentations / products to become individual entrepreneurs.
Medical representatives of any big pharmacy company are the good examples of direct sales.

2. Franchise Model:
MacDonald is the biggest example of Franchise Model in the world of-course. In this model business owners purchase another company's business strategy.
They do not create a new product or services but they use product or services of the parent company from which the purchase the Franchise.
The franchisee purchases an ownership stake in a business model that has already been successfully developed.
The company offering its proprietary product or service, its business processes and its brand is known as the franchisor, and it benefits from a reduction in capital output used to build new locations.

3. Freemium Model:
Facebook is the best example of this Freemium Model.
For companies that offer personal or business services via the Internet, the freemium business model is common. Under a freemium model, business give away a service at no cost to the consumer as a way to establish the foundation for future transactions. Companies that offer a basic-level service for free build relationships with customers and eventually offer advanced services as add-ons or advertisement-free options at a cost. The freemium model tends to work well for Internet-based businesses with little customer acquisition costs but high lifetime value. Spotify and Skype both operate under a freemium business model.

4. Subscription Model:
Freelancer or LinkedIn or any such internet portals are the best examples of this.
Businesses that operate in an industry where customer acquisition costs are high may operate under a subscription or recurring revenue business model. The objective of a subscription business model is to retain customers under a long-term contract and secure recurring revenue from repeat purchase of a product or service

In theory these are the 4 models while in real there are many business models as many small entrepreneurs and many small start-ups even do not follow any model, just run the business 🙂