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What is a Business Model?

Business cannot be run haphazardly; a certain level of structure is necessary to start an independent business. A business model refers to a mechanism for generating revenue continuously. A good business model allows for stable revenue generation by repeating its elements. Even when dealing with similar products, the detailed processes differ, so one could argue that there are as many business models as there are businesses. However, there are also basic patterns that can be applied to a certain extent. It's common to combine these simple basic patterns to create a system for the success of one's own business. So, what are some basic business model patterns?

10 Basic Business Model Patterns

When business models are simply broken down, they can be classified into 10 patterns.Here, we will introduce the mechanisms and examples of each model.

・Simple Product Sales Model

This is a business model in which a company develops its own products and earns revenue by selling them. It can be said to be a model with a particularly simple mechanism among business models. This applies to various manufacturers of smartphones, clothing, etc., and restaurants. In franchises, restaurants are often seen.

• Retail Model

This business model involves purchasing goods from various manufacturers and selling them, without developing or manufacturing the products themselves. This includes convenience stores, supermarkets, bookstores, and online retailers like Amazon. Convenience stores may have their own private brands, but in that case, it's a simple product sales model. Many retailers, such as convenience stores and bookstores, operate on a franchise model.

• Advertising Model

This business model involves not receiving payment from users who provide goods or services, or keeping prices low, and generating revenue through advertising. This includes commercial television stations that air commercials, search engines like Google, and free newspapers. Users can use these goods and services for free or at a low price, but the company receives advertising fees from other companies that place advertisements. This business model is not commonly seen in franchises.

• Total Model

This business model involves promoting a featured product or a system that creates a sense of value, encouraging customers to use other products and services together. Examples include insurance, izakayas (Japanese pubs), and 100-yen shops. Izakayas are an example of the total model in franchises.

• Secondary Use Model

This business model involves processing the same product into a different form for use. Because older items can be reused, costs can be reduced and profits increased. Examples include best-of albums compiling existing releases, DVD sales of movies screened in theaters, and the publication of business books compiling in-house know-how. This is rarely seen in franchises.

• Licensing Model

This business model involves the license holder providing existing products or services to other companies, or the license holder receiving them. This includes things like the film adaptation of a bestselling novel, the creation of merchandise based on characters, and "OEM" (Original Equipment Manufacturer) businesses, which are particularly common in the light vehicle market. This is a business model not often seen in franchises.

• Consumables Model

This is a business model where the price of the main product is kept low, and revenue is generated from the costs of surrounding consumables and maintenance. Examples include capsule coffee, where customers purchase capsules repeatedly, and printers, where ink refills are necessary. This is not often seen in franchises.

• Subscription Model

This is a business model where customers use the same product or service regularly. Examples include mobile phone businesses and subscription services for water dispensers. Mobile phone shops, for example, operate on a franchise model.

• Matching Model

This business model generates revenue by effectively bridging the gap between sellers of goods and services and users. Examples include real estate brokerage, hotel reservation portal sites, and insurance review services. Franchising is common in real estate brokerage, for example.

• Freemium Model

This business model involves offering a free version with limited features and services, and then having some users upgrade to a paid version with unlocked features and services. Examples include online storage services like Google, game apps, and news sites. Franchising is unlikely for this business model.

How to Build a Business Model

By combining the business models introduced above and adding the necessary elements, you can create a business model that can generate substantial profits. Here are some points to keep in mind when considering a business model.

• Does it lead to stable profits?

If you're going to do business, you have to make money. It's important to think carefully about whether you can generate stable profits in the long term, rather than just temporary gains, and whether there are any other better systems.

・Can you approach it with passion?

Even if there is a business that can generate stable profits if done properly, it may not be possible without the passion to "do it properly."Whether you can dedicate yourself to that business with passion is also important when starting your own business. Even if you are aiming to open a franchise, carefully consider whether it is a business you can be passionate about.

Start with the basics if you're going to start a business

To start your own business, you need to learn a lot about management. The business model is basic, but it is necessary to open a business and develop a stable one.Even when opening a franchise, it is important to thoroughly understand the business model provided by the headquarters before taking the plunge. If you are considering starting your own business, please refer to the information introduced here.

(The information regarding amounts, periods, and procedures presented in this column is general in nature. For details, please contact FC Owners.)