Small Business Models
Small Business Models
William A. Cohen (Author & Founder, Institute of Leader Arts) gives expert video advice on: How do I decide on the best business model for my company? and more...
What is a "business model"?
Well a business model is just an explanation of how you're going to conduct your business. That is: From start to finish, I'm going to manufacture this product, I'm going to hire a salesman to sell it, and they're going to sell it. How exactly you are going to do this is where the business model comes in. If for example, it's an online school. First, you've got to get the customers; maybe you advertise through the internet in some way to persuade people to call in. You'll have representatives talk with them and you'll send them some material and maybe talk with them again; convincing them to sign up. They pay their money, they take the course, and they finish up their program and they graduate. So a business model is just a model of what you're going to do from start to finish; from your start until you collect the money, and how you're going to operate.
What is a "home-based" business?
Home-based just means you work out of the home which is, with through the internet especially, very popular. It always was doable in a lot of cases. And a lot of very famous people started their businesses at the home even a thousand years ago. Joe Cossman, you know his first product, which was soap by the way I have to tell you it was entirely different story, but he started for a year. He was working full time and he started out on a kitchen table. He brought a used typewriter for $25 and had some great stationary made up. And every night that he would come back after work after five and they would clear the kitchen table and he would start sending letters all over the world, with his great stationary, looking for products that he could sell here. And that's how he got his start. Came, you know, some 25 million dollars over a business career of about twenty years. So home just means you work out of the home.
What is a "brick and mortar" business?
Well brick and mortar is where you have a physical presence outside of the home. The overhead is monies that you have to spend, and it doesn't necessarily contribute directly to your business. In other words, if, I spend, I have to spend this money whether or not I make a single sale. That's overhead. So, if I'm working out of the home, well, pretty easy, because, you know, I'm going to live here one way or the other. But, if I have to, if I have to have an office outside, that's overhead, that's money that I'm spending. It doesn't, it doesn't do anything for me whatsoever. So I'm not suggesting everybody move into their home or have a home business. Not always desirable, you know, for different reasons. But there is a, the overhead is a major reason, I think, plus a convenience factor, that people are, or they can, and especially because of the Internet they can, are working out of their home and not working outside.
What is an "e-commerce" business?
With small business and pricing, e-commerce just means money that has been involved in some way with the Internet; e-commerce is very popular nowadays. There are a lot of companies that sell different products. Companies that sell software have software that you can download, they say, "Download this software to speed up your computer four times," you know, and you pay $29.95 and you send your credit card in and you get a rip. That's e-commerce. Amazon.com sells books, that's e-commerce, it is unlimited. E-commerce is really amazing and it's really grown up within the last fifteen years. It's just amazing what's available and what's been happening with e-commerce business.
What is a "franchise"?
Well, a franchise is a business which has either duplicated itself or been duplicated by somebody else and is then bought, that's a turnkey operation. In other words, SuperCuts. SuperCuts, the guys that cut your hair (which I no longer need much any more!). But, SuperCuts is a franchise. In other words, someone figured out how to do a really great job cutting hair with one or two stores and it worked very well. He thought "I bet people would like to get their hair cut like this all over the country". So he got this together and offered a franchise. The franchise has to be bought. He gives them free instruction in how to do this. They have certain things they have to agree to. He guarantees them a certain amount of advertising. But it's a turnkey operation. They get all the instruction in how to do it from him. Here's how to hire barbers. Here's how to train them. Here's how to operate. Here's the paperwork. Here's the software. All you do is pay me the money to franchise and I get a certain cut from every cut that you make and that's a franchise. The kind I'm going to buy. The other kind is yes, you're very successful as an entrepreneur in whatever you do. And you say, just like this fellow I was talking about the consulting. Now he's all over the world. I've been very successful. I know how to do this. I bet there are other people that would like to get involved in this worldwide. And you get them and they pay, then they agree to pay a certain amount of their income to you in exchange for your advertising, training and whatever else you're providing.