Six Great Business Models

6 Great Business Models

Health-Club Model
There are two outstanding components to the health-club model:
automated recurring revenue
use-it-or-lose-it pricing
Whether you work out or not, you pay. This shifts the onus of facilities utilization to the customer. Not many businesses have been as clever in pricing and financial modeling as health clubs.
Other examples of this type model include:
Country clubs
Cable TV
Jelly of the month club
Vonage and other all you can call plans
Timeshare vacation condos

Levi Strauss model
The gold rush of 1849 made many miners rich. However, for every miner that struck it rich, there were thousands of failures. A far more lucrative business than mining for gold was selling picks, supplies, housing, and banking services to the anxious miners.
Companies like Wells Fargo and Levi Strauss were born as service companies to gold rush miners. After all, money is no object when you are about to strike it rich. We recently saw a modern-day example of this during the home equity gold rush. Mortgage brokers, home builders, and real estate gurus all benefited from the gold rush mentality of buyers. These modern day "pick sellers" made far more money that the home buyers and sellers.
A.K.A. Selling picks to the miners

Technological destruction model
eBay, Craig's List
Taking an obsolete process and annihilating it with technology can be a great business model. For example, look what bar code scanners did to the grocery industry. Craig's List, EBay, Cars.com et al destroyed the publishing industry. Google stole tons of revenue from the Yellow Pages. Hewlett Packard desktop printers directly stole business from commercial printers
To best capitalize on this business model, find a huge market plus a method to forever change it with technology.

Trump model
A.K.A. gold plating the gold standard
Starbucks, Haagen Daz, Panera Bread
Until the recent recession, consumers seemed ever-willing to have upscale everything. Why just feed Rover his usual Puppychow when he can have a hand-crafted dog biscuit? Why buy a $3 sandwich when I can buy a $9 artisan sandwich?
This business model adds a new definition to the top end of the market. Typically, this top-end is high profit. Occasionally, this top-end niche grows to be a large niche as well. Examples include Starbucks, Panera Bread, and Coach bags.
Donald Trump has derived his entire living based on this business model. Trump enters a market with the highest-end product, no matter what the cost (e.g.
Taj Mahal).

Ultra-niche
Mystery book store, graduation cap store
The internet has made it possible to gain
world-wide audience for almost any product
or service. With easily expanded
geographic coverage, businesses are free
to specialize in ever smaller niches.
Small niches allow companies to offer
large variety and expertise in categories
which used to have little or no offering
Examples include:
Online mystery book stores and author-signed bookstores with tens of thousands of titles
Websites selling nothing but tassels
Battery stores
Christmas stores

Low cost provider
Translated to low-price-to-consumer
Done correctly, this tactic can be the most powerful business model. Low cost can be obtained through operational excellence ala Wal-Mart or UPS. Low cost can also be obtained through a streamlined offering such as Southwest Airline's use of only 737 aircraft. Access to low-cost vendors could result in low-cost provider status. Vertical integration or controlling the distribution channel could result in low-cost provider status as well.
Take note, it is not a good business model to simply sell for less. Under-cutting competition results in lower margins which destroys a business model. For the low-cost provider model to work, margins must be maintained. Focus on low cost of good and low cost of deliver, not lower margins.

Bottom Line
You are not stuck with your business model
Specific tactics exist to improve an existing business model
www. Businessmodelinstitute.com for instance
Learn to borrow parts of others’ business model and imbed into yours
Review your business model annually

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Six Great Business Models

by Jim Muehlhausen

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