10 Small Business Essentials for 2023
Table of Contents
- 1. A Business Plan
- 2. Small Business Insurance
- 3. HR Tools
- 4. Accounting Software and Support
- 5. Tech Protection
- 6. Marketing
- 7. DIY Legal Tools
- 8. Collaboration Tools
- 9. Data Management
- 10. Health Insurance
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About the author.
The right tools and resources can help your small business thrive. Whether you’re launching a new venture or looking to expand your current operation, these small business essentials will help you to succeed in the coming year. Let’s dive in.
Our List of Small Business Essentials
Here’s our list of tools and resources that every business needs to succeed (we’ll explain each of these resources in more depth below):
- A comprehensive business plan
- Small business insurance
- Accounting software and support
- Tech protection
- A marketing strategy
- Legal support
- Collaboration tools
- Data management capabilities
- Health insurance
1. A Comprehensive Business Plan – Small Business Essentials
Starting a small business is exciting, particularly when you’re passionate about your work. But passion alone isn’t enough to generate long-term success. It would be best if you had a sense of direction. That’s where your business plan comes in. Don’t worry. You don’t have to be a seasoned business professional to make a business plan.
With a bit of strategic thinking, you can create a vision for the development of your business to help guide your startup through 2022 and the years that follow. Here’s what you need to know:
What Is a Small Business Plan?
While motivation and drive are valuable, the success of your business depends on having an actionable roadmap for how you’ll achieve your goals. A business plan for a company of any size outlines specific plans for how you’ll generate income and plans for growth based on your projected revenue.
Why Do I Need a Small Business Plan?
There are many reasons you need a business plan. Here are a few of the things it helps you do:
- Identify your target market and figure out how to reach them
- Map out how you’ll generate revenue
- Allocate your financial resources in a strategic way
- Establish trust to score investor funding
- Understand when and how to scale your business
- Forecast future opportunities for growth
2. Small Business Insurance – Small Business Essentials
All businesses need insurance, regardless of size. Why?
While no one wants to encounter mishaps, conflicts, or other unexpected problems, they happen. Therefore, small business insurance is essential for protecting you and your employees from the potentially negative impact of unforeseen situations.
Let’s explore some of the basic types of insurance.
General Liability Insurance
General liability insurance protects you from various types of events. But each policy’s coverage varies depending on the price and terms. When shopping for public liability insurance, look for a policy that offers these critical types of coverage:
- Bodily injury coverage
- Property damage coverage
- Allowance for legal expenses
Professional Liability Insurance
Depending upon your industry, you may want to consider getting a professional liability insurance policy in addition to general liability insurance. This type of policy can offer several benefits:
- Specialized coverage in the event of copyright infringement or patent violation
- Help with legal costs if bodily or non-bodily (psychological or emotional) injury occurs
- Financial protection in lawsuits related to defamation
Add-Ons for Small Business Insurance
Always review the coverages and expenses of a plan before committing to pay its premium. If you purchase a policy through a broker or commercial website, be sure to ask any questions you may have so you fully understand what is and isn’t covered.
You may be able to customize your small business insurance policy or add some of these additional coverages if they aren’t standard inclusions:
- Commercial property insurance
- Workers’ compensation insurance
- Commercial vehicle insurance
- Disability insurance (for you as an individual)
We’ll get into health insurance below. If you don’t scroll down that far, you should know that Selfgood offers supplemental health insurance for freelancers.
Read about supplemental benefits here , or click here to start with Selfgood today .
3. HR Tools – Small Business Essentials
Larger companies typically hire in-house Human Resources associates, but many small businesses can’t afford to have on-site HR.
Luckily, third-party services like Gusto and Paychex help small business owners to manage their HR duties.
Depending on which you select, you can enjoy HR benefits like these:
- Payroll processing services
- Employee engagement programs
- Time-tracking tools
4. Accounting Software and Support – Small Business Essentials
Keeping track of your numbers is critical for managing cash flow and planning for your business’s future. If you can’t afford an in-house accountant, you may be concerned about handling this work yourself.
Here’s some good news:
- There are many software programs designed to help you manage your accounting tasks.
Let’s discuss why accounting software is such a valuable business tool:
Quality software programs like Quickbooks and NetSuite streamline the expense-tracking process. Some even help you stay on track with bills by automating payments and payroll.
Unless you’re a professional bookkeeper , you may have questions about your finances that software can’t answer. Fortunately, many software programs offer service plans with access to a live bookkeeper. We’d highly recommend it!
5. Tech Protection – Small Business Essentials
Your technology (laptops, iPads, phones, etc.) is one of your most expensive investments. You rely upon these items for managing nearly every aspect of your business. What would you do if something happened to these devices or their data? Protecting your tech assets is the best way to avoid catastrophic scenarios that could endanger your business. Start by investing in these security measures:
Opt for the Warranty
When you purchase devices for your small business, don’t pass on spending a little extra cash for an extended warranty, manufacturer insurance, or retailer protection plan. Opting for these low-cost protection services can help you avoid significant expenses should you need to repair or replace a device.
Any device connected to the internet is susceptible to hacking (not just online businesses!). That can put private information into the wrong hands for misuse. Virtual private networks (VPNs) make it easy and affordable to protect your business data. Go with a well-known and trustworthy provider like NordVPN or ExpressVPN , and connect all your devices to ensure privacy for you and your team members’ online activity.
6. Marketing Strategy – Small Business Essentials
How do you get the word out and attract customers?
It’s all about marketing. When you make your brand visible to people at the right time, you’ll get your name out there and attract customers.
Small businesses use a few strategies for generating brand awareness and achieving long-term customer engagement. Here are a few you can implement today:
Blogs and Articles
You may not be a writer by trade, but you can still create an online presence by providing valuable content to your target audience. Most businesses do this by publishing blog articles on their website that are relevant to their industry and the interests of their target market. This will help you rank higher in search engines and show your readers that you’re an expert in your field.
In 2021, marketing research found that 1 in 3 people use social media to learn about new products, services, brands, and stores. In addition, 1 in 4 people use social media platforms to purchase. You can leverage the marketing power of these tools by posting engaging posts to increase brand awareness and maintain customer relationships.
Email Lists and Newsletters
Forbes experts still say marketing newsletters are one of the best revenue-generation methods. However, you’ll need to do it right to see valuable results. Here’s a good tip:
Try to avoid bragging about the success of your business or your plans for the future in your newsletter.
Also: Don’t think of it as a newsletter — think of your newsletter readers as subscribers to your blog. Sending out newsletters with engaging content makes your customers feel you understand their interests and care about their needs.
Consumers are constantly overwhelmed by aggressive forms of marketing directly asking or pressuring them to spend money. They are more likely to make purchases when they decide without feeling pressured, like after reading a newsletter providing them with information that’s relevant to them on a personal level.
7. Legal Support – Small Business Essentials
Can’t afford to have an attorney create custom legal documents for your small business? You’re not alone.
Regardless, every small business owner should have legitimate legal documents for various purposes.
Unfortunately, making your own without the guidance of a lawyer could lead to several problems. For instance, it may contain statements you didn’t know were illegal, or you might unintentionally leave out critical information.
So, what should you do?
Use Legal Document Templates
With a few exceptions, most legal documents that small business owners need for successful operations are easy to find. Customizable templates are usually sufficient for such needs.
You can access templates for legal documents using your Alliance of Gig Workers membership perks and customize them to meet the unique needs of your small business.
An Alliance of Gig Workers membership gives you exclusive access to some of the basic legal templates for business operations documents (availability varies by state):
- Client agreements
- Employee contracts
- Rental forms and lease agreements
- Purchase agreements
Sign up for Selfgood today to access an Alliance of Gig Workers membership!
8. Collaboration Software – Small Business Essentials
All small businesses deal with communication issues. Information gets lost in endless email threads. Email addresses get misspelled. Critical emails end up in the recipient’s spam folder, and team members are accidentally left out of meaningful conversations. In recent years, businesses of all sizes and industries have been using collaboration tools to solve these problems.
What Are Collaboration Tools?
Whether your team is remote or you’re working together in the same physical space, collaboration software can smoothen conversation and increase productivity. There are dozens of collaboration software tools out there. However, the one that will work best for your small business depends on your unique needs.
While you research your options, keep in mind that different programs offer different features:
- Instant message apps
- File sharing and storage
- Calendar integration
- Task and project management
- Goal setting features
- Social capabilities like comments and positive shout-outs
- Cloud services (like iCloud or Microsoft Cloud)
9. Data Management Capabilities – Small Business Essentials
If you previously believed data management doesn’t apply to your industry or business, you’ll want to think again after reading this section. Business data comes in many forms. Your contacts list, sales numbers, employee information, and marketing stats are all examples of business data. Managing all of that data can be hard work. Plus, you should periodically audit your data for accuracy and to gather the information that can inform future business decisions.
How Can I Manage My Small Business’s Data?
The problem of data management does not have a one-size-fits-all solution. Instead, effective data management options exist for every type of business in all stages of growth.
Here are a few customer relationship management (CRM) programs and other types of software that can help you manage your company’s data:
10. Health Insurance – Small Business Essentials
Starting a new business is an exciting and fulfilling experience. However, self-employment doesn’t come with the health insurance benefits frequently offered through an employer. Luckily, you don’t need an employer to get quality health insurance. Instead, you have a few options, such as getting coverage through your partner’s job or using the health insurance marketplace.
Get Coverage Through a Spouse or Partner
If your spouse works full-time for a company that offers health insurance benefits, you and your dependents may be eligible to enroll in their plan. In addition, certain companies, states, and health insurance plans allow you to enroll in your partner’s program regardless of marital status. Have your spouse or partner discuss your options for health insurance coverage with their employer’s HR department, or call the health insurance company directly.
Use the Health Insurance Marketplace
In 2010, the Obama Administration enacted the Affordable Care Act (ACA), known as “Obamacare.” The ACA made healthcare accessible to millions of Americans who would otherwise not have it. Using the Health Insurance Marketplace at Healthcare.gov , anyone can shop around and enroll in the health insurance plan that’s right for them.
Takeaways – Small Business Essentials
Starting your own business can feel intimidating. It’s a huge undertaking, but knowing what you’ll need to ensure success can help reduce some of that stress.
If you plan to expand your solo venture or launch a new small business in 2023, Selfgood has tools to help you save money and help you succeed. Join today for access to all of Selfgood’s incredible benefits.
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The 7 Elements of a Strong Business Model Envisioning the many moving parts of a functioning business is the first step to success.
By Larry Alton • Apr 22, 2015
Opinions expressed by Entrepreneur contributors are their own.
Creating a business model isn't simply about completing your business plan or determining which products to pursue. It's about mapping out how you will create ongoing value for your customers.
Where will your business idea start, how should it progress, and when will you know you've been successful? How will you create value for customers? Follow these simple steps to securing a strong business model .
1. Identify your specific audience.
Targeting a wide audience won't allow your business to hone in on customers who truly need and want your product or service. Instead, when creating your business model, narrow your audience down to two or three detailed buyer personas. Outline each persona's demographics, common challenges and the solutions your company will offer. As an example, Home Depot might appeal to everyone or carry a product the average person needs, but the company's primary target market is homeowners and builders.
Related: The Science of Building Buyer Personas (Infographic)
2. Establish business processes.
Before your business can go live, you need to have an understanding of the activities required to make your business model work. Determine key business activities by first identifying the core aspect of your business's offering. Are you responsible for providing a service, shipping a product or offering consulting? In the case of Ticketbis , an online ticket exchange marketplace, key business processes include marketing and product delivery management.
3. Record key business resources.
What does your company need to carry out daily processes, find new customers and reach business goals? Document essential business resources to ensure your business model is adequately prepared to sustain the needs of your business. Common resource examples may include a website, capital, warehouses, intellectual property and customer lists.
4. Develop a strong value proposition.
How will your company stand out among the competition? Do you provide an innovative service, revolutionary product or a new twist on an old favorite? Establishing exactly what your business offers and why it's better than competitors is the beginning of a strong value proposition. Once you've got a few value propositions defined, link each one to a service or product delivery system to determine how you will remain valuable to customers over time.
Related: How to Develop and Evaluate Your Startup's Value Proposition
5. Determine key business partners.
No business can function properly (let alone reach established goals) without key partners that contribute to the business's ability to serve customers. When creating a business model, select key partners, like suppliers, strategic alliances or advertising partners. Using the previous example of Home Depot, key business partners may be lumber suppliers, parts wholesalers and logistics companies.
6. Create a demand generation strategy.
Unless you're taking a radical approach to launching your company, you'll need a strategy that builds interest in your business, generates leads and is designed to close sales. How will customers find you? More importantly, what should they do once they become aware of your brand? Developing a demand generation strategy creates a blueprint of the customer's journey while documenting the key motivators for taking action.
7. Leave room for innovation.
When launching a company and developing a business model, your business plan is based on many assumptions. After all, until you begin to welcome paying customers, you don't truly know if your business model will meet their ongoing needs. For this reason, it's important to leave room for future innovations. Don't make a critical mistake by thinking your initial plan is a static document. Instead, review it often and implement changes as needed.
Keeping these seven tips in mind will lead to the creation of a solid business plan capable of fueling your startup's success.
Related: 5 Strategies for Generating Consumer Demand
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Business Canvas Essentials is an informative and practical document for all those dreamers, visionaries and entrepreneurs who want to create and implement new business adventures away from the traditional business models, exploring new proposals to understand and represent the different business units in an easy and practical way.
The growth and development of innovation in all areas that surround our daily actions and feelings are evolving dramatically, which makes it imperative to research and develop new business models that interpret and visualize these changes so that they can be represented in a written form.
The content of this material provides a general overview and illustration of the different business models and helps to understand the nature of these models. It explains traditional and experimental models, as well as their dynamics, various innovation techniques, how to position the model in a highly competitive environment and how to approach the reform of a company's business model.
Understanding the concept of Business Model. Review and become familiar with the Business Model Canvas concept and its 9 blocks. Review and become familiar with the concept of Lean Canvas as a business visualization tool and its contribution for new entrepreneurs. Review and understand the different business model patterns. Describe techniques and tools from the design world that can help create more innovative Business Models. Understanding in a general way, 4 strategic areas of study and reinterpretation of Business Models.
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The eight essentials of innovation
It’s no secret: innovation is difficult for well-established companies. By and large, they are better executors than innovators, and most succeed less through game-changing creativity than by optimizing their existing businesses.
Yet hard as it is for such organizations to innovate, large ones as diverse as Alcoa, the Discovery Group, and NASA’s Ames Research Center are actually doing so. What can other companies learn from their approaches and attributes? That question formed the core of a multiyear study comprising in-depth interviews, workshops, and surveys of more than 2,500 executives in over 300 companies, including both performance leaders and laggards, in a broad set of industries and countries (Exhibit 1). What we found were a set of eight essential attributes that are present, either in part or in full, at every big company that’s a high performer in product, process, or business-model innovation.
Since innovation is a complex, company-wide endeavor , it requires a set of crosscutting practices and processes to structure, organize, and encourage it. Taken together, the essentials described in this article constitute just such an operating system, as seen in Exhibit 2. These often overlapping, iterative, and nonsequential practices resist systematic categorization but can nonetheless be thought of in two groups. The first four, which are strategic and creative in nature, help set and prioritize the terms and conditions under which innovation is more likely to thrive. The next four essentials deal with how to deliver and organize for innovation repeatedly over time and with enough value to contribute meaningfully to overall performance.
To be sure, there’s no proven formula for success, particularly when it comes to innovation. While our years of client-service experience provide strong indicators for the existence of a causal relationship between the attributes that survey respondents reported and the innovations of the companies we studied, the statistics described here can only prove correlation. Yet we firmly believe that if companies assimilate and apply these essentials—in their own way, in accordance with their particular context, capabilities, organizational culture, and appetite for risk—they will improve the likelihood that they, too, can rekindle the lost spark of innovation. In the digital age, the pace of change has gone into hyperspeed, so companies must get these strategic, creative, executional, and organizational factors right to innovate successfully.
President John F. Kennedy’s bold aspiration, in 1962, to “go to the moon in this decade” motivated a nation to unprecedented levels of innovation. A far-reaching vision can be a compelling catalyst, provided it’s realistic enough to stimulate action today.
But in a corporate setting, as many CEOs have discovered, even the most inspiring words often are insufficient, no matter how many times they are repeated. It helps to combine high-level aspirations with estimates of the value that innovation should generate to meet financial-growth objectives. Quantifying an “innovation target for growth,” and making it an explicit part of future strategic plans, helps solidify the importance of and accountability for innovation. The target itself must be large enough to force managers to include innovation investments in their business plans. If they can make their numbers using other, less risky tactics, our experience suggests that they (quite rationally) will.
Establishing a quantitative innovation aspiration is not enough, however. The target value needs to be apportioned to relevant business “owners” and cascaded down to their organizations in the form of performance targets and timelines. Anything less risks encouraging inaction or the belief that innovation is someone else’s job.
For example, Lantmännen, a big Nordic agricultural cooperative, was challenged by flat organic growth and directionless innovation. Top executives created an aspirational vision and strategic plan linked to financial targets: 6 percent growth in the core business and 2 percent growth in new organic ventures. To encourage innovation projects, these quantitative targets were cascaded down to business units and, ultimately, to product groups. During the development of each innovation project, it had to show how it was helping to achieve the growth targets for its category and markets. As a result, Lantmännen went from 4 percent to 13 percent annual growth, underpinned by the successful launch of several new brands. Indeed, it became the market leader in premade food only four years after entry and created a new premium segment in this market.
Such performance parameters can seem painful to managers more accustomed to the traditional approach. In our experience, though, CEOs are likely just going through the motions if they don’t use evaluations and remuneration to assess and recognize the contribution that all top managers make to innovation.
Fresh, creative insights are invaluable, but in our experience many companies run into difficulty less from a scarcity of new ideas than from the struggle to determine which ideas to support and scale. At bigger companies, this can be particularly problematic during market discontinuities, when supporting the next wave of growth may seem too risky, at least until competitive dynamics force painful changes.
Innovation is inherently risky, to be sure, and getting the most from a portfolio of innovation initiatives is more about managing risk than eliminating it. Since no one knows exactly where valuable innovations will emerge, and searching everywhere is impractical, executives must create some boundary conditions for the opportunity spaces they want to explore. The process of identifying and bounding these spaces can run the gamut from intuitive visions of the future to carefully scrutinized strategic analyses. Thoughtfully prioritizing these spaces also allows companies to assess whether they have enough investment behind their most valuable opportunities.
During this process, companies should set in motion more projects than they will ultimately be able to finance, which makes it easier to kill those that prove less promising. RELX Group, for example, runs 10 to 15 experiments per major customer segment, each funded with a preliminary budget of around $200,000, through its innovation pipeline every year, choosing subsequently to invest more significant funds in one or two of them, and dropping the rest. “One of the hardest things to figure out is when to kill something,” says Kumsal Bayazit, RELX Group’s chief strategy officer. “It’s a heck of a lot easier if you have a portfolio of ideas.”
Once the opportunities are defined, companies need transparency into what people are working on and a governance process that constantly assesses not only the expected value, timing, and risk of the initiatives in the portfolio but also its overall composition. There’s no single mix that’s universally right. Most established companies err on the side of overloading their innovation pipelines with relatively safe, short-term, and incremental projects that have little chance of realizing their growth targets or staying within their risk parameters. Some spread themselves thinly across too many projects instead of focusing on those with the highest potential for success and resourcing them to win.
These tendencies get reinforced by a sluggish resource-reallocation process. Our research shows that a company typically reallocates only a tiny fraction of its resources from year to year, thereby sentencing innovation to a stagnating march of incrementalism. 1 1. See Stephen Hall, Dan Lovallo, and Reinier Musters, “ How to put your money where your strategy is ,” McKinsey Quarterly , March 2012; and Vanessa Chan, Marc de Jong, and Vidyadhar Ranade, “ Finding the sweet spot for allocating innovation resources ,” McKinsey Quarterly , May 2014.
Innovation also requires actionable and differentiated insights—the kind that excite customers and bring new categories and markets into being. How do companies develop them? Genius is always an appealing approach, if you have or can get it. Fortunately, innovation yields to other approaches besides exceptional creativity.
The rest of us can look for insights by methodically and systematically scrutinizing three areas: a valuable problem to solve, a technology that enables a solution, and a business model that generates money from it. You could argue that nearly every successful innovation occurs at the intersection of these three elements. Companies that effectively collect, synthesize, and “collide” them stand the highest probability of success. “If you get the sweet spot of what the customer is struggling with, and at the same time get a deeper knowledge of the new technologies coming along and find a mechanism for how these two things can come together, then you are going to get good returns,” says Alcoa chairman and chief executive Klaus Kleinfeld.
The insight-discovery process, which extends beyond a company’s boundaries to include insight-generating partnerships, is the lifeblood of innovation. We won’t belabor the matter here, though, because it’s already the subject of countless articles and books. 2 2. See, for example, Marla M. Capozzi, Reneé Dye, and Amy Howe, “ Sparking creativity in teams: An executive’s guide ,” McKinsey Quarterly , April 2011; and Marla M. Capozzi, John Horn, and Ari Kellen, “ Battle-test your innovation strategy ,” McKinsey Quarterly , December 2012. One thing we can add is that discovery is iterative, and the active use of prototypes can help companies continue to learn as they develop, test, validate, and refine their innovations. Moreover, we firmly believe that without a fully developed innovation system encompassing the other elements described in this article, large organizations probably won’t innovate successfully, no matter how effective their insight-generation process is.
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Business-model innovations—which change the economics of the value chain, diversify profit streams, and/or modify delivery models—have always been a vital part of a strong innovation portfolio. As smartphones and mobile apps threaten to upend oldline industries, business-model innovation has become all the more urgent: established companies must reinvent their businesses before technology-driven upstarts do. Why, then, do most innovation systems so squarely emphasize new products? The reason, of course, is that most big companies are reluctant to risk tampering with their core business model until it’s visibly under threat. At that point, they can only hope it’s not too late.
Leading companies combat this troubling tendency in a number of ways. They up their game in market intelligence, the better to separate signal from noise. They establish funding vehicles for new businesses that don’t fit into the current structure. They constantly reevaluate their position in the value chain, carefully considering business models that might deliver value to priority groups of new customers. They sponsor pilot projects and experiments away from the core business to help combat narrow conceptions of what they are and do. And they stress-test newly emerging value propositions and operating models against countermoves by competitors.
Amazon does a particularly strong job extending itself into new business models by addressing the emerging needs of its customers and suppliers. In fact, it has included many of its suppliers in its customer base by offering them an increasingly wide range of services, from hosted computing to warehouse management. Another strong performer, the Financial Times , was already experimenting with its business model in response to the increasing digitalization of media when, in 2007, it launched an innovative subscription model, upending its relationship with advertisers and readers. “We went against the received wisdom of popular strategies at the time,” says Caspar de Bono, FT board member and managing director of B2B. “We were very deliberate in getting ahead of the emerging structural change, and the decisions turned out to be very successful.” In print’s heyday, 80 percent of the FT ’s revenue came from print advertising. Now, more than half of it comes from content, and two-thirds of circulation comes from digital subscriptions.
Virulent antibodies undermine innovation at many large companies. Cautious governance processes make it easy for stifling bureaucracies in marketing, legal, IT, and other functions to find reasons to halt or slow approvals. Too often, companies simply get in the way of their own attempts to innovate. A surprising number of impressive innovations from companies were actually the fruit of their mavericks, who succeeded in bypassing their early-approval processes. Clearly, there’s a balance to be maintained: bureaucracy must be held in check, yet the rush to market should not undermine the cross-functional collaboration, continuous learning cycles, and clear decision pathways that help enable innovation. Are managers with the right knowledge, skills, and experience making the crucial decisions in a timely manner, so that innovation continually moves through an organization in a way that creates and maintains competitive advantage, without exposing a company to unnecessary risk?
Companies also thrive by testing their promising ideas with customers early in the process, before internal forces impose modifications that blur the original value proposition. To end up with the innovation initially envisioned, it’s necessary to knock down the barriers that stand between a great idea and the end user. Companies need a well-connected manager to take charge of a project and be responsible for the budget, time to market, and key specifications—a person who can say yes rather than no. In addition, the project team needs to be cross-functional in reality, not just on paper. This means locating its members in a single place and ensuring that they give the project a significant amount of their time (at least half) to support a culture that puts the innovation project’s success above the success of each function.
Cross-functional collaboration can help ensure end-user involvement throughout the development process. At many companies, marketing’s role is to champion the interests of end users as development teams evolve products and to help ensure that the final result is what everyone first envisioned. But this responsibility is honored more often in the breach than in the observance. Other companies, meanwhile, rationalize that consumers don’t necessarily know what they want until it becomes available. This may be true, but customers can certainly say what they don’t like. And the more quickly and frequently a project team gets—and uses—feedback, the more quickly it gets a great end result.
Some ideas, such as luxury goods and many smartphone apps, are destined for niche markets. Others, like social networks, work at global scale. Explicitly considering the appropriate magnitude and reach of a given idea is important to ensuring that the right resources and risks are involved in pursuing it. The seemingly safer option of scaling up over time can be a death sentence. Resources and capabilities must be marshaled to make sure a new product or service can be delivered quickly at the desired volume and quality. Manufacturing facilities, suppliers, distributors, and others must be prepared to execute a rapid and full rollout.
For example, when TomTom launched its first touch-screen navigational device, in 2004, the product flew off the shelves. By 2006, TomTom’s line of portable navigation devices reached sales of about 5 million units a year, and by 2008, yearly volume had jumped to more than 12 million. “That’s faster market penetration than mobile phones” had, says Harold Goddijn, TomTom’s CEO and cofounder. While TomTom’s initial accomplishment lay in combining a well-defined consumer problem with widely available technology components, rapid scaling was vital to the product’s continuing success. “We doubled down on managing our cash, our operations, maintaining quality, all the parts of the iceberg no one sees,” Goddijn adds. “We were hugely well organized.”
In the space of only a few years, companies in nearly every sector have conceded that innovation requires external collaborators. Flows of talent and knowledge increasingly transcend company and geographic boundaries. Successful innovators achieve significant multiples for every dollar invested in innovation by accessing the skills and talents of others. In this way, they speed up innovation and uncover new ways to create value for their customers and ecosystem partners.
Smart collaboration with external partners, though, goes beyond merely sourcing new ideas and insights; it can involve sharing costs and finding faster routes to market. Famously, the components of Apple’s first iPod were developed almost entirely outside the company; by efficiently managing these external partnerships, Apple was able to move from initial concept to marketable product in only nine months. NASA’s Ames Research Center teams up not just with international partners—launching joint satellites with nations as diverse as Lithuania, Saudi Arabia, and Sweden—but also with emerging companies, such as SpaceX.
High-performing innovators work hard to develop the ecosystems that help deliver these benefits. Indeed, they strive to become partners of choice, increasing the likelihood that the best ideas and people will come their way. That requires a systematic approach. First, these companies find out which partners they are already working with; surprisingly few companies know this. Then they decide which networks—say, four or five of them—they ideally need to support their innovation strategies. This step helps them to narrow and focus their collaboration efforts and to manage the flow of possibilities from outside the company. Strong innovators also regularly review their networks, extending and pruning them as appropriate and using sophisticated incentives and contractual structures to motivate high-performing business partners. Becoming a true partner of choice is, among other things, about clarifying what a partnership can offer the junior member: brand, reach, or access, perhaps. It is also about behavior. Partners of choice are fair and transparent in their dealings.
Moreover, companies that make the most of external networks have a good idea of what’s most useful at which stages of the innovation process. In general, they cast a relatively wide net in the early going. But as they come closer to commercializing a new product or service, they become narrower and more specific in their sourcing, since by then the new offering’s design is relatively set.
How do leading companies stimulate, encourage, support, and reward innovative behavior and thinking among the right groups of people? The best companies find ways to embed innovation into the fibers of their culture, from the core to the periphery.
They start back where we began: with aspirations that forge tight connections among innovation, strategy, and performance. When a company sets financial targets for innovation and defines market spaces, minds become far more focused. As those aspirations come to life through individual projects across the company, innovation leaders clarify responsibilities using the appropriate incentives and rewards.
The Discovery Group, for example, is upending the medical and life-insurance industries in its native South Africa and also has operations in the United Kingdom, the United States, and China, among other locations. Innovation is a standard measure in the company’s semiannual divisional scorecards—a process that helps mobilize the organization and affects roughly 1,000 of the company’s business leaders. “They are all required to innovate every year,” Discovery founder and CEO Adrian Gore says of the company’s business leaders. “They have no choice.”
Organizational changes may be necessary, not because structural silver bullets exist—we’ve looked hard for them and don’t think they do—but rather to promote collaboration, learning, and experimentation. Companies must help people to share ideas and knowledge freely, perhaps by locating teams working on different types of innovation in the same place, reviewing the structure of project teams to make sure they always have new blood, ensuring that lessons learned from success and failure are captured and assimilated, and recognizing innovation efforts even when they fall short of success.
Internal collaboration and experimentation can take years to establish, particularly in large, mature companies with strong cultures and ways of working that, in other respects, may have served them well. Some companies set up “innovation garages” where small groups can work on important projects unconstrained by the normal working environment while building new ways of working that can be scaled up and absorbed into the larger organization. NASA, for example, has ten field centers. But the space agency relies on the Ames Research Center, in Silicon Valley, to maintain what its former director, Dr. Pete Worden, calls “the character of rebels” to function as “a laboratory that’s part of a much larger organization.”
Big companies do not easily reinvent themselves as leading innovators. Too many fixed routines and cultural factors can get in the way. For those that do make the attempt, innovation excellence is often built in a multiyear effort that touches most, if not all, parts of the organization. Our experience and research suggest that any company looking to make this journey will maximize its probability of success by closely studying and appropriately assimilating the leading practices of high-performing innovators. Taken together, these form an essential operating system for innovation within a company’s organizational structure and culture.
Marc de Jong is a principal in McKinsey’s Amsterdam office, Nathan Marston is a principal in the London office, and Erik Roth is a principal in the Shanghai office.
The authors wish to thank Jill Hellman and McKinsey’s Peet van Biljon for their contributions to this article.
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Competing Through Business Models (A): Business Model Essentials, Module Note
By: Ramon Casadesus-Masanell, Joan Enric Ricart Costa
This note defines the concepts of business model and the value loop. It also introduces business model representations and proposes four tests for evaluating business models in isolation. This is the…
- Length: 23 page(s)
- Publication Date: Jan 17, 2008
- Discipline: Strategy
- Product #: 708452-PDF-ENG
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This note defines the concepts of business model and the value loop. It also introduces business model representations and proposes four tests for evaluating business models in isolation. This is the first note in a series of three written for the HBS elective course "Competing through Business Models."
Jan 17, 2008 (Revised: Aug 31, 2009)
Harvard Business School
Small Business Trends
How to start a reselling business.
In recent years, the gig economy has expanded dramatically, presenting an array of opportunities for those looking to harness the benefits of a flexible and profitable business model. At the forefront of this trend is the concept of reselling — a venture that allows entrepreneurs to blend their passion for discovering hidden treasures with the mechanics of e-commerce. This article highlights how to start a business , walking you through the essentials of transforming your keen eye for value into a profitable enterprise.
The Evolution of Reselling
Once upon a time, reselling was a term typically reserved for pawn shops and garage sales. However, the digital era has rewritten the playbook. Technological advancements and the proliferation of online marketplaces have reshaped the way we think about the buy-and-sell model. From the convenience of our smartphones, we can now access a global audience, turning what was once a local hustle into an expansive online resale business. This shift has democratized the ability to earn from anywhere, provided you have a connection and a collection.
Reselling Business Ideas
Whether you’re captivated by the charm of vintage fashion, or you geek out over the latest tech gadgets, finding the best items to flip can turn into a profitable business venture. To get your gears turning, here’s a list of popular and emerging niches within the reseller market:
- Vintage Clothing : Step into the world of throwback fashion where nostalgia meets the runway.
- Collectibles : From rare stamps to limited edition comic books, the thrill of the hunt can prove quite lucrative.
- Tech Gadgets : With tech continuously evolving, gently used gadgets are always in demand.
- Books : Whether rare editions or just last year’s bestsellers, books can open the chapter to a rewarding venture.
- Furniture : Upcycled or untouched, unique furniture finds can furnish your account with solid returns.
- Sports Equipment : Help others play the game without breaking the bank and score some profit in the process.
Steps to Become a Reseller
Starting a reseller business can be an exciting and lucrative endeavor, but it does require careful planning and strategic action. Below are key steps to become a reseller and get your business running smoothly.
Before diving into the business, you must draft a business plan , which will be your roadmap to success. For detailed guidance on each section of your business plan, you may want to learn how to write a business plan , which can help you in securing funding or bringing in partners.
Small Business Deals
To ensure you’re on the right track, consider using a business startup checklist to cover all the essential steps. As you develop the framework of your business, it’s essential to understand the common business structures and choose the right one for your operations.
Choosing a Reselling Business Model
Your choice of business model is critical to the success of your reselling venture. Reseller business ideas, whether it be dropshipping, wholesale purchasing, or consignment, come with their own set of benefits and considerations:
- Dropshipping : This model allows you to sell products without holding any inventory. You simply take orders and pass them on to a supplier who then ships the goods directly to your customers. The advantage is low overhead, but you have less control over inventory and shipping times.
- Wholesale : Buying goods in bulk at a discount and selling them at a retail price can offer you a healthy profit margin. However, it requires significant upfront investment and space for inventory.
- Consignment : You sell goods on behalf of a third party, paying them once the items sell. This model can keep initial costs down and vary your offerings without risk.
Consider which model aligns with your financial capacity, storage space, and comfort with risk.
Sourcing for Your Reseller Business
The heart of your reselling business lies in your ability to source attractive products. Here are several methods to build a diverse inventory:
- Scour garage sales and thrift stores for unique finds.
- Explore online options like eBay, Craigslist, or estate sales for deals.
- Form partnerships with local artisans and crafters to resell their goods.
- Attend trade shows and auctions for bulk buys or rare items.
- Look into liquidation sales to purchase inventory at a significantly reduced cost.
By diversifying your sourcing methods, you’ll create a rich, varied collection that appeals to a wide customer base.
Launching Your Own E-commerce Business for Reselling
When it comes to selling your finds, an e-commerce platform can be your greatest ally. Here’s how to leverage online platforms and why you might consider your own e-commerce site:
- Utilize established platforms : Websites like eBay, Etsy, and Amazon make it easy to reach millions of potential customers. They offer ready-to-go infrastructure but come with fees and competition.
- Build your own e-commerce site : With tools like Shopify or WooCommerce, you can create a branded online store. This avenue provides full control over your customer’s experience and can foster brand loyalty.
Setting Up Your Online Store for Reselling
Establishing an e-commerce store is a multi-step process that demands attention to detail. The platform you choose, such as Shopify, WooCommerce, or BigCommerce, should align with your technical skills and business needs. Payment gateway integration is essential, with options like PayPal, Stripe, or Square offering secure transaction processes. User experience is king in online retail, so ensure your site is intuitive, aesthetically pleasing, and reflects your brand. Mobile optimization is non-negotiable, as a significant portion of online shopping is done via smartphones.
When setting up your online store, a website startup guide can help you navigate through the process of creating an engaging online presence.
Navigating Sales Tax in Your Reseller Business
Sales tax can be a labyrinth for new business owners. As a reseller, you need to understand the sales tax requirements for each region you sell into. Begin by applying for a sales tax permit in your state and consider using automated tax software to manage out-of-state sales tax obligations. Staying informed and compliant is crucial; late payments or uncollected taxes can lead to penalties.
Sculpting a Reseller Brand Identity
Your brand is the story you tell your customers and how you make them feel. A logo that captures the essence of your business, consistent color schemes, and a relatable narrative elevate your brand. Even the product descriptions are part of your brand voice; they should tell a story that resonates with your audience. This emotional connection can set you apart from competitors.
SEO and Digital Marketing for Your Reselling Business
Search engine optimization (SEO) is the practice of increasing your website’s visibility in search engines. Use relevant keywords in your product titles and descriptions for better SEO. Social media marketing is another powerful tool, providing a platform to engage with customers, showcase your products, and drive traffic to your site.
Nurturing Client Relationships in Reselling
The cornerstone of a successful reselling business is strong client relationships. Encourage repeat business through excellent customer service, requesting feedback, and responding to it constructively. Personalized experiences and loyalty programs can also enhance customer retention.
Overcoming Challenges in The Reseller Business
In the reseller business, you’re likely to encounter several challenges that can affect your operation’s efficiency and profitability. Here are strategies to tackle some common issues:
- Use inventory management software to track stock levels, sales patterns, and order history.
- Develop a system for regular inventory audits to maintain accuracy.
- Establish relationships with reliable shippers and consider multiple shipping options for redundancy.
- Create a detailed quality checklist for sourcing products.
- Train staff or personally handle the quality control process to maintain high standards.
- Implement a customer feedback loop to identify and rectify quality concerns quickly.
- Stay informed about industry trends by subscribing to trade magazines, online forums, and reports.
- Use social media and Google Analytics to understand customer interests and behavior.
- Be flexible and willing to pivot your product line to adapt to changing customer preferences.
Maintaining agility and focusing on operational efficiency can significantly mitigate these challenges.
FAQs: How to Start a Reselling Business
Is the reselling model more profitable than conventional retail.
The profitability of reselling versus traditional retail depends on several factors, including overhead costs, sourcing, and operational efficiency. Reselling can have lower upfront costs and be highly profitable if managed effectively.
When is reselling illegal?
Reselling is illegal when it involves counterfeit goods, violates copyright or trademark laws, or fails to comply with tax requirements. Always verify the authenticity of products and adhere to legal and tax obligations to ensure your reselling practices are legitimate.
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What Is a Business Model?
Understanding business models, evaluating successful business models, how to create a business model.
- Business Model FAQs
The Bottom Line
Learn to understand a company's profit-making plan
Katrina Ávila Munichiello is an experienced editor, writer, fact-checker, and proofreader with more than fourteen years of experience working with print and online publications.
Investopedia / Laura Porter
The term business model refers to a company's plan for making a profit . It identifies the products or services the business plans to sell, its identified target market , and any anticipated expenses . Business models are important for both new and established businesses. They help new, developing companies attract investment, recruit talent, and motivate management and staff.
Established businesses should regularly update their business model or they'll fail to anticipate trends and challenges ahead. Business models also help investors evaluate companies that interest them and employees understand the future of a company they may aspire to join.
- A business model is a company's core strategy for profitably doing business.
- Models generally include information like products or services the business plans to sell, target markets, and any anticipated expenses.
- There are dozens of types of business models including retailers, manufacturers, fee-for-service, or freemium providers.
- The two levers of a business model are pricing and costs.
- When evaluating a business model as an investor, consider whether the product being offer matches a true need in the market.
A business model is a high-level plan for profitably operating a business in a specific marketplace. A primary component of the business model is the value proposition . This is a description of the goods or services that a company offers and why they are desirable to customers or clients, ideally stated in a way that differentiates the product or service from its competitors.
A new enterprise's business model should also cover projected startup costs and financing sources, the target customer base for the business, marketing strategy , a review of the competition, and projections of revenues and expenses. The plan may also define opportunities in which the business can partner with other established companies. For example, the business model for an advertising business may identify benefits from an arrangement for referrals to and from a printing company.
Successful businesses have business models that allow them to fulfill client needs at a competitive price and a sustainable cost. Over time, many businesses revise their business models from time to time to reflect changing business environments and market demands .
When evaluating a company as a possible investment, the investor should find out exactly how it makes its money. This means looking through the company's business model. Admittedly, the business model may not tell you everything about a company's prospects. But the investor who understands the business model can make better sense of the financial data.
A common mistake many companies make when they create their business models is to underestimate the costs of funding the business until it becomes profitable. Counting costs to the introduction of a product is not enough. A company has to keep the business running until its revenues exceed its expenses.
One way analysts and investors evaluate the success of a business model is by looking at the company's gross profit . Gross profit is a company's total revenue minus the cost of goods sold (COGS). Comparing a company's gross profit to that of its main competitor or its industry sheds light on the efficiency and effectiveness of its business model. Gross profit alone can be misleading, however. Analysts also want to see cash flow or net income . That is gross profit minus operating expenses and is an indication of just how much real profit the business is generating.
The two primary levers of a company's business model are pricing and costs. A company can raise prices, and it can find inventory at reduced costs. Both actions increase gross profit. Many analysts consider gross profit to be more important in evaluating a business plan. A good gross profit suggests a sound business plan. If expenses are out of control, the management team could be at fault, and the problems are correctable. As this suggests, many analysts believe that companies that run on the best business models can run themselves.
When evaluating a company as a possible investment, find out exactly how it makes its money (not just what it sells but how it sells it). That's the company's business model.
Types of Business Models
There are as many types of business models as there are types of business. For instance, direct sales, franchising , advertising-based, and brick-and-mortar stores are all examples of traditional business models. There are hybrid models as well, such as businesses that combine internet retail with brick-and-mortar stores or with sporting organizations like the NBA .
Below are some common types of business models; note that the examples given may fall into multiple categories.
One of the more common business models most people interact with regularly is the retailer model. A retailer is the last entity along a supply chain. They often buy finished goods from manufacturers or distributors and interface directly with customers.
Example: Costco Wholesale
A manufacturer is responsible for sourcing raw materials and producing finished products by leveraging internal labor, machinery, and equipment. A manufacturer may make custom goods or highly replicated, mass produced products. A manufacturer can also sell goods to distributors, retailers, or directly to customers.
Example: Ford Motor Company
Instead of selling products, fee-for-service business models are centered around labor and providing services. A fee-for-service business model may charge by an hourly rate or a fixed cost for a specific agreement. Fee-for-service companies are often specialized, offering insight that may not be common knowledge or may require specific training.
Example: DLA Piper LLP
Subscription-based business models strive to attract clients in the hopes of luring them into long-time, loyal patrons. This is done by offering a product that requires ongoing payment, usually in return for a fixed duration of benefit. Though largely offered by digital companies for access to software, subscription business models are also popular for physical goods such as monthly reoccurring agriculture/produce subscription box deliveries.
Freemium business models attract customers by introducing them to basic, limited-scope products. Then, with the client using their service, the company attempts to convert them to a more premium, advance product that requires payment. Although a customer may theoretically stay on freemium forever, a company tries to show the benefit of what becoming an upgraded member can hold.
Example: LinkedIn/LinkedIn Premium
Some companies can reside within multiple business model types at the same time for the same product. For example, Spotify (a subscription-based model) also offers free version and a premium version.
If a company is concerned about the cost of attracting a single customer, it may attempt to bundle products to sell multiple goods to a single client. Bundling capitalizes on existing customers by attempting to sell them different products. This can be incentivized by offering pricing discounts for buying multiple products.
Marketplaces are somewhat straight-forward: in exchange for hosting a platform for business to be conducted, the marketplace receives compensation. Although transactions could occur without a marketplace, this business models attempts to make transacting easier, safer, and faster.
Affiliate business models are based on marketing and the broad reach of a specific entity or person's platform. Companies pay an entity to promote a good, and that entity often receives compensation in exchange for their promotion. That compensation may be a fixed payment, a percentage of sales derived from their promotion, or both.
Example: social media influencers such as Lele Pons, Zach King, or Chiara Ferragni.
Aptly named after the product that invented the model, this business model aims to sell a durable product below cost to then generate high-margin sales of a disposable component of that product. Also referred to as the "razor and blade model", razor blade companies may give away expensive blade handles with the premise that consumers need to continually buy razor blades in the long run.
Example: HP (printers and ink)
"Tying" is an illegal razor blade model strategy that requires the purchase of an unrelated good prior to being able to buy a different (and often required) good. For example, imagine Gillette released a line of lotion and required all customers to buy three bottles before they were allowed to purchase disposable razor blades.
Reverse Razor Blade
Instead of relying on high-margin companion products, a reverse razor blade business model tries to sell a high-margin product upfront. Then, to use the product, low or free companion products are provided. This model aims to promote that upfront sale, as further use of the product is not highly profitable.
Example: Apple (iPhones + applications)
The franchise business model leverages existing business plans to expand and reproduce a company at a different location. Often food, hardware, or fitness companies, franchisers work with incoming franchisees to finance the business, promote the new location, and oversee operations. In return, the franchisor receives a percentage of earnings from the franchisee.
Example: Domino's Pizza
Instead of charging a fixed fee, some companies may implement a pay-as-you-go business model where the amount charged depends on how much of the product or service was used. The company may charge a fixed fee for offering the service in addition to an amount that changes each month based on what was consumed.
Example: Utility companies
A brokerage business model connects buyers and sellers without directly selling a good themselves. Brokerage companies often receive a percentage of the amount paid when a deal is finalized. Most common in real estate, brokers are also prominent in construction/development or freight.
There is no "one size fits all" when making a business model. Different professionals may suggest taking different steps when creating a business and planning your business model. Here are some broad steps one can take to create their plan:
- Identify your audience. Most business model plans will start with either defining the problem or identifying your audience and target market . A strong business model will understand who you are trying to target so you can craft your product, messaging, and approach to connecting with that audience.
- Define the problem. In addition to understanding your audience, you must know what problem you are trying to solve. A hardware company sells products for home repairs. A restaurant feeds the community. Without a problem or a need, your business may struggle to find its footing if there isn't a demand for your services or products.
- Understand your offerings. With your audience and problem in mind, consider what you are able to offer. What products are you interested in selling, and how does your expertise match that product? In this stage of the business model, the product is tweaked to adapt to what the market needs and what you're able to provide.
- Document your needs. With your product selected, consider the hurdles your company will face. This includes product-specific challenges as well as operational difficulties. Make sure to document each of these needs to assess whether you are ready to launch in the future.
- Find key partners. Most businesses will leverage other partners in driving company success. For example, a wedding planner may forge relationships with venues, caterers, florists, and tailors to enhance their offering. For manufacturers, consider who will provide your materials and how critical your relationship with that provider will be.
- Set monetization solutions. Until now, we haven't talked about how your company will make money. A business model isn't complete until it identifies how it will make money. This includes selecting the strategy or strategies above in determining your business model type. This might have been a type you had in mind but after reviewing your clients needs, a different type might now make more sense.
- Test your model. When your full plan is in place, perform test surveys or soft launches. Ask how people would feel paying your prices for your services. Offer discounts to new customers in exchange for reviews and feedback. You can always adjust your business model, but you should always consider leveraging direct feedback from the market when doing so.
Instead of reinventing the wheel, consider what competing companies are doing and how you can position yourself in the market. You may be able to easily spot gaps in the business model of others.
Criticism of Business Models
Joan Magretta, the former editor of the Harvard Business Review, suggests there are two critical factors in sizing up business models. When business models don't work, she states, it's because the story doesn't make sense and/or the numbers just don't add up to profits. The airline industry is a good place to look to find a business model that stopped making sense. It includes companies that have suffered heavy losses and even bankruptcy .
For years, major carriers such as American Airlines, Delta, and Continental built their businesses around a hub-and-spoke structure , in which all flights were routed through a handful of major airports. By ensuring that most seats were filled most of the time, the business model produced big profits.
However, a competing business model arose that made the strength of the major carriers a burden. Carriers like Southwest and JetBlue shuttled planes between smaller airports at a lower cost. They avoided some of the operational inefficiencies of the hub-and-spoke model while forcing labor costs down. That allowed them to cut prices, increasing demand for short flights between cities.
As these newer competitors drew more customers away, the old carriers were left to support their large, extended networks with fewer passengers. The problem became even worse when traffic fell sharply following the September 11 terrorist attacks in 2001 . To fill seats, these airlines had to offer more discounts at even deeper levels. The hub-and-spoke business model no longer made sense.
Example of Business Models
Consider the vast portfolio of Microsoft. Over the past several decades, the company has expanded its product line across digital services, software, gaming, and more. Various business models, all within Microsoft, include but are not limited to:
- Productivity and Business Processes: Microsoft offers subscriptions to Office products and LinkedIn. These subscriptions may be based off product usage (i.e. the amount of data being uploaded to SharePoint).
- Intelligent Cloud: Microsoft offers server products and cloud services for a subscription. This also provide services and consulting.
- More Personal Computing: Microsoft sells physically manufactured products such as Surface, PC components, and Xbox hardware. Residual Xbox sales include content, services, subscriptions, royalties, and advertising revenue.
A business model is a strategic plan of how a company will make money. The model describes the way a business will take its product, offer it to the market, and drive sales. A business model determines what products make sense for a company to sell, how it wants to promote its products, what type of people it should try to cater to, and what revenue streams it may expect.
What Is an Example of a Business Model?
Best Buy, Target, and Walmart are some of the largest examples of retail companies. These companies acquire goods from manufacturers or distributors to sell directly to the public. Retailers interface with their clients and sell goods, though retails may or may not make the actual goods they sell.
What Are the Main Types of Business Models?
Retailers and manufacturers are among the primary types of business models. Manufacturers product their own goods and may or may not sell them directly to the public. Meanwhile, retails buy goods to later resell to the public.
How Do I Build a Business Model?
There are many steps to building a business model, and there is no single consistent process among business experts. In general, a business model should identify your customers, understand the problem you are trying to solve, select a business model type to determine how your clients will buy your product, and determine the ways your company will make money. It is also important to periodically review your business model; once you've launched, feel free to evaluate your plan and adjust your target audience, product line, or pricing as needed.
A company isn't just an entity that sells goods. It's an ecosystem that must have a plan in plan on who to sell to, what to sell, what to charge, and what value it is creating. A business model describes what an organization does to systematically create long-term value for its customers. After building a business model, a company should have stronger direction on how it wants to operate and what its financial future appears to be.
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5 Business Models to Consider When Starting a Tech Company
- 20 Jul 2023
What separates successful from unsuccessful startups? Is it their innovative ideas , the way their products fill a market need , or how they distribute their offerings and make money? Is it their founders and teams or the investors and partners backing them?
According to the online course Launching Tech Ventures , it’s all of the above—which also comprise a startup’s business model.
“As an entrepreneur, the onus is on you to construct each element of your startup business model through a process of search and discovery,” says Harvard Business School Senior Lecturer Jeffrey Bussgang, who teaches Launching Tech Ventures. “In parallel, you must evaluate those elements to ensure you’re building a sustainable, valuable company. To do so, each business model element must be aligned.”
To help launch your venture on the right track, here’s a breakdown of a business model’s eight components and five examples to consider.
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The 8 Components of a Startup Business Model
A business model is a plan for how your business will succeed. You can define success in terms of finances, product-market fit , sustainable production and distribution, or reaching and converting customers.
In Launching Tech Ventures , Bussgang presents the eight components of a business model using the Diamond-Square framework, coined by HBS Professor Thomas Eisenmann.
The first four facets are internal and operational in nature, and the remaining four encompass the stakeholders involved:
- Customer value proposition (CVP) : How will your venture deliver value?
- Go-to-market (GTM) strategy : How will your venture reach customers?
- Profit formula (PF): How will you make money?
- Technology and operations management (T&O): How will you create and maintain your product?
- Founders: Are they a strong fit for the opportunity and business model?
- Team : Do they complement one another? Can you fill any gaps?
- Investors : Who have you assembled to finance your business? Are you all aligned?
- Partners: Who have you selected to aid in your execution? How will they help?
Determining your business model is critical to mapping your direction and goals before launch. All eight components work together to form yours, so it’s crucial to carefully craft each.
“Not all business models are created equal,” Bussgang says in Launching Tech Ventures . “Some business models yield companies that are valued dramatically differently than others.”
The term “business model” often refers to how you deliver your product and drive revenue, or your GTM strategy and PF from the Diamond-Square framework. To decide how to make money and reach end users, here are five business models to consider.
Related: 5 Skills Needed to Launch a Successful Tech Business
5 Examples of Tech Startup Business Models
1. freemium model.
The freemium model—a portmanteau of the words “free” and “premium”—is popular for directly distributing to your target audience. This model offers one tier of your product for free and charges users for the full or upgraded version.
One tech startup that uses a freemium model is the screen time regulation app One Sec . It pairs with other apps so that, upon opening a particular one, you’re prompted to take a deep breath and receive statistics on how many times you’ve attempted to open it that day, followed by the choice to continue or exit.
One Sec offers one free app pairing. If you’d like to use it for multiple apps, unlock more breathing exercises, and access additional features, you must pay for the premium version.
A freemium model can be effective because it gives users a taste of the product experience before purchase. If they love the free version, they may be inclined to upgrade to the premium one.
The downside is that, sometimes, users are content with the free version and never convert to paying customers. Ensure your premium version offers features your target audience is willing to pay for before committing to a freemium model.
2. Advertisement-Based Model
If you’d rather offer your product for free, an advertisement-based model may be the right fit. Like the freemium model, it delivers your product directly to your end user, but the profit formula differs. With an advertisement-based model, you sell ad space within your product to other businesses to bring in revenue.
This model is effective when your product creates enough value for users that they engage with it despite the presence of ads. Social media apps, such as Facebook and Instagram , are common examples. You can sign up and access all their features, knowing you’ll receive ads.
Another option is to combine the freemium and advertisement-based models—like some streaming platforms do—by offering your product’s free version with ads and the premium version without them.
3. Employee Benefit Model
If your tech startup offers products focused on well-being, the most effective way to reach your end users may be through their employers or insurance providers. In the employee benefit model, your product is free to your end user and paid for by a corporation to offer as a benefit.
For example, caregiver support app ianacare partners with employee assistance programs and human resources teams. Together, they aggregate end users’ resources—including their employee benefits—into the ianacare app so they feel supported personally and professionally.
To sell to employers, ianacare cites several statistics on its website about working caregivers, including the 80 percent who report a loss of productivity at work and the 32 percent who’ve voluntarily left a job to care for a loved one. If an employee benefit model is right for your startup, ensure you communicate why your product will help boost companies’ employee productivity, retention rate, or satisfaction.
In addition to its employee benefit model, ianacare uses a direct distribution method by allowing individuals to download and sign up for the app. Certain features are “locked” and can only be accessed through a partnership with the user’s employer.
In Launching Tech Ventures , Bussgang recommends using a mix of direct and indirect methods to reach your target audience.
“Do you have the right mix of direct and indirect channels to educate, support, and distribute the product to customers in a repeatable and scalable fashion?” Bussgang prompts.
Ask yourself this question when crafting your business model.
4. Intermediation Model
Another business model to consider is intermediation, in which your business acts as the bridge between your product and end user.
For example, travel sites such as Booking.com and Expedia act as intermediaries between you and airlines, hotels, and vehicle rental agencies. You have the option to purchase tickets and book accommodations directly from each provider, but doing so through a site provides the ease of doing everything in one place. It also grants access to potentially greater deals and the convenience of comparing options.
If you can think of a way your venture would add value to the customer experience as an intermediary, consider using this model.
5. Disintermediation Model
The opposite can also make a strong business model. Disintermediation removes a step in the supply chain process to streamline product delivery.
A well-known example of disintermediation is e-commerce giant Amazon , which removes retailers’ transaction and delivery processes, simplifying the experience for the seller and end user.
A disintermediation model is a good fit for scenarios that seem cumbersome or complex. Could your product leverage innovative technology to remove one or more steps in a process? Doing so can create value for you and your end user while driving profit.
Selecting the Right Business Model for Your Tech Company
Your tech startup’s business model is a critical decision that can impact whether it succeeds or fails. When thinking it through, consider how the eight elements impact each other.
“You can’t focus on individual pieces of the model in isolation,” Bussgang says in Launching Tech Ventures. “You need to think about each element—your value proposition, go-to-market strategy, profit formula, and tech and operations management—in a holistic fashion so that you can align them clearly.”
One way to gain the perspective needed to craft your business model is by learning from tech entrepreneurs who came before you.
Launching Tech Ventures features several founders, team members, and investors who offer first-hand insight into the challenges and processes of launching a tech business—from ideation to growth stage.
Are you interested in building the skills to launch a viable, valuable tech startup? Explore Launching Tech Ventures —one of our online entrepreneurship and innovation courses —and download our free guide on how to start your entrepreneurial journey.
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Competing Through Business Models (A): Business Model Essentials, Module Note
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Publication Date: January 17, 2008
Source: Harvard Business School
This note defines the concepts of business model and the value loop. It also introduces business model representations and proposes four tests for evaluating business models in isolation. This is the first note in a series of three written for the HBS elective course "Competing through Business Models."
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The SaaS Business Model: Essentials, Stages and Benefits
The SaaS business model has become one of the rapidly developing and changing business models since “SaaS” was first coined by John Koenig at a conference in March 2005. Thinking of its history, this business model is relatively new, but it is also a highly demanded model with a huge market value. Looking at SaaS companies like Zoom, Slack, Shopify and many more, it seems like we will be more acquainted with this model soon. But, what is the SaaS business model exactly? How does it work? What are its benefits? In this article, we will dive into the SaaS business model and explore its essentials and benefits.
What is the SaaS Business Model?
The basic definition of the SaaS business model is selling cloud-based software to its customers via a subscription model. This may be a monthly or annual subscription or per user or business.
In other words, it provides hosting in a software application and makes it accessible to clients on any internet-enabled device. Subscription payment underlies this model and, therefore, is at the very centre of it.
With this subscription-based business model, SaaS differs from traditional business models that rely on one-time purchases.
This difference between the SaaS business model and other traditional business models wipes out the need for an end-user licence. It enables its customers to be licenced to easily log in to their account and get full access rather than setting up the software and infrastructures they bought.
What are the Essentials of the SaaS Business Model?
- Recurring Revenue SaaS doesn’t sell product, sell a long-term service. As it differs from buying a product, this subsription-based business model allows for predictable revenue forecasts. Looking ahead with a good certainty is one of the essentials that constructs this business model.
- Pivoting SaaS product is subject to develop constantly. While other business models establish a developed new version of their previous product, SaaS consistently improve the existing product and provides small updates to its services regularly. This minimizes the time customers experience user downtime.
- Metrics Every business and industry rely on metrics. It always matter to keep track. However, SaaS has different metrics to measure a company’s financial, customer engagement and product management issues. They keep the track of health and sustainability of their operations with SaaS Metrics .
What Are the Stages of SaaS Business Model?
It takes a relatively good amount of time to create a SaaS business model. Like many other business models, it can be broken down into three stages.
- Startup After long hours of planning, finally you start your journey. You have a well-developed idea on solving an existing problem in the industry and its time to start up! In the early phase of a SaaS business, your product is still in its development process including initial traction processes. Therefore, in this stage, you should identify your potential customers, serve the value of your product to them Other things to focus on should be refining the product and features, establishing business relationships, making the first hires and seeking for financial backing. The questions to ask are “What is my target audience?” “How can I engage with them?”, “Does my product works well?” and “What kind of operations my business need?”
- Growth In the growth stage, things start to speed up. This stage is an important transition phase for your SaaS business. Therefore, the full focus should be on raising funds, investing in product and implementing metrics and analytics. One of the essential aspects of this stage is to efficiently maintain your customer onboarding process to reach more customers while retaining value proposition. You should ask, “Is it possible to find funding at this level of my product?” and “Are my existing audience pleased with my product and features?” and “ How to Increase SaaS User Engagement? “.
- Grown Achiving Grown is the holy phase of a SaaS business. At the last stage, the main focus turns to continue growth and scaling. The company has reached its grown model with a reliable product which means that it has proved its value and now has a well-defined target with well-defined audience. Company is now has a good MRR and ARR and all the metrics are stable. The focus should be on securing scale and compete with competitors!
3 Benefits of the SaaS Business Model
No need for inventory.
As your business is set in a cloud, you don’t need physical equipment; therefore, physically producing and distributing. Inventory stocks and all the materials are so old school. The absence of these materials means easier scale.
With the SaaS business model, growth can be happen really quick. If you find a gap in the market and fill it with a valuable product, you cannot imagine how fast your business will grow.
Easy to Update
SaaS products enable developers to update and improve very easily. The controlling of the product and its environment is very easy because SaaS lives in the cloud.
The SaaS business model with its essentials and benefits is growing rapidly, and it provides you with countless opportunities. Rising market demand and competition make this model very dynamic; therefore, pay attention to each stage and work on them! SaaS onboarding is also a big part of creating and maintaining a successful SaaS business model. So, check SaaS Onboarding Best Practices to Improve Customer Success in 2021 !
Serra is a Content Editor at AnnounceKit. She is passionate about SaaS marketing, growth, and blogging. @serraavan on Twitter.
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What is a Business Model? A Short Guide to Developing Successful Business Models
You’ll often hear professionals discuss how important it is to have a clearly defined business model . A company’s business model can literally make or break their chances of success
But what is a business model exactly? Let’s take a look.
What is a Business Model and Why is It Important?
In essence, a business model is how a company plans to make a profit. This scope includes the business’s value proposition, key expenses, products or services, and its target market.
The value proposition, a central part of any business model, defines the company’s key offering or offerings, whether products or services. Importantly, it also describes what differentiates this offering from existing products, and what makes it attractive to the business’ target market.
Business models can be broadly grouped into categories, such as:
It’s also important to note that one company may operate more than one business model concurrently. For example, eCommerce giant Amazon acts as both a retailer and a marketplace.
It is essential for new companies to define their business model, as it allows them to attract more investors and talent, as well as develop effective strategies .
However, it’s equally important that established businesses regularly review and update their business model in the face of changing market trends and as their company grows.
What Makes a Strong Business Model?
A strong business model must clearly lay out how your business is going to generate revenue, including drilling down into your target market and value proposition.
Key elements of a good business model include:
- A well-defined value proposition
- The business’ target market
- Start-up costs anticipated expenses
- Revenue projection
- Key competitors and how they measure up against the company
- Marketing strategy
- Key stakeholders and partnership opportunities
Additionally , the business models of successful companies generally share certain common characteristics. They often have a unique selling point, or unique selling proposition (USP), that sets them apart from their competition and meets their target customers’ needs, which they offer at an attractive price point.
Furthermore, successful business models are financially sustainable and adapt to meet changes in the market or in the business’s own needs.
How to Create a Successful Business Model
1. conduct market research.
The best business models are based on a thorough understanding of current market trends, opportunities, and challenges. Start by conducting research into the latest trends, your top competitors, and what is and isn’t currently working well in the industry.
2. Define your Target Market
Next, you’ll need to identify who your business’ target market or customer base will be. Dig deeper into your ideal customer’s needs, and especially their key pain points. These will become the problems that your product or service will solve.
3. Develop Your Service Offering
Once you have a clear picture of your target audience and their main pain points, you can use this to develop a service offering that will most effectively address this.
Be sure to tie this back to your business’s value proposition: what makes your products or services not only desirable to your target market, but what differentiates you from your competitors?
4. Make a Road Map
Once you’ve defined your target market and the product or service you’re going to offer them, the next step is to work out what you need to make that happen. It’s essential to create a clear picture of the resources you’ll need to get your business up and running.
At this point, you should also consider potential challenges you may face along the way, and how you plan to address them.
Document all of these elements as part of a well-defined road map to launch your business.
5. Start Developing Partnerships
Another essential part of any business model is the partners who will help the company achieve success. This could be suppliers, service providers, contractors, advertising partners, collaborators, or other stakeholders.
Having an idea of who these partners will be and how you will work together will help you to shape your business model.
6. Define Revenue Streams
Revenue is central to any business, and any strong business model must clearly define where revenue will come from. You’ll also need to consider how you will increase revenue over time, such as specific strategies to build your customer base and close sales.
7. Do Testing
The final step of this process is testing your business model to ensure you’re in the strongest possible position to go live. This could involve test surveys within your target market, or soft launches. The idea is to gauge how well your business model will perform and help you to reach your goals.
8. Continually Review and Adapt
Avoid taking a “set it and forget it” approach to your business model. There are many reasons why you may need to adapt your business model over time. Not only may the market change, but as your business begins to operate and grow, you may find you need to reassess some of your original ideas and assumptions.
Therefore, it is essential to take a flexible position and continually review and adapt your business model to reflect evolving circumstances, whether internal or external to your business.
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Branding Essentials And Design Trends For In-Demand Business Models
Businesses are of all sorts and sizes, and what truly sets them apart is their respective branding. While you can’t judge a book by its cover, you can have a pretty good idea about what the business is about by just looking at its branding. No matter how much you try to pull me away from this idea, it is true; and you need to make sure that your business has a befitting and professional branding that helps your target customers and clients distinguish and remember you.
Let us first explore the types of business models and then study how each can have a befitting branding essential that works best with their nature.
Business Model Branding
The kinds of business models have evolved, especially because of digitalization and globalization. From the traditional ways of trading products and services, we have entered into a sphere of innovation with new and interesting ways of doing business.
A solopreneurs is one who decides to carry out all business operations by herself or himself. They are solely responsible for raising funds for the business, investing money in it, running and marketing it, and reaping all the benefits.
For such people, the solopreneur business model is smaller in size because they tend to keep the company or brand as big as they can handle.
Branding You Need: Business Card Design
Budget: Starts at $99
- Print business card
- Digital business card
For a person responsible solely for his or her business, the key to success lies in building professional ties and having business-to-business communications in the digital and the physical world.
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There is math that goes into designing a custom business card design for your personal branding and business branding. Many times, the name of the company is eponymous with the person who owns it. A visiting card includes the most important information about yourself and your business such as the corporate logo, personal name, contact information (email, social media handles, phone number, and address).
Business Card Design Tips:
- Use new design trends and printing techniques
- Add your logo design to brand your business card
- Don’t write too much text on the 3.5 by 2 inch card
- Avoid using more than one typeface for the text
Business Card Trends:
- Make business cards using trends like augmented reality, holographic technology, credit punching, and QR codes.
- Customized visiting card design and printing made to suit the personality of the person or business – focus on card cut out, paper texture and letter pressing, and die cutting.
- Use trendy design techniques for a unique graphic effect like gradient, overlay, hologram, and photographic.
Business Card Inspirations:
There is no end to the way you can design, print and cut out a business card. The idea is to make it creative and readable. People should keep your card for future reference.
These shops are physical as they are built in an architectural structure that is touchable and requires customers to bring themselves to the place, browse and pick items before paying at the point of purchase.
Such business models require on-ground branding activities targeted more at the local market it is situated in. For a pop-up shop, one should consider using any graphic accessory that helps it attract customers.
Branding You Need: Logo Design
Budget: $199 and above
A unique logo design with a distinguished style will help customers identify such businesses from their competitors who might be situated on the same street. The front of the store is a great opportunity to paste the customized logo, whereby it is visible to people in vehicles and on foot.
This brand logo can be placed in a number of places on the storefront. For example, on top of the store, as a window or door signage, or on a sign pole next to the store.
The usability of a logo is such that it can be used on shopping bags, product tags, and payment receipts . This piece of graphic art is versatile and handy for pop up stores belonging to any industry from a restaurant brand to fashion retailing.
Logo Designing Tips:
- Select one style of design for one logo
- Use suitable graphic elements and principles
- Don’t copy someone else’s logo for your brand
- Avoid DIY and focus on design customization
Logo Design Trends:
- Symbolism has become a vital visual part of professional logo designs, whereby symbols and signs are used in logos to complete the picture.
- The inventive use of basic elements of design in brand logos has evolved from being conventional to unconventional and unpredicted.
- While many logos are turning to simple and minimal looks, some brands are taking the logo design trends game to a whole new level.
Logo Design Inspirations:
A logo may be a small piece of graphic but it is the most powerful ingredient of your brand’s identity design. Here are some cool logo inspirations for you.
These types of businesses are established on the web using technologies that allow customers to browse online, collect items in a virtual cart, pay the bill using e-wallets, and receive their order at the comfort of their home.
Nowadays, such business models are on the rise because they can reach a wider audience that is spread across hundreds and thousands of miles. For such trading companies, it is important to make a strong presence in the digital world.
Branding You Need: Website Design and Development
Budget: $350 and above
- Web design and development
- Web page template
- WordPress website design theme
If you’re an e-commerce business then you must invest a good amount of money in creating a professional website design that is eye-catching and user-friendly.
The beauty of this is that you can design temporary discount web pages based on holiday themes customary to the regions (of the world) you deliver to. For example, while Christmas will help you entice the western part of the world, Holy or Eid will let you promote towards the east. Hence, you have a convenient prospect to reach a global audience of buyers.
Know that the web development industry is now equipped with many themes, trends, and plugins you can integrate into your website to make it more reachable and likable. The best part is that you can design a responsive website design to cater to all types of customers, from those who use their laptops to those who use their smartphones.
Web Designing Tips:
- Make a mobile responsive website
- Keep product listing easily index-able
- Don’t over-fill your website with items
- Avoid black hat SEO techniques for ranking
Website Design Trends:
- For online businesses, aesthetics and function in web design play an important role in charming visitors and retaining their attention.
- There’s no room for web designing mistakes in this decade because many resources and professionals are available to prevent your business from failing in user-interface and user-experience.
- For the sake of successful search engine optimization, e-commerce businesses need to design and develop websites to appeal to users and search engines.
Web Design Inspirations:
The online world is full of examples of great designs and here are some from our stash of web design collection.
Brick And Click
Unlike brick and mortar, the brick and click businesses aim to provide their customers with a seamless digital and on-ground experience to accommodate all kinds of people, from those who like walking to the shop or those who are awestruck by technology.
Simply put, it is a type of business that operates both online and offline. This way customers have the option to shop in the store or buy on the website, as per their choice. In some instances, these businesses provide a dedicated app for users and offer special discounts. The idea is to provide an experience of both worlds to customers.
Branding You Need: Complete brand identity
Budget: $200 to $1200
The opportunity is endless for brick and click business models however, if the branding is not coherent then things like brand image and brand positioning can get shambolic. To avoid this, the best idea is to create a complete brand identity that consistent and clear.
Such business models need a branding style guide mentioning how logo design standards, branding theme, and brand colors will be used across all platforms from physical locations to online.
With such vast functioning, these types of businesses can amplify their brand presence in a number of ways by using print designs and digital designs.
- Keep all designs consistent yet adaptable
- Put your unique brand logo on every piece of design
- Don’t hire too many designers to design your brand identity
- Avoid staying stagnant with no changes or evolution
Brand Identity Trends:
- Take the help of technologies like holograms, augment reality and virtual reality in trade events to innovatively brand your business in an avant-garde way.
- Re-invent traditional designing methods for branding stationery and marketing materials so that nothing seems cliché or boring.
Use animation to convert customer experience into an interactive experience, or better yet to tell a brand story that presses the right chords with your market.
Visual Brand Identity Inspirations:
A complete visual identity helps all stakeholders and shareholders know how they can present a particular business to its market. Check out these creative designs for ideas.
It is a kind of business model that allows earners to earn and buyers to buy. Most of the crowdsourcing companies are service-based, such as:
- Peer-to-peer property lending marketplace
- Language translation service
- Outsourcing of mundane household chores
- Private investment sharing
- Architectural design and engineering services
- Project management services
While a website is a critical part of such a model, these businesses need that extra punch to survive in this competitive landscape.
Branding You Need: Social and Web Presence
Budget: $150 to $300 plus
- Web banner ads
- Social media covers
- Social ad designs
Having a website is not enough. If you belong to the crowdsourcing industry then you need to develop your social media page with the necessary marketing and branding tactics that will help get skilled workers and clients. This means your target audience is split, and you need to create social networking pages that invite both.
Add call-to-action buttons, but make sure to design a professional social media banner to catch the attention of the visitor in a snap. It can be in the form of an illustrated image, a photograph, or an animated video.
The great thing about social media is that not only are you branding your business, you also have the liberty to do marketing and advertising. This means that all of the activities that can get you leads and conversions are in progress simultaneously.
Web & Social Ad Tips:
- Use video techniques to make interactive banners
- Keep your call-to-action button at the forefront
- Don’t clutter the design for social media
- Avoid selling more than one product, service or package in one social ad
Web & Social Trends:
- Creativity and innovation in content production and editing techniques have become a vital part of video marketing strategy .
- Data has become the key factor in determining target markets, and help businesses make their marketing plans.
- Advertisements are winning the bet again via social selling such as social ads, web banner ads, and search ads. Everything is aimed towards conversions.
Social & Web Ads Inspirations:
No matter the kind of business you are, you have to understand that while you may not need everything, you do need to know what type of branding your business needs to stay relevant, memorable and appealing. While doing so, you have to be open to out-of-the-box ideas and never be afraid to experiment.
Let us know the kind of business you are and we will provide free branding consultation .
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Affirm CEO: We have a business model that's perfect for uncertain times
Amazon dedicates team to train ambitious AI model codenamed 'Olympus' -sources
The logo of Amazon is seen, November 15, 2022. REUTERS/Pascal Rossignol/File Photo Acquire Licensing Rights
Nov 7 (Reuters) - (This story has been refiled to spell out AGI in paragraph 5)
Amazon (AMZN.O) is investing millions in training an ambitious large language model (LLMs), hoping it could rival top models from OpenAI and Alphabet (GOOGL.O) , two people familiar with the matter told Reuters.
The model, codenamed as “Olympus”, has 2 trillion parameters, the people said, which could make it one of the largest models being trained. OpenAI's GPT-4 model, one of the best models available, is reported to have one trillion parameters.
The people spoke on condition of anonymity because the details of the project were not yet public.
Amazon declined to comment. The Information reported on the project name on Tuesday.
The team is spearheaded by Rohit Prasad, former head of Alexa, who now reports directly to CEO Andy Jassy. As head scientist of artificial general intelligence (AGI) at Amazon, Prasad brought in researchers who had been working on Alexa AI and the Amazon science team to work on training models, uniting AI efforts across the company with dedicated resources.
Amazon has already trained smaller models such as Titan. It has also partnered with AI model startups such as Anthropic and AI21 Labs, offering them to Amazon Web Services (AWS) users.
Amazon believes having homegrown models could make its offerings more attractive on AWS, where enterprise clients want to access top-performing models, the people familiar with the matter said, adding there is no specific timeline for releasing the new model.
LLMs are the underlying technology for AI tools that learn from huge datasets to generate human-like responses.
Training bigger AI models is more expensive given the amount of computing power required. In an earnings call in April, Amazon executives said the company would increase investment in LLMs and generative AI while cutting back on fulfillment and transportation in its retail business.
Reporting by Krystal Hu in San Francisco. Editing by Gerry Doyle
Our Standards: The Thomson Reuters Trust Principles.
Krystal reports on venture capital and startups for Reuters. She covers Silicon Valley and beyond through the lens of money and characters, with a focus on growth-stage startups, tech investments and AI. She has previously covered M&A for Reuters, breaking stories on Trump's SPAC and Elon Musk's Twitter financing. Previously, she reported on Amazon for Yahoo Finance, and her investigation of the company's retail practice was cited by lawmakers in Congress. Krystal started a career in journalism by writing about tech and politics in China. She has a master's degree from New York University, and enjoys a scoop of Matcha ice cream as much as getting a scoop at work.
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Business Model Canvas Essentials Professional Certification Exam Answers 2023 – Certiprof
Business Canvas Essentials is an informative and practical document for all those dreamers, visionaries and entrepreneurs who want to create and implement new business adventures away from the traditional business models, exploring new proposals to understand and represent the different business units in an easy and practical way.
Table of Contents
– Understanding the concept of Business Model.
– Review and become familiar with the Business Model Canvas concept and its 9 blocks.
– Review and become familiar with the concept of Lean Canvas as a business visualization tool and its contribution for new entrepreneurs.
– Review and understand the different business model patterns.
– Describe techniques and tools from the design world that can help create more innovative Business Models.
– Understanding in a general way, 4 strategic areas of study and reinterpretation of Business Models.
Apply Here : Business Model Canvas Essentials Professional Certification
– Format: Multiple choice question
– Open Book: No
– Questions: 40
– Passing Score: 32/40 or 80 %
– Language: English / Spanish
– Duration: 60 minutes
– Open book: No
– Delivery: This examination is available online
– Supervised: It will be at the Partner’s discretion
This product solves the problem of headphones tangling while they are being stored in your pocket or book bag; this is an example of what section of the Lean Canvas?
- Unique Value Proposition.
- Customer Problem.
- Customer Solution.
“The product will sell for $20”, to which block of the Business Model Canvas would this sentence belong?
- Revenue streams.
- Key Metrics.
- Cost structure.
Match the block name or item from the Business Model Canvas to it associated question. What do you do?
- Value proposition.
- Key resources.
- Customer relationships.
- Key partners.
- Key activities.
The list of questions that you created to ask future customers for replies and analyzed for usable information is known as:
- Customer Feedback Survey.
- Business Model.
Select all of the potential different charging mechanisms that can be considered in the Business Model Canvas (BMC) and are described in the CertiProf preparation material.
- Brokerage fees.
- All of the above.
Match the block name or item from the Business Model Canvas to it associated question. How do you reach them?
- Distribution channels.
- Customer segment.
Which of the following questions directly relates to the value proposition in a business model canvas?
- How much is our good or product worth in the market?
- Is there anyone in the field who is doing the same job at a lower cost?
- What is the problem we are trying to help our customer solve?
- How much is a customer willing to pay for the service or product we offer?
Select all potential types of revenue streams that can be considered in the Business Model Canvas (BMC) and are described in the CertiProf preparation material.
- Asset sales.
- Usage fee and subscription fees.
The money gained from the sales after expenses are paid is:
Based on the material presented by CertiProf for the Business Model Canvas certification, the following questions can be used in which of the Business Model Canvas blocks. What products and services do they currently pay for? How do they currently pay? How do they prefer to pay?
- Building the Revenue Stream Block.
- Building the Channels Block.
- Building the Customer Relationship Block.
- Building the Customer Segment Block.
What should the Business Model Canvas Value Proposition block contain?
- The set of products and services offered to each customer segment.
- The reason why the customer should buy our product or service.
- How our channels are integrated.
The following questions can be used in which of the Business Model Canvas blocks? Which ones have we established? What is their cost? How do they integrate with the rest of our business model?
- Building the Value Proposition Block.
Select all potential types of customer segments that can be included in the Business Model Canvas (BMC) and that are described in the CertiProf preparation material.
(Selecta ll that apply) Choose all of the correct answers (multiple possibilities).
- Mass Market.
- Niche Market.
Select the blocks that are contained in the Business Model Canvas? Choose all of the correct answers (multiple possibilities).
- Pitching to venture capitalists.
- Accumulation of reasonable debt.
- Customer segments.
We plan to sell 100% of our products, which is 20 products. This is an example of what section of the Lean Canvas?
- Revenue Streams.
What describes “The Channel Block” in a Business Model Canvas?
- Your goals as a company.
- Where you offer your products/services.
- How you sell your products/services.
- Who your customers are.
Define the word “revenue”:
- Money coming in.
CertiProf offers the Business Model Canvas Essential (BMCE) certification to the general public at no cost. Based on what you learned with Business Model Canvas this could be a practical example of:
- Freemium Strategy.
Match the block name or item from the Business Model Canvas to it associated question. Who will help you?
What are the building blocks of the Business Model?
- Customer Segments.
- Value Propositions.
- Customer Relationships.
- All the above.
Teenagers ages 16-18 and teachers is an example of what section of the BMC?
- Customer Segment.
What does “Unique Value Proposition” mean?
- What you propose to customers.
- The benefit or value your product/service provides.
- Describe your product.
- Describes your customer service experience.
This block is the starting point for the creation of the Canvas Model and is key to explain for whom we create value with the product or service we offer.
- Value Proposition.
Select all the potential uses of the Business Model Canvas described in the CertiProf preparation material. (Selecta ll that apply) Choose all of the correct answers (multiple possibilities).
- Outline new business ideas.
- Visualize existing businesses.
- Used by teams as a common business language.
- Enable better strategic conversations.
Netflix “self service” and “AI recommendations” are examples of:
- Key Activities.
- Customer Relationship.
- Key Partners.
The following questions can be used in which of the Business Model Canvas blocks? What sets of products and services do we offer to each customer segment? What needs of our customers are we satisfying? What problems are our customers helping to solve?
- Building the Customer Segment Building Block.
- Building the Customer Relationship Building.
Cost and value-oriented strategies are examples of which of the following Business Model Canvas blocks?
- Cost Structure.
- Revenue Stream.
One of the following is NOT one of the nine building blocks. Which one is it?
- Customer relationship.
What are key metrics?
- A tape measure.
- Goals that determine the success of your business.
- Areas of your business or project that are vital to your success.
- Critical success factors.
Why is the use of the Business Model Canvas recommended? (Select the best answer)
- To better manage business projects to obtain the best results.
- To better understand customer needs.
- Ideal for understanding and presenting a business model in an objective and structured way, which adds value to your business idea and boosts your brand’s success.
- To maximize the overall profitability of the business.
Match the block name or item from the Business Model Canvas to it associated question. How much will you make?
- Revenue stream.
Who invented the Business Model Canvas?
- Steve Blank.
- Ash Maurya.
- Alexander Osterwalder.
Which of the following is an example of Freemium Pricing
It represents how companies spend most of their resources to keep generating demand for their products and services:
Niche Market is an example of__________?
These are pricing mechanisms explained in CertiProf’s Business Model Canvas certification material.
(Select all that apply) Choose all of the correct answers (multiple possibilities).
- According to the market segment.
- Fixed Price List.
The online marketplace website goes in what section of the Business Model Canvas?
Fixed Menu Pricing and Dynamic Pricing are two different pricing mechanisms to be defined in which Business Model Canvas Block?
This product is compact and an all in one that is easy to use; this is an example of what section of the BMC?
The Business Model Canvas consists of __________ main elements or blocks (number).
Match the block name or item from the Business Model Canvas to it associated question. How do you interact?
A brief and compelling presentation that provides a general description of the business with the objective of obtaining financial support from the audience is:
The person who provides money to start-up the business with the expectation of a future financial return is known as a(n):
- Business broker.
Match the block name or item from the Business Model Canvas to it associated question. How do you do it?
The money spent on the materials to make your products are known as:
- Capital expenditures (CAPEX).
Match the block name or item from the Business Model Canvas to it associated question. What will it cost?
Students have a hard time focusing on their school work because of classroom distractions is an example of what section of the Lean Canvas?
A model, simulation, or sample of an idea is a:
At which point in the Business Model Canvas should we identify the means to be used to deliver our value proposition to the potential audience?
- Relationship with customers.
Match the block name or item from the Business Model Canvas to it associated question. Who do you help?
What is another word for costs?
Which of the following choices is the BEST definition of a channel?
- A statement regarding a customer’s specific demands.
- A short list of the partnerships that are essential for a business’ operation.
- The method or pathway used to reach a customer.
- A specific service or product from a large portfolio.
What is the purpose of using the Business Model Canvas in a business idea?
- The Canvas model is an ideal tool to understand a business model in a more direct and structured way.
- The Canvas model is always a representation of a business that will be profitable.
- The Canvas model is a tool for breaking down the organizational structure of a new company into understandable parts.
- The Canvas model is a technique widely used in startups to understand a revenue model needed to make a product successful.
What best describes a Business Model Canvas?
- A work of art.
- A one-page plan that describes your new business idea.
- Customer relations.
- A model of your business office.
What does Business Model Canvas offer?
- The systematic way to generate new ideas.
- A holistic view of our business plan.
- A way to get rich quick.
- None of the above.
According to the Business Model Canvas theory, which of the nine blocks is the best block to start writing the business model?
- Relationship with the audience.
Important Key Points
- What do you do? Value proposition
- How do you do it? Key activities
- What do you need? Key resources
- Who will help you? Key partners
- How do you interact? Audience relationship
- Who do you help? Audience segments
- How do you reach them? Distribution channels
- What will it cost? Cost structure
- How much will you make? Revenue stream
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Adobe researchers create 3D models from 2D images ‘within 5 seconds’ in new AI breakthrough
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VentureBeat presents: AI Unleashed - An exclusive executive event for enterprise data leaders. Hear from top industry leaders on Nov 15. Reserve your free pass
A team of researchers from Adobe Research and Australian National University have developed a groundbreaking artificial intelligence ( AI ) model that can transform a single 2D image into a high-quality 3D model in just 5 seconds.
This breakthrough, detailed in their research paper LRM: Large Reconstruction Model for Single Image to 3D , could revolutionize industries such as gaming, animation, industrial design, augmented reality (AR), and virtual reality (VR).
“Imagine if we could instantly create a 3D shape from a single image of an arbitrary object. Broad applications in industrial design, animation, gaming, and AR/VR have strongly motivated relevant research in seeking a generic and efficient approach towards this long-standing goal,” the researchers wrote.
Training with massive datasets
Unlike previous methods trained on small datasets in a category-specific fashion, LRM uses a highly scalable transformer-based neural network architecture with over 500 million parameters. It is trained on around 1 million 3D objects from the Objaverse and MVImgNet datasets in an end-to-end manner to predict a neural radiance field ( NeRF ) directly from the input image.
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“This combination of a high-capacity model and large-scale training data empowers our model to be highly generalizable and produce high-quality 3D reconstructions from various testing inputs including real-world in-the-wild captures and images from generative models,” the paper states.
The lead author, Yicong Hong , said LRM represents a breakthrough in single-image 3D reconstruction. “To the best of our knowledge, LRM is the first large-scale 3D reconstruction model; it contains more than 500 million learnable parameters, and it is trained on approximately one million 3D shapes and video data across diverse categories,” he said.
Experiments showed LRM can reconstruct high-fidelity 3D models from real-world images, as well as images created by AI generative models like DALL-E and Stable Diffusion . The system produces detailed geometry and preserves complex textures like wood grains.
Potential to transform industries
The LRM’s potential applications are vast and exciting, extending from practical uses in industry and design to entertainment and gaming. It could streamline the process of creating 3D models for video games or animations, reducing time and resource expenditure.
In industrial design, the model could expedite prototyping by creating accurate 3D models from 2D sketches. In AR/VR, the LRM could enhance user experiences by generating detailed 3D environments from 2D images in real-time.
Moreover, the LRM’s ability to work with “in-the-wild” captures opens up possibilities for user-generated content and democratization of 3D modeling. Users could potentially create high-quality 3D models from photographs taken with their smartphones, opening up a world of creative and commercial opportunities.
Blurry textures a problem, but method advances field
While promising, the researchers acknowledged LRM has limitations like blurry texture generation for occluded regions. But they said the work shows the promise of large transformer-based models trained on huge datasets to learn generalized 3D reconstruction capabilities.
“In the era of large-scale learning, we hope our idea can inspire future research to explore data-driven 3D large reconstruction models that generalize well to arbitrary in-the-wild images,” the paper concluded.
You can see more of the impressive capabilities of the LRM in action, with examples of high-fidelity 3D object meshes created from single images, on the team’s project page .
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