Thanks to technology, in this day and age there are more business models to
choose from than ever before. Today you can start a business part-time or
full-time, at home or totally mobile, online or in a brick-and-mortar commercial
location!
The key is to choose a business model that fits your Life Plan. This will
ensure that you spend the right number of hours each week, take the right level
of risk (some models involve more risk than others), are practical in terms of
your financial wherewithal, and gain the kind of satisfaction and success that
only you can define.
First off, you have to make a key choice: How much time do you want to devote
to your business?
When you go for a full-time business model, you leave behind whatever you
were doing previously to commit yourself completely to your startup. When you
make this leap, expect to spend more hours working than you ever did working for
someone else.
In contrast, you can start up part-time. With this model, you adapt your
business to time-consuming obligations you already have, such as your day job,
parenting responsibilities or any other activities that would keep you from
making your startup your total focus.
Once you've determined whether you see yourself as a part-time or full-time
entrepreneur, consider our list of business model options.
In this step, we will focus on seven business models:
- Home-based
- Brick-and-mortar
- e-Commerce
- eBay
- Franchising
- Licensing your product
- Multi level marketing
Business Model Options
Home-based
Drawing upon technology, you can create a legitimate and competitive business
from home. It's part of our culture now, with more than half of all businesses
sharing the same address as your kitchen and bed.
Home-based businesses can be run full-time or part-time, and may or may not
be web-based.
Upside
- Less risk and lower startup costs than a brick-and-mortar business
because it allows you to test the entrepreneurial waters without having to
spend money on real estate, staff, etc.
- Easily scaleable — you can make your home-based business as big or small
as you'd like to suit existing commitments, such as parenthood and a day
job.
- Outsourcing is a great strategy to keep things simple at home—you can
contract with other companies to do your public relations, warehousing,
shipping, web management, even manufacturing.
Downside
- Shipping activities and customer traffic in residential properties are
restricted by local zoning ordinances (check with your local government for
details).
- Working at home can come with lots of distractions and can infringe on
your other domestic commitments.
- If foot traffic is necessary in your business, your home may not make
the desired impression on customers.
Brick-and-Mortar
This is a business with a classic physical location outside of the home. It
involves a dedicated facility—whether retail, wholesale, service or
manufacturing.
Upside
- Gives you an opportunity to work face-to-face with people and become
more involved in your community.
- A physical location may attract walk-in traffic to supplement traffic
you gain through marketing efforts, depending on your type of business.
- Gives you a dedicated space to go to work each day and become mentally
and physically immersed in running your business.
Downside
- Higher risk and startup costs (build-out costs to set up your location,
lease/purchase costs, etc.)
- Requires a full-time commitment upfront to get the facility ready for
business, as well as personnel to staff it.
- If your concept is retail-oriented, you must acquire inventory to
merchandize your store.
e-Commerce
In this model, you don't have foot traffic in your business, only traffic
(hopefully) to your website. You sell your product(s) through your website. This
can apply to businesses that sell to consumers or to other businesses.
Upside
- As with a home-based business, this is a lower risk, lower cost business
to start. You don't necessarily have to have lots of personnel, inventory
and facilities.
- You can choose to do it full-time or part-time.
- Easily scaleable — you can make your e-commerce business as big or small
as you'd like to suit existing commitments, such as parenthood and a day
job.
- You can tap into a national, or even global, customer base through the
Internet.
Downside
- As with a brick-and-mortar store, shipping, inventory purchasing and
storage, and credit card processing can all become headaches if you don't do
them right, particularly if you are a one-person show.
- Over 800 million people access the Internet globally, but it's a
challenge to A) get that traffic to come to your site and B) convert them
into a customer confident enough to make a purchase.
eBay-preneurship
You can use eBay as a
location for your online store, which allows you to tap into their huge
marketplace.
Upside
- Lower cost, lower risk than starting an independent e-commerce site as
there are a great many tools to help eBay sellers get their businesses off
the ground (e.g. PayPal to accept payment, a ready-made marketplace, online
store templates, market research tools, etc.).
- eBay has a huge following worldwide already, so you could potentially be
tapping into a vast existing customer base.
Downside
- As with a brick-and-mortar store, shipping, inventory purchasing and
storage, and credit card processing can all become headaches if you don't do
them right, particularly if you are a one-person show.
- Over 800 million people access the Internet globally, but it's a
challenge to A) get that traffic to come to your site and B) convert them
into a customer confident enough to make a purchase.
Franchising
When you're a franchisee, you use someone else's proven business concept as
your entrepreneurial roadmap. Typically, this is in exchange for an upfront fee
and a portion of revenues over time to be paid to the franchisor.
Upside
- Lower risk than opening an independent brick-and-mortar business because
franchising provides you with a streamlined process to start your business,
as well as other support such as marketing, business plan estimates and
samples, assistance with real estate issues, and staff training.
- Provides you a recognized, established brand to attract customers more
quickly.
- Some franchises participate in a streamlined
SBA loan program
that could make your loan application process simpler.
- Success rates for franchises are higher than non-franchise businesses.
Downside
- You've got to be able to pay the upfront franchise fees.
- Franchise guidelines can be strict and limit your ability to get
creative with your business.
- Your financial upside is somewhat limited because you must pay your
franchisor a cut of your profits.
Resource
To find out about franchising options, check into the
International Franchise Association.
There's a wealth of information there about various franchises, best
practices, and statistics. It's a good place to start getting smart about
the opportunities and issues associated with this popular business model.
Licensing your Product
If you're working a day job and don't want to run a company, you can still
take advantage of your great product idea by licensing it to another company
that has the entire infrastructure in place to properly manufacture, market and
sell it.
Upside
- Lower risk because you can work on your product part-time.
- Lower cost because your main expense is producing a prototype of your
product and testing it to make it attractive to potential licensees (rather
than the cost involved in setting up an entire business to make, market and
sell the product).
- If you do successfully license your product, you could receive royalties
long after you've stopped working on the product, and you can have the
freedom to move on to the next big idea!
Downside
- Finding the right licensee takes tenacity and determination, and can
take a long time — don't quit your day job!
- Unless your product gets sold in a significant enough volume by the
company you license it to, the amount of royalties you receive can be low or
non-existent.
- It's extremely difficult to get through the door of big companies to
start a negotiation. That's partly why less than 3% of all patented ideas
actually make it to market through licensing arrangements.
Multilevel Marketing
MLM is a marketing and distribution structure. People at the top sell to
those below them, who in turn sell to those below them. The higher up you are in
this structure, the more money you can make. The challenge with MLM businesses
is that people at the top are frequently the winners. The vast majority of
people at the bottom end up spending money and time to get involved and end up
losing whatever they put in.
If you're determined to get involved in a MLM business opportunity, be sure to
check with at least a handful of other people who've entered at your level (who
you identify on your own, separate from people the MLM promoter refers you to),
and see what they have to say. Find out their perspectives on how—and if it's
possible—to be successful.
Upside
- Typically, limited startup costs (a membership or initial inventory
commitment).
- You can do it based from home.
- You are provided tools, products and sales techniques that are
pre-packaged for you.
Downside
- Most people lose money in MLM activities because they can't sell the
product as effectively as they thought they could.
- Credibility can become an issue, especially if you start treating
friends like they're customers instead of friends.
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