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If you are starting a new business, one of the first things you need to do is research the different types of business models – and, no, we’re not talking about people who walk on the runway. (Although that would be nice, wouldn’t it? A tall, leggy blonde or a svelte guy with six-pack abs bringing your lunch every day?) Essentially, a business model is the ground plan for any company. It sets out what goods or services a business will provide, what the prime customer base will be, and how the company will reach those customers. A business model is the first thing you should decide upon when founding a company, even before you set up a business plan. After all, it’s hard to set up a plan without knowing what type of business you are running. According to a study by MIT’s Sloan School of Management, there are four primary business models used by most companies in the United States. The one you choose is determined by what goods or products you are offering, who runs and owns the business, and your own personal preferences. Here are the four primary models you may want to consider for your company: 1. A distributor buys goods and then resells them. A distributor usually buys goods at a low price and resells them at a higher price. In exchange, the distributor may take on transportation costs, as well as advertising and business overhead. A retail store is the most common type of distributor business. 2. A brokerage acts as a mediator between two parties, usually between one business and their potential clients. There are four markets for brokerage companies: business-to-business markets, business-to-consumer markets, consumer-to-consumer markets, and peer-to-peer markets. Different types of brokers include real estate agents, theatrical agents, online marketplaces, search catalogues, and auction companies. 3. A creator invents a product or service and sells it. Factories are perhaps the most common type of business to follow this model. Businesses using the creator model may often work with a distributer or brokerage to increase profits for their own company. 4. The final type of business model is a landlord. Most people are familiar with landlords when it comes to the housing market; however, anyone who rents out real estate for any reason is working with a landlord business model. For example, theaters that rent out seats or a mortgage company who makes profits on loans are also following the landlord business model. Based on the goods or services your company provides, it should be fairly obvious which business model you should follow. However, sometimes it may not be clear. For example, if your business offers multiple products or services or if you loan money or items out for profit, you may be uncertain as to what type of business model to follow. In these instances, it is in your best advantage to talk to a financial advisor or business attorney. Solutions First Legal Services, P.C. - Attorney Robin Becker is lead lawyer and founder of Solutions First, a Chicago law firm specializing in family law, business law, and mediation services. Having practiced law for more than 20 years, Becker is known for her skill in relationship dynamics and offers an “outside the box” approach to the sensitivities that permeate both family relationships and business relationships. Ms. Becker is a well-known public speaker, author, and was honored as one of “100 Women Making a Difference” by Today’s Chicago Woman magazine.
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