What is a Business Model? A Compass to Success for SMEs.

A Business Model is the core of doing business in an era of intense sales competition, especially in the B2B world where multiple dimensions such as cost, value, time, and long-term relationships must be considered. Understanding the Business Model is like having a clear roadmap, helping everyone in the organization to see the overall picture of the business in the same direction.

This article will provide examples of models that will help new entrepreneurs understand the business planning process and be able to generate sales growth in any situation, paving the way to becoming a sustainably successful entrepreneur.

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Table of Contents

• What is a Business Model? Its Key Role in Driving Business Growth
• Different Types of Business Models
• What are the Components of the Business Model Canvas?
• Summary of the Importance of a Business Model in Fostering Business Growth

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What is a Business Model? Its Key Role in Driving Business Growth

A Business Model is a diagram or concept that describes the overall picture of how a particular business model will generate revenue, create value for whom, what resources it will use, and how it will connect all operations together. Before seriously planning a business, it is important to start by creating a Business Model to get a comprehensive overview first. If you understand the main purpose of the business, it will be easier to build upon it by creating various strategies.

Therefore, a Business Model plays a crucial role in driving business growth because it helps entrepreneurs see the bigger picture of every process, from product or service development, defining sales channels, creating value that customers want, structuring costs, to systematically and efficiently managing business partnerships.

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Different Types of Business Models

To help SME owners understand various revenue generation approaches, we have selected examples of commonly seen Business Models to illustrate the differences and to know what kinds of business models exist in the current era.

1. Subscription Model

Each Business Model has a different revenue structure. This model generates recurring income through a monthly or annual subscription system, which is suitable for online businesses related to software or platforms that customers use regularly, such as Netflix or Spotify.

2. Crowdsourcing Model

This is a business that relies on a group of people outside the organization to co-create or participate in a particular product, where everyone can contribute content. This allows for the creation of new things without using all of the organization's internal resources. An example of this business model is Wikipedia.

3. Freemium Model

This is a popular model in the digital industry, such as Google Workspace or Dropbox. The business owner's Business Model allows customers to try basic features for free at first, and then charges for additional premium features or continued use.

4. One-for-one Model

This is another model that combines selling products with creating social value. It sets a condition that for every product the business sells, a portion is given back to society. An example of this business model is if a customer buys a pair of glasses, the business will also donate a pair to someone in need. This is a Business Model that helps build a positive brand image.

5. Product to Service Model

Many businesses are shifting from selling products outright to providing services that generate continuous income. For example, instead of selling photocopiers, they lease them along with an annual service for ink replacement and repairs. This helps customers not to worry about potential costs after purchasing the machine and is considered an interesting business because it creates a steady income for the business.

6. Bundling Model

This Business Model involves combining several products or services to sell as a package, such as buying a phone with an internet package. This model helps increase the value per sale and encourages customers to make a purchase decision more easily, as buying a bundle is more cost-effective than buying separately.

7. Leasing Model

Currently, consumers value flexibility in use more than the need for ownership, causing the rental business to grow in various industries, such as machinery, cars, or houses. This Business Model helps customers access high-priced goods without a large initial investment.

8. Razor Blades Model

The razor blades model involves selling a main product at a low price but generating revenue from the continuous sale of necessary accessories that must be used with it. This is considered a very clever Business Model. Examples include printers and ink cartridges, or coffee machines and coffee capsules.

9. Franchise Model

This Business Model is highly popular in Thailand because it allows people to invest in a brand and get the right to use the brand name, along with training from experienced professionals, without having to go through trial and error themselves. They can control product quality and learn to work systematically. Examples of this model include 7-Eleven or Cafe Amazon.

10. Retailer Model

The retailer model is where a buyer purchases goods from a manufacturer and then resells them. Examples include convenience stores, department stores, and  E-Commerce platforms like Shopee or Lazada. It is very suitable for those with skills in finding distribution channels, online marketing, and logistics.

11. Distribution Model

This Business Model focuses on being an intermediary to bring products from manufacturers to retailers or end-users, such as being a distributor for industrial or agricultural products. Some entrepreneurs may also run warehouse and delivery services concurrently.

12. Manufacturer Model

The final example of a Business Model is the manufacturer, which produces goods and then sells them directly to customers or through partners. This model allows for good control over quality and production costs, but it also requires expertise or knowledge of specific technologies suited to each industry.

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What are the Components of the Business Model Canvas?

The Business Model Canvas is an important tool used to describe the 9 main components of a business. Writing a Business Model Canvas helps to see a comprehensive picture of the business from all sides. The details are as follows:

• Customer Segments: Every type of business should clearly define its customer groups to be able to design products, services, and communication strategies that best meet the targets.
• Value Propositions: Entrepreneurs must be able to answer what reasons make customers choose their products or services, such as good quality, value for money, fast service, or solving a problem effectively.
• Channels: The business should define clear sales channels in the Business Model Canvas, and each channel must align with the behavior of the target customer group to achieve maximum sales efficiency.
• Customer Relationships: Maintaining a good relationship between the customer and the brand will help create a good experience, increase trust, and increase the chances of repeat purchases.
• Revenue Streams: A business cannot continue without revenue. Therefore, this component of the Business Model Canvas is very important. It should be clearly defined how revenue will be generated, such as from product sales, membership fees, or service fees.
• Key Resources: Such as personnel, technology, capital, or intellectual property rights. These are resources that every business model must have for sales and services to proceed.
• Key Activities: Such as production, delivery, or research and development. These activities will affect the ability to provide services and create value for customers, and they must be carried out continuously and efficiently.
• Key Partners: Having good partners will help a private business grow, contribute to increasing efficiency, reducing costs, and enhancing competitiveness.
• Cost Structure: Such as cost of goods, labor costs, marketing costs, or IT system costs. These expenses are all important parts of financial planning. Understanding the cost structure will help in setting appropriate sales prices.

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A Business Model is a Tool That Helps Foster Business Growth

Whether it's a small business, a large business, or an SME entrepreneur, all want to generate profit and grow sustainably. Having a clear Business Model is a crucial foundation that will help entrepreneurs understand the needs of their target customers, leading to effective planning of the production process and cost control.

KGP