How to choose the right business model for your company

Constant and strategic innovation is number two in Tony Robbins’ 7 Forces of Business Mastery. Innovation is vital to any company, in any industry. Market forces change every day, and your customer is always on the lookout for something new – something better, faster and stronger. You must give it to them, or see your company fall behind.

Business model innovation is just as important.

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What is a business model?

Here’s the business model definition from the dictionary:

A business model is “a model for the successful operation of a company, identifying revenue, customer source, products, as well as the details of financing.” It explains what products or services the business plans to manufacture and market and how it will do so, including what expenses it will incur throughout the products/services’ life cycle. It’s a relatively high-level plan, but it includes things like:

1. Your target customer

2. Your value proposition, which is part of your brand identity

3. Your business partners, like suppliers and advertisers

4. Your key business processes – shipping, retail, providing a service, etc.

5. Your key business resources, like customer information, real estate and even your website

6. Your sales strategy

Knowing the different types of business models and which is best for your endeavor is the first step in starting a new business. If you want to be an entrepreneur instead of a wantrapreneur, you need to do your research and make a solid decision about creating a business model that will lead to success.

Tony says, “Stay committed to your decisions, but stay flexible in your approach.” This is what creating a business model is all about. Your business must be adaptable and responsive to those changing market forces. But before you can innovate and adjust your business model, you need a starting point.

How do you know what to consider when creating a business model?

Tony teaches that owners must create business maps, not business plans. While the goal is the same, a business map takes a more in-depth look at how you provide value to customers and what success looks like for your company. Whether you’re creating a business model from scratch or feel you need to make some innovations to keep up with the market, a business map can help you get there.

Types of business models

Business models vary widely, especially when you take into consideration business model innovation that customizes each model to its specific business. However, there are some general types of business models:

1. Advertising-based

Advertising-based businesses get most of their revenue by offering advertising space on their owned channels. Websites and online media frequently use this business model, as well as radio and print publishers. The key to success here is that you must have an audience – otherwise, your advertising space will not reach anyone and will therefore not be worth any money. Businesses that use this model have to understand how to win at social media as it’s grown into the modern, optimal way of driving traffic to websites. Print newspapers quickly learned this at the advent of the Internet. They required massive business model innovation in order to stay alive.

Examples of advertising-based business models: YouTube, The Washington Post, BuzzFeed



2. Franchises


Franchises allow business owners to quickly grow their business by selling the rights to use their brand to individual entrepreneurs. If your business has a strong brand identity and a business model that franchisees can easily replicate, starting a franchise could be a way for you to scale without much direct investment.

As a franchise owner, you can maintain different levels of control over your franchisees depending on how much or how little you want to stay involved with your expanding business.

Examples of franchises: The UPS Store, Ace Hardware, Orangetheory Fitness

3. Direct sales

Direct sales is a business model in which employees sell the product directly to the end consumer, eliminating “middle men” like wholesalers and distributors. Interacting with the consumer in this way has many benefits – you have strict oversight of your sales team and can ensure everyone follows the same strategy, and you get direct feedback from the consumer. You’ll also have more control over your costs and the price of your product, so you can be more competitive. Network marketing is a great example of direct sales.

Examples of direct sales: Arbonne, Amway, Young Living 



4. Retailers


Retailers purchase products from a distributor or wholesaler and sell them to consumers. This business model differs from direct sales because there is a “middle man” involved. Retailers therefore have less control over prices and product quality. Both online stores and brick-and-mortar locations are types of business models that qualify as retailers; in fact, many retailers have both of these options available for consumers. Physical storefronts are not a thing of the past, contrary to many reports: a 2016 Forrester study found 62% of millennials prefer to shop in a physical store.

Examples of retailers: Target, World Market, Walmart

5. Brokerage

A brokerage business model connects buyers and sellers so they can conduct a business transaction. A fee is charged for each transaction and is charged to either the buyer or seller or, in come cases, both. A real estate agency is a good example of a brokerage-type business model. While this type of business model involves varying levels of time commitment and management for the owner, it can be an ideal way of achieving financial freedom.

Examples of brokerages: ReMax, Craigslist


6. Freemium


The freemium business model offers a free product or service that customers then have the option of upgrading for a fee. Freemiums offer unlimited use of basic features to their customers, then charge for advanced functionality or for additional users.

Examples of the freemium business model: MailChimp, LinkedIn


How do you know which business model is right for you? Creating a business model is an in-depth process. You need to determine which combination of factors allows you to provide value to the customer, while also keeping your prices competitive and your costs under control.  

Creating a business model

Asking yourself the right questions is the first step toward creating a business model that will lead to long-lasting results. And the best way to start asking those questions is to create a business map. Having a business map is the first point on the list of the 7 Forces of Business Mastery – it’s that important.

Business maps are different than business plans. They dig deeper to discover what business you are really in. Business plans address the more obvious points you might think of, like sales, operations and plans for scaling. These are all important, but you will not even get that far if you don’t first ask yourself, “What business am I really in?” This means thinking beyond your product or service and discovering the value you provide.

Does Apple sell computers? Yes. But what is it about Apple that lets them crush the competition? The business they are really in is selling sleek, design-focused technology that lets the consumer feel they are part of an exclusive club. Does Starbucks sell coffee? Sure. But the business they are really in is selling a relaxed, casual café experience. Once you know what business you are in, you can begin to determine what success looks like for your company. Business model innovation will follow.

If you’re wondering “What is a business model?” and how you can create one, Tony can help. He’s built many successful businesses, and he shares all his secrets at his 5-day live event, Business Mastery. It’s time for you to start innovating – and that starts with your business model.

Ready to take your business to unreached levels?

Discover how to cultivate the business model your company needs with Tony Robbins’ 7 Forces of Business Mastery free content series.