The Best Online Business Models
I’m frequently asked about how to run or create an online business, even from long time online business owners (sometimes even from very successful ones)
One thing I’ve realized is that, like offline business, you can have some or good success online without really understanding what a business is or how to create an efficient and effective one.
I have a friend who runs a fair-sized mortgage company. She has an intense interest in business models and is forever asking people what their business model is. She’ll ask restaurant owners, shop owners, and even lunch companions; anyone and everyone.
She finds the question personally interesting but she also likes to get a wide range of ideas on how to best model her business to make it the best it can be.
Many of the people who ask me the questions don’t understand the concept of a business model, if they’ve even heard the term.
This is a HUGE MISTAKE because, without an appropriate business model, you will, at best, limit the success you have and, at worst, fail miserably.
So we’re going to look at business models and what are the best online business models.
There is not one “best” model because situations are different, people are different and talents are different.
But whether you just have an offline business, have a job and are looking to start an online business or already have an online business and want to make it better you should understand what the best business model for you is and how to build you business to match that model.
What is a Business Model?
Wikipedia defines business model as:
“A business model is a framework for creating economic, social, and/or other forms of value. The term business model is thus used for a broad range of informal and formal descriptions to represent core aspects of a business, including purpose, offerings, strategies, infrastructure, organizational structures, trading practices, and operational processes and policies.”
Basically, a business model is how your company makes, or expects to make, money; it is the model upon which you create your business.
As entrepreneurs and business owners you probably have an intuitive understanding of your own business model but what you don’t have is a precise enough understanding to communicate it to your staff and partners and to make important decisions.
Components of a Business Model
To understand your business model you need to have defined the basic components, they are:
- The Offer: what it is you have that people will pay money for
- Supporting Infrastructure: how you will be able to provide your offer (this could be people, Internet infrastructure, intellectual property, etc.)
- Sales Funnel/Customer Relations: how you will distribute your offer and care for you customers, including your channels of distribution, customer support, etc.
- Financial Infrastructure: what cost you will have, how you will collect money and how you will pay the bills
Here is a visual view of the business model components and their major interconnections.
Let quickly look at each of those components.
The Offer
To make money you must have one or more offers that you present to prospects.
That is the center of your business model because without a great offer you won’t achieve great success.
A strong business model must offer products and services that people will desire and pay for over and over.
It must be something of value and something that differentiates you from your competition.
If you can’t tie your offer to real desire and define a strong differentiator then the central component of your model is weak.
Well known marketer Yanik Silver recently created a new company called Maverick Business Adventures.
His offer was to provide the power and excitement of once in a lifetime experiences combined with business education and networking.
Sort of one part “time of your life” adventure travel, one part Outward Bound, one part mastermind group, one part charity work and one part business conference.
It was something nobody had done, combining Baja road rallies or mock jet fighter battles or Icelandic “Center of the Earth” dives with high level business sessions.
His offer was well thought out and defined and he wildly differentiated himself.
Every business decision ties back to being able to always offer these kinds of “products”.
Supporting Infrastructure
A strong business model needs to know what it’s important, core resources are and the important, core business activities it needs to perform; it also needs to find areas of weakness and fill those with select partners.
For example, billion dollar company Whole Foods Markets took a unique view on their infrastructure when they started their first store.
They decided to sell only high quality natural and organic products at a time when hardly anyone had heard the words organic and food spoken together.
They felt their employees were a key resource and made happy, healthy employees a top priority when traditional food store employees weren’t treated well.
They felt like their suppliers were critical to their success and developed win-win partnerships with them.
Every business decision looks at how their unique infrastructure is impacted.
Sales Funnel/Customer Relations
While it is important to have a great offer and a strong infrastructure it is equally important to know who your target customers are and build an appropriate distribution channel.
You want more than customer satisfaction you want to delight your customers, to understand them enough to exceed their expectations.
This is the true essence of a sales funnel, to take the people in your funnel and delight them and build strong relationships with them.
You need to understand how you do this in your business model so you can ensure that your business decisions fit into this part of your model.
Financial Structure
Finally, you need to understand what costs your model will have and how you will to them as well as how you will get revenue and how it will be used.
Defining what costs fit into your business model will help you make sure that you aren’t making decisions that don’t fit into your model; usually those are mistakes so being able to fit them into your model will help you avoid those types of mistakes.
Conclusion
All businesses have business models but serious business actually have defined them and control them whereas all other businesses just take whatever dynamic business model happens.
Not defining your business model limits success and causes wrong turns and mistakes.
There are 4 major components of a good business model:
- The Offer: what it is you have that people will pay money for
- Supporting Infrastructure: how you will be able to provide your offer (this could be people, Internet infrastructure, intellectual property, etc.)
- Sales Funnel/Customer Relations: how you will distribute your offer and care for you customers, including your channels of distribution, customer support, etc.
- Financial Infrastructure: what cost you will have, how you will collect money and how you will pay the bills
Define them so you can communicate them and use them are guideposts for decision making.
Next time we’ll start looking at specific business models, stay tuned 
What is your business model?
How is it defined?
How has it helped you succeed?
I’d love to hear all about it, please leave me a comment.
Talk soon,
The “Shameless” (but “Ethical”) Marketer
http://www.Twitter.com/DavidHusnian
http://www.8-8-8Sale.com
http://www.MusicForInternetMarketers.com
http://www.SecretsOfGoogleAdwords.com
http://www.MadMondaySale.com
http://www.2ForTuesdaySale.com
.
[...] previous installments, we’ve looked at what business models and why you should know what yours is and 2 proven-successful business models; that is, 2 different ways you WILL make money online if [...]