How to Select a Business Model

BYTRADEBYTRADE Posts: 63subscriber Bronze Level Member
edited December 2011 in Selecting a Business
1


Obtain the annual reports for at least five other businesses in the same industry. You can obtain the annual report on the company website or by contacting the Investor Relations department for the company.



2


Read over the company descriptions of operations and earnings. Understand how the companies are organized and where they are located.



3


Identify the point of sale for the company. Understand how the customer makes a sale and how the business delivers the good or service. Try to focus on the most efficient process. Efficiency is a function of quality and costs.



4


Calculate the gross margin. Gross margin is equal to sales minus the cost of goods sold divided by sales. If sales are $100,000 and the cost of goods sold is $20,000, then the gross profit is $80,000 and gross margin is 80 percent. Analysts use gross margin as a measure for business model performance. The higher the margin, the better the business model.



5


Select the best business model for your business. Now that you've studied and researched several business models in the industry select the business model which you think will make your business the most successful. Examples of possible business models include an Internet based model, a brick and mortar (physical building) model, a subscription model, a wholesale model or some mixture several different models. There are many different types of models, the challenge is customizing the right one for your business.



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