Types of Business Models

1. Manufacturer- A manufacturer makes finished products from raw materials. It may sell
directly to the customers or sell it to a middleman i.e another business that sells it finally to the
customer. Examples – Ford, 3M, General Electric.

2. Distributor- A distributor buys products from manufacturers and resells them to the
retailers or the public. Examples – Auto Dealerships.

3. Retailer- A retailer sells directly to the public after purchasing the products from a
distributor or wholesaler. Examples – Amazon, Tesco.

4. Franchise- A franchise can be a manufacturer, distributor or retailer. Instead of creating

a new product, the franchisee uses the parent business’s model and brand while paying
royalties to it. Examples – McDonald’s, Pizza Hut.

5. Brick-and-Mortar- Brick-and-mortar is a traditional business model where the retailers,

wholesalers, and manufacturers deal with the customers face-to-face in an office, a shop, or a
store that the business owns or rents.

6. eCommerce- E-Commerce business model is an upgradation of the traditional brick-

and-mortar business model. It focuses on selling products by creating a web-store on the
internet.

7. Bricks-and-Clicks- A company that has both an online and offline presence allows
customers to pick up products from the physical stores while they can place the order online.

8. Nickel-and-Dime- In this model, the basic product provided to the customers is very
cost-sensitive and hence priced as low as possible. For every other service that comes with it, a
certain amount is charged. Examples – All low-cost air carriers.

9. Freemium- This is one of the most common business models on the Internet.
Companies offer basic services to the customers for free while charging a certain premium for
extra add-ons.

10. Subscription- If customer acquisition costs are high, this business model might be the
most suitable option. The subscription business model lets you keep customers over a long-
term contract and get recurring revenues from them through repeat purchases. Examples –
Netflix, Dollar Shave Club.

11. Aggregator- Aggregator business model is a recently developed model where the
company various service providers of a niche and sell their services under its own brand. The
money is earned as commissions. Examples – Uber, Airbnb, Oyo.

12. Online Marketplace- Online marketplaces aggregate different sellers into one platform
who then compete with each other to provide the same product/service at competitive prices.
13. Advertisement- Advertisement business models are evolving even more with the rise of
the demand for free products and services on the internet. Just like the earlier times, these
business models are popular with media publishers like Youtube, Forbes, etc.

14. Data Licensing / Data Selling- With the advent of the internet, there has been an
increase in the amount of data generated upon the users’ activities over the internet. This has
led to the advent of a new business

15. Affiliate Marketing- Affiliate marketing business model is a commission-based model

where the affiliate builds its business around promoting a partner’s product and directs all its
efforts to convince its followers and users to buy the same.

16. Dropshipping- Dropshipping is a type of e-commerce business model where the

business owns no product or inventory but just a store. The actual product is sold by partner
sellers who receive the order as soon as the store receives an order from the ultimate customer

17. Network Marketing- Network marketing or multi-level marketing involves a pyramid

structured network of people who sell a company’s products.

18. Crowdsourcing- Crowdsourcing business model involves the users to contribute to the
value provided. This business model is often combined with other business and revenue models
to create an ultimate solution for the user and to earn money. Examples of businesses using the
crowdsourcing business model are Wikipedia, reCAPTCHA, Duolingo, etc.

19. Blockchain - The Blockchain is an immutable, decentralized, digital ledger. It is a digital

database that no one owns but anyone can contribute to. Many businesses are taking this
decentralised route to develop their business models

20. High Touch- The High Touch model is one which requires lots of human interaction.
The relationship between the salesperson and the customer has a huge impact on the overall
revenues of the company.

21. Low Touch- The opposite of the High Touch model, the low touch model requires
minimal human assistance or intervention in selling a product or service.

22. Auction-Based- Mostly used for unique items that are not frequently traded and that
don’t have a well-established market value, like collectables, antiques, real estate, and even
businesses.

The 4 Main Types of Intellectual Property and Related Costs

1. Patent 3. Copyright
2. Trademark 4. Trade Secret
Patents result from the following stages:

1. Conceptualization 4. Invention Disclosure

2. Invention Disclosure 5. Maintenance
3. Patent Application 6. Costs
ELEMENTS OF BUSINESS PLAN
1. Executive Summary 6. Breakdown of Your Products and
2. Company Description Services
3. Market Analysis 7. Marketing Plan
4. Competitive Analysis 8. Sales Strategy
5. Description of Management and 9. Request for Funding
Organization 10. Financial Projections

Elements of Financial analysis

1. Revenues- Revenues are probably your business's main source of cash. The quantity,
quality and timing of revenues can determine long-term success.

Revenue growth (revenue this period - revenue last period) ÷ revenue last period.

Revenue concentration (revenue from client ÷ total revenue). If a single customer

generates a high percentage of your revenues, you could face financial difficulty if that customer
stops buying

Revenue per employee (revenue ÷ average number of employees). This ratio

measures your business's productivity.

2. Profits- If you can't produce quality profits consistently, your business may not survive in
the long run.

Gross profit margin (revenues – cost of goods sold) ÷ revenues. A healthy gross profit
margin allows you to absorb shocks to revenues or cost of goods sold without losing the ability
to pay for ongoing expenses.

Operating profit margin (revenues – cost of goods sold – operating expenses) ÷

revenues. Operating expenses don't include interest or taxes. This determines your company’s
ability to make a profit regardless of how you finance operations (debt or equity). The higher, the
better.

3. Operational Efficiency Operational efficiency measures how well you're using the
company’s resources. A lack of operational efficiency leads to smaller profits and weaker
growth.

4. Capital Efficiency and Solvency- are of interest to lenders and investors.

5. Liquidity- Liquidity analysis addresses your ability to generate sufficient cash to cover
cash expenses. No amount of revenue growth or profits can compensate for poor liquidity.
RAISING CAPITAL

Types of capital

 Debt Capital- Debt capital can be obtained through private or government sources.
Sources of capital can include friends, family, financial institutions, online lenders, credit
card companies, insurance companies, and federal loan programs.

 Equity Capital- Typically distinctions are made between private equity, public equity,
and real estate equity.
 Working Capital- Working capital includes a company’s most liquid capital assets
available for fulfilling daily obligations.
 Trading Capital- Trading capital may be held by individuals or firms who place a large
number of trades on a daily basis.

Raising Capital Process

 Pricing

1. Price stability- After the offering is completed, investors do not want a lot of volatility.
High levels of volatility will represent that the security was valued incorrectly or
unreflective of the market’s demand or intrinsic value.

2. Buoyant aftermarket- If there is to be any price volatility after the issue, hopefully, it will
be to the upside. A strong post-issue performance indicates an underpriced offering.

3. Depth of investor base- If an offering attracts only a few highly concentrated investors,
the probability of price volatility will be high.

Pricing Tradeoff- Choosing the “right” price requires a tradeoff between achieving a strong
aftermarket price performance and underpricing.

Costs of Underpricing- Underpricing an issue reduces the risk of an equity overhang and
ensures a buoyant aftermarket

DCF - Discounted Cash Flow

Business Ethics

Business ethics is the study of appropriate business policies and practices regarding
potentially controversial subjects including corporate governance, insider trading, bribery,
discrimination, corporate social responsibility, and fiduciary responsibilities

Code of ethics

A code of ethics is a guide of principles designed to help professionals conduct business

honestly and with integrity.