Small Business Models: Scaling for Success

Small Business Models: Scaling for Success Small businesses thrive on ingenuity and the ability to adapt. From having flexible products and services to fluid pricing models, most small businesses need to be able to pivot in order to succeed long-term.

To adopt an elastic business model that can move with changing markets, small business owners need to be aware of industry trends and forecasts, as well as evolving business and pricing models within their areas of expertise.

Follow along in this post as we explore some of the most popular small business structures to see how you can expand your enterprise in the future.

Products and Goods

People have been exchanging goods for thousands of years, so it’s no surprise that product-based business structures continue to be popular today—they’ve proven their worth over many years of trial and error.

A product-based business is one that relies on a physical product, such as hand painted mailboxes to game consoles. They make money by selling their products to customers, whether those are individuals or other businesses.

Product-based businesses have a unique set of benefits compared to their counterparts:

  • They offer flexibility with products, so you can expand, cut back, or even shelf a product line if necessary.
  • They provide simple expansion solutions, like customer personalization, upgraded versions of the original product, and add-ons.
  • They’re straightforward and easy for customers to understand.

Alternately, they also come with drawbacks:

  • They have higher costs likes material, warehouse space, and distribution.
  • Manufacturing issues can lead to recalls.
  • If a product is unsuccessful, it may be difficult to recoup your losses while still supporting your other lines.

Services

According to Entrepreneur, some of the most profitable small businesses are service based, such as finance (accounting, bookkeeping, and tax preparation), real estate (both agents and landlords), and science and tech consulting.

Service-based businesses are when an individual or business offers services to its customers. These customers can either be individuals or other businesses, and services can range anywhere from cleaning and housekeeping all the way to healthcare and office administration.

Just like product-based business structures, consulting companies, contractors, and freelancers have been around for a very long time, and as the world continues to embrace a technologically-friendly era, they are only becoming more popular.

Service-based businesses can offer benefits such as:

  • No manufacturing, storage, or distribution costs.
  • The flexibility of offering a variety of related services, for example, an accounting firm that offers both personal and business tax returns outside of your usual
  • The ability to work from home as a freelancer, contractor, or consultant.

Some of the downfalls of service-based businesses are:

  • They tend to have higher competition than product-based businesses.
  • They can be more affected by seasonality (think tax season).
  • Markets tend to be more saturated, which can lead to difficulty finding customers.

Hybrids

Hybrids are a mix between service- and product-based businesses. They combine a product with a service to make both short- and long-term income.

For example, think of PlayStation or Xbox. Both companies offer a product in the form of a console, but also offer long-term subscriptions to PlayStation Plus and Xbox Live respectively. The subscriptions provide users with discounts, free games, and online multiplayer opportunities that are not available with the console alone.

Another good example of this type of business model is Fitbit—you purchase a product in the form of a fitness tracker, and then you can opt for a premium membership that offers additional insights and statistics outside of what you receive with the basic purchase of the hardware.

Hybrid business structures offer a variety of benefits, including:

  • The ability to sell a variety of products (consider the different types of Fitbits).
  • The generation of both short- and long-term revenue.
  • The flexibility to adapt either goods or services to changing trends as needed.

Some of the challenges associated with hybrids include:

  • The difficulty of managing both types of business structures at once.
  • Ensuring that the service adds enough value to the product to be worth a purchase to customers.
  • Finding a balance between offering a product that satisfies customers as a standalone product, while showing that it could be improved by including the service.

So, How Can You Expand?

As you can see, each business structure has both positives and negatives to consider. As a small business owner, it’s important to evaluate where your business stands currently, and where you would like it to be in the future.

If you are a product-based business, do you see opportunities to offer services down the road related to whatever you sell? And if you are a service-based business, do you see any way to explore products as you grow? If your business is currently a mix of both, do you think that you would benefit from scaling back and putting your efforts into one aspect of your business as you expand?

Be sure to ask yourself these questions as you begin to explore how best to scale your business to meet market trends and fend off competition. Pay close attention to your core customers and whether or not you tend to get more interest from individuals or businesses, and what your competitors are doing to maintain enthusiasm about their products.

Don’t be afraid to think outside of the box, but remember to have market research to back up your ideas so that you aren’t left footing the bill for a product or service that your target market wasn’t quite ready for.

How do you plan to expand your small business?

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Brittany Foster

Marketing Writer at LawDepot
Brittany is an ardent reader, writer, and blogger.
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