Business Models

Question 1

Define ‘Business Model’

Answer 1

Plan implemented to generate revenue and make a profit from operations.

Question 2

Information included in business models (4)

Answer 2

1. Products or services.
2. Target markets.
3. Projected expenses.
4. Value proposition.

Question 3

The two levers of a business model

Answer 3

Pricing and Cost.

Question 4

Why business models change after business has opened

Answer 4

1. Changing business environments.
2. Changing market demands.

Question 5

How freemium providers make profit

Answer 5

1. Advertising to customers using free services.
2. Luring customers into premium service with less limited scope.

Question 6

What makes a business model successful

Answer 6

The passion and ability of the people who execute the plan.

Question 7

Define ‘value proposition’ (3)

Answer 7

Description of:

1. Goods or services offered.
   2.Why they are desirable to customers.
2. How offer differs or outcompetes competition.

Question 8

Successful business models allow a company to: (2)

Answer 8

1. Fulfill client needs at a competitive price.
2. At a sustainable cost.

Question 9

Common business model mistakes

Answer 9

Underestimating costs of funding business before profits made.

Question 10

Why counting costs to introduction of a product is not enough

Answer 10

Business must run until it is profitable.

Question 11

Define ‘gross profit’

Answer 11

Total revenue minus costs of goods sold (COGS)

Question 12

Define ‘net income’

Answer 12

Gross profit minus operating expenses

Question 13

Why investors look at gross profit when evaluating (2)

Answer 13

1. Indicates efficiency and effectiveness of a business model.
2. In comparison to competitors.

Question 14

Why investors look at cash flow/net income as well as gross profit

Answer 14

Indication of real profit made.

Question 15

How companies leverage price

Answer 15

Raising price of goods.

Question 16

How companies leverage costs

Answer 16

Finding inventory at reduced cost.

Question 17

Why excessive expenses can be correctable

Answer 17

Company management team may be at fault.

Question 18

Difference between offer and business model

Answer 18

Business model is not just what a company sells, but how it sells it.

Question 19

Decribe the retailer model

Answer 19

Buy finished goods and interface directly with customers.

Question 20

Describe the manufacturer model

Answer 20

Sourcing raw materials and producing finished products.

Question 21

Describe the fee-for-service business model

Answer 21

Centered around labour and providing services for fees rather than selling goods.

Question 22

Describe the subscription-based business model

Answer 22

Offering a product that requires ongoing payment in order to find long-term customers.

Question 23

Describe the bundling business model

Answer 23

Bundle multiple products to sell multiple goods to a single client.

Question 24

Describe the marketplace business model

Answer 24

Host a platform for business to be conducted for compensation.

Question 25

Describe the affiliate business model

Answer 25

Companies pay an entity with broad reach to promote goods.

Question 26

Describe the razor blade business model

Answer 26

Durable product sold below cost to a consumer to generate high-margin sales of a disposable component of the product.

Question 27

Describe the reverse razor blade business model

Answer 27

High-margin product sold upfront, then companion products provided at low cost (or free).

Question 28

Describe the franchise business model

Answer 28

Leverage existing business plans to expand and reproduce a company at a different location, at a cost to the franchisee.

Question 29

Describe the pay-as-you-go business model

Answer 29

Amount charged depends on how much of the product or service was used.

Question 30

Describe the brokerage business model

Answer 30

Connects buyers and sellers for a few, without selling a good themsevles.

Question 31

Describe the brokerage business model

Answer 31

Connects buyers and sellers for a few, without selling a good themselves.

Question 32

‘Identify your audience’ meaning

Answer 32

Understanding who you are trying to target.

Question 33

Importance of identifying the audience (3)

Answer 33

Guides crafting: Product; Messaging; and Approach to connecting.

Question 34

‘Define the problem’ meaning

Answer 34

Identifying the demand you want to supply.

Question 35

Danger of not defining the problem

Answer 35

May not be a demand for the service you want to provide.

Question 36

‘Understand you offerings’ meaning

Answer 36

The product you want to sell and how your expertise matches it.

Question 37

Factors involved tweaking product while understanding the offering (2)

Answer 37

1. Market needs
2. Possible offerings

Question 38

‘Document your needs’ meaning

Answer 38

Identifying and analysing obstacles.

Question 39

Types of challenges when documenting needs

Answer 39

1. Product-specific challenges.
2. Operational.

Question 40

Utility of Documenting all Needs

Answer 40

Assessment of whether launch-ready.

Question 41

‘Find key partners’ meaning

Answer 41

Leveraging other business partners to enhance success.

Question 42

‘Set monetisation solutions’ meaning

Answer 42

Identifying how money is made.

Question 43

‘Test your model’ meaning

Answer 43

Performing surveys and/or soft launches to see whether business model works.