First up, I was supposed to take up MARKETING, but as I was at it, I realized there is a fundamental topic we missed. It’s a basic that we have to look at before we proceed otherwise some readers might be lost. Pardon my oversight. We will be looking at Small Business Setup, Models & Classification. Though it’s also applicable to big businesses, but since this series is about small and medium businesses, I’ll keep it focused on same.
If you landed here via search or other means, you may like to check out the previous topic in this series: Choosing a Name For Your Small Business
Business Setup (Online or Brick & Mortar)
Here we talk from where your business will reach it’s desired customers. How do you intend to offer your products and services to your target customers? Do you have a physical office or shop they can come and transact with you (this is called Brick and Mortar Business) or will you offer your products or services over the internet (known as online)? Both has its advantages and disadvantages.
Advantages of Brick and Mortar Businesses
– Simple to setup
– You can start skeletal and then standardize it later.
– For egocentric people, this makes them happy knowing that people can see ‘their business.
Disadvantages of Brick and Mortar Businesses
– High cost of office/shop rental
– Limited to clients within your locality/city.
– Potential target for robbery and accidents eg, fire outbreak.
Advantages of Online Businesses
– Cheaper to setup
– Worldwide customer base
– Flexible working schedule
– Can be started in your bedroom.
Disadvantages of Online Businesses
– The entire system must be setup before starting.
– There is a threat of hackers if proper care is not taken.
Requires training to be grounded with the process.
– Have to be computer/technology literate to run online business.
These are just some of the advantages and disadvantages of both business setup. One must be certain of the involvements of each before adopting it.
Business Transaction Model (B2B or B2C)
Are you setting up your business to deal with consumers directly or it’s setup to transact with other businesses? You have to define this and follow the principles of each. Most small businesses though deal with both. For instance, when I and my brother were neck deep with GSM Clinic, at a time 80% of our client base were other mobile phone repair shops. At a time, most of them literally became lazy and only opened shop to collect jobs, charge huge fees, bring the jobs to us to do and they pay us a fraction of the fee.
B2B – or Business-To-Business are those enterprises that deal with other enterprises. In other words, their business is there to serve other businesses and not directly the general public. Example of B2B are business consulting firms, distributors, etc.
B2C – These are businesses that deal directly with the consumers. Their products and services are designed to be sold to the final consumer. Examples here include retail shops, petrol stations, etc.
BTW, I am presently setting up my first B2B business that happens to be an online one too, called NigeriAds (with an old name I used previously) It will offer businesses an integrated platform to market their products and services using the power of the internet in ways they never thought possible. When fully in it’s groove, we will disrupt the advertising sector and I see radio and TV stations scrambling to stay afloat.
Read more about it at www.nigeriads.com.ng
Let’s move on.
Business Classification (Common or Uncommon)
Though not a standard classification of business models, I had to touch on this for personal reasons – I am not a fan of common types of businesses, maybe that’s why ‘I never blow’ , hahahahahaha. For instance, when I started GSM Clinic Nigeria with Gibson my brother, mobile phone repairs was not common in Nigeria. There were maximum 10 shops in the entire city of Port Harcourt. That’s an uncommon business to me.
Common businesses can be seen almost everywhere you turn to and they operate on small margins, their profit margins per unit is small due to the competition. You can’t afford to hike prices otherwise clients move to the next dealer.
Common Businesses are susceptible to price swings and easily close. Swing in prices by manufacturer or wholesaler or economic issues can affect common businesses adversely and may cause them to take loss in profits or even close when they cannot stand price reduction. I have heard of sellers who just received goods at certain prices only for economic situations beyond their control to make prices of the commodity drop drastically. They either had to sell at prices below their cost price or they close down.
– Common Businesses gulp plenty money in order to stand out. Relatively, just to appear unique, they have to spend extra resources to stand out from the crowd. This include money spent on continuous advertisements and customer relationship building.
Common Businesses are sure to have customers. For instance, the market women selling food stuff will always sell while a man selling unique power bikes may not sell for some days or weeks.
Also Common Businesses can leverage on the economics of scale and make reasonable profits by selling huge quantities of common goods and services. This is where the Igbo business men are experts. They patiently trade everyday with little profits and await the day a customer will come and buy huge quantities of their goods and they smile to the bank.
On the other hand, Uncommon Businesses mostly operate on principles that are a direct opposite of their Common Business brothers. Just read the above characteristics of Common Businesses and add the opposite of each and you get that of Uncommon Businesses models. It’s that simple. So you decide which you want.
That’s about it about models of businesses. Like I stated earlier, it’s necessary we deal with this so we are all on the same boat going forward, as we shall come across these terms going forward.
BTW, I got a high profile request based on this series and I shall decide what to make of it subsequently. And still standing by to reply to any queries, even if they are not related to the topic. We will return back on track with the MARKETING topic – BRANDING Small Business. Till next Saturday, have a nice week ahead.