a blog from CenturyLink

How to know when it’s time to rethink your business model

by | Jan 15, 2022


Is it time to rethink your business model?

At a high level, your business model describes the type of business you operate. It includes how and where it’s operated, your target customer base and how you generate revenue. It also describes how your organization brings value to customers in order to continue generating that revenue and run a successful business.

If your small business has made a consistent profit for years without expanding or making sweeping changes, and you’re reasonably certain you can continue to do so, terrific!

But if your customer’s habits are changing, or new competitors are on the scene, it may be time to reconsider your business model to ensure that you are still the company that can meet your customers’ needs.

A coffeeshop owner passes a woman her coffee subscription.

Reasons for rethinking your business model

As a company grows and evolves, its business model may need to change too. Here are some indicators that you may want to steer your company in a new direction:

  • You’re losing money. Many businesses ordinarily go through ebbs and flows. If you’re experiencing decreased revenues month after month without an obvious reason, like seasonal shifts, pandemic lockdowns, or an economic recession, take a hard look at why. Are your prices too high? Or your costs? If you can’t pinpoint the reason, it may be time to rethink your business model.
  • Your customer base is decreasing. Many business owners worry when they see a drop-off in regular customers and struggle to bring in new ones. Sometimes, you can fix this issue with more effective advertising or a greater online presence. But if you’ve tried these things and still aren’t seeing any improvement, it might be time to rethink things.
  • You have too many competitors offering the same product or service. Having a competitive advantage is vitally important to small businesses, especially when there are many similar businesses in an area. Market saturation occurs when certain products or services are no longer in demand in a specific market, which could be due to increased competition. Once a market is saturated, there’s little opportunity or growth unless you find new ways to differentiate yourself or rethink your business model.
  • The market/customer demand has changed but your business has not. It’s critical for a business owner to know what customers care about. A company can quickly become obsolete if it fails to understand changing customer needs. Digitization is one area that has had a big impact on all types of organizations. Technological advancements have transformed how customers want to interact with companies and how businesses are run. You may need to change your business model to engage online with your customers.

An older female entrepreneur checks the status of orders on her smartphone.

Types of business models

If you are rethinking your business model, be aware that there are many to research.

At a high level, the most common types of business models are business to business (B2B), business to consumer (B2C) and business to government (B2G). Under these big-picture models are more finely detailed models that zero in on how a company operates and generates money. A few examples are:

  • Bricks and clicks
  • Subscription
  • Advertising
  • Leasing

Bricks and clicks model

The bricks and clicks model combines both an offline (such as a physical location) and an online or digital presence. Typically, a customer can purchase a product in the physical store or order it online and have it shipped to the store for pickup or have it delivered to their home. But there are many bricks and clicks combos. A catering business might open an ecommerce site to sell sauces, or a pizza shop could take orders by phone, a website, by text or by customers saying “Alexa, order pizza.”

Subscription model

A subscription-based model delivers a product or service regularly for a monthly fee. You’ve seen it before with streaming services, but it can also apply to small businesses. For example, an organic meat farmer delivers a box of select steaks, chops and sausages to consumers each month or twice a month for a fixed recurring price. An automotive mechanic shop evens out its cash flow by offering regular maintenance for an affordable recurring fee in addition to one-off repairs.

Advertising model

A popular business model these days is advertising, where a company creates content that’s shared online and draws revenue from advertisements. YouTube is a premier example. All types of businesses can create how-to and other informational videos. The ads that get placed on those videos can become a passive source of income. A software company could create an e-newsletter with curated content for their industry. If other businesses decide they want to sponsor the newsletter, you can collect the advertising revenue. Or let’s say that a restaurant owner and chef decides to create digital content online, including recipes, videos, and eBooks. Eventually, they may be able to leverage influencer partnerships with brands.

Leasing model

In the leasing model, a company purchases a product that it then rents to other businesses or consumers. Leasing computers and copiers is common, but this model could extend to all kinds of small businesses. For example, a jewelry shop could rent high-value watches and unique necklaces.

A female small business owner confirms project details over the phone.

Combining business models

Your business may have unique needs that require a custom solution. When you rethink your business model, you can make it your own. Instead of completely changing your business model, you may be able to diversify it or adapt additional revenue models. For example, a local hardware store may continue to sell home improvement supplies while adding a leasing model. Essentially, that business can use bricks and clicks and leasing models.

Review your business model regularly

To help ensure the long-term viability of your company, review your business model at least annually. Do some analysis to learn about market trends and customer demand. (The Small Business Administration provides some solid guidance.) Determine whether your customer base and target audience are in sync, their needs and wants, and how you could better meet what they’re looking for. Then plan to revise your model accordingly.

Overall, companies desire to grow for many of the same reasons. They want more profit to take advantage of opportunities as they arise, to expand when needed and to weather market downturns without impacting customers or suppliers. Rethinking your business model may be a logical step.

Making changes in business

For more on making moves in business, check out the Small Business section of the CenturyLink Discover blog, including articles like these:

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<a href="https://discover.centurylink.com/author/kim-lindros" target="_self">Kim Lindros</a>

Kim Lindros