Types of Company and Their Models
Updated: Sep 3, 2021
A company is always different from another. No two companies are alike. The companies also form a network (called an ecosystem).
A startup company is not a company yet.
By location: Local or National
By people count: Sole proprietor, Partnership, Small Business, Large Business
By the profit margin: Small profit margin (<5%) and large profit margin (25%)
By position on a supply chain: upstream, downstream, or critical
By brand power: branded or generic (OEM or ODM)
By the cash flow model: heavy debt to revenue ratio, small debt to revenue ratio
By the consumable nature of your product: is your product consumable or not?
By nature of the products - is the product consumable, or does it have very short life cycle. (Examples: bathroom tissue paper, computer games, and coca-cola)
A company is only the instrument to support the business. But the business must generate cash flow to support the company. A company needs to pay salaries with cash.
A company is defined by its industry choice
By industry association: first industry (agriculture), secondary industry (manufacturing), third industry (service) and fourth industry (research and support)
Location in the supply chain and the smiley curve
A smiley curve connects the Design - Manufacturing - Marketing elements. No one can do everything, because if you do then someone would specialize to under cut you.
A company is defined by its CHOICE of Market Presence.
A market is defined by its fatness, the frequency, and the regularity of its business transactions.
A company is also defined by its ability to collect payment from debtors. Good companies request Pay Upon Shipping, bad ones let the shipping happen first and then harass the customer for payment later.
Company is defined by how it survives, how it helps others, and how it grows. This is called the business model.
A business plan describes the model, not how to startup the company. If the model makes sense, people will help you start it.
The four fundamental natural business models are:
(1) Open a market and charge commission;
(2) Make tool and sell tool, or sell the tool-making operation;
(3) Own land and charge for right of use;
(4) Attract others to come by act or performance and charge.
All other business models are variations of these.
No matter what modern times it is, it always comes to these four ways. Business does not recognize high tech, and high tech does not automatically create business.