Small businesses look to take advantage of every opportunity to increase efficiency and the bottom line. Small-business owners, including sole proprietors such as independent contractors, can benefit from collective business models by combining efforts with competitors.
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Collective Business Model Variations
The collective business model pools resources from similar businesses or professionals in related fields for the benefit of the group as a whole. Three types of businesses and organizations that are based on the collective business model include cooperatives, franchises and trade associations. In each of the collective business types, collaboration between like-minded businesspeople, professionals and workers is used to increase productivity and maximize profits.
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In cooperatives, members collectively own the business. Depending on the structure of the organization, members may also include workers. For example, professional sole proprietors, such as independent photographers, may join forces and form a cooperative for marketing purposes. Individuals can then use this collective business model to sell their work. The cooperative members may hire employees to operate the business or may undertake the administrative duties themselves. In addition, members may also operate individual businesses that collaborate with the cooperative on group projects, providing each member with additional resources at little or no charge. Cooperatives are democratically controlled. All members participate in decision-making and share in profits.
Trade associations include tradespeople and business owners in related fields. Members generally pay dues to participate. A business can use this collective business model to its advantage by participating in group purchasing plans, thus reducing costs for needed products and services. Trade association members can use contacts in the industry to promote products. For example, building a network of contacts within a specific industry can help a business gain access to new customers and establish a reputable presence in the industry. Trade associations often offer members research data specific to the industry, which can help the company’s marketers in developing and planning new products or services based on industry trends.
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In a franchise business model, the business owner or management pays the franchisor company a fee to sell the company’s brand-name products or services. The small-business owner can use this collective business model to operate an enterprise that already holds a successful reputation and markets recognizable brands. A franchise manager can take advantage of the regional, often national, advertising campaigns the franchisor company initiates. It should be noted, however, that the franchisees pay for these promotions through group purchasing.