The Most Expensive Business Models to Start and Run

White papers, articles and books about financial planning and using Excel spreadsheets.There are numerous business models available for new business owners to consider. Some are more expensive than others to run and will require more start-up capital. When starting a business, business owners should know what to expect in terms of operating expenses. Awareness is instrumental for realistically setting a budget and for gauging the amount of funding to request from investors.

Distributor or Merchant Business Model

The most expensive business models are typically merchant businesses. These businesses sell directly to the public. Retail operations often require significant capital for the building, location, merchandise and advertising. When implementing this type of business model, product liability is not a concern unless the company decides to also sell a product it has created.

Business owners must factor in both business expenses and capital expenses when considering the overall cost of running a business. Business expenses include the building lease and salaries of employees. Capital expenses may include any assets purchased by the business. For example, business owners must consider operating expenses such as the cost of each transaction made by a customer and how that cost will affect profitability. Building leases are expensive. Utility costs, maintenance, cleaning staff and countless other expenses related to maintaining a business should also be factored into the total operating cost.

Business owners must also be able to obtain equipment for businesses. Computers, cash registers and servers are required to maintain most merchant businesses. Restaurants will require appliances, delivery vehicles and other equipment to conduct business. Website maintenance and hosting is an additional expense of merchant companies.

The overhead is tremendous for merchant businesses. Merchant businesses are most frequented by the public but are some of the most expensive to start and maintain. Significant capital is required. These business models are often the most expensive to run because of business liability issues, potential theft, and inventory replenishment. Lawsuits from customers are common in high traffic retail businesses. Coverage for your business will protect businesses from liability and losses due to theft.

Creator Business Model

The creator business model creates a product or service from scratch and sells it to the public. The creator business model has all the concerns of the distributor or merchant business model, but this model has the additional expense of product liability issues. Business owners will be responsible for start-up business costs such as licenses, registration, incorporation, building leases, equipment purchase and other business and capital expenses. Patents may also be required if the idea is novel and proprietary.

Business owners must take additional care and implement best practices and quality control to ensure the product will not harm the public. Manufacturing is an expensive and costly endeavour and requires significant capital. The risks are much greater when product development is the foundation of the business. In general, the creator business model is the most expensive business model to start and to run.