Asset-Light Business Model
Asset-Light Business Model
In today’s business environment a company has to be agile and nimble to survive. An asset-light business model will help entrepreneurs to grow by investing only one-fourth to one-third of the capital that would usually be required.
The idea of an asset-light and investment-friendly business model is to keep the capital assets less in comparison to the operations. It is the key to the success of most start-ups, because of its ability to scale them up, compared to other methods. In this article, we will describe some asset-light businesses that have great potential for scalability that an entrepreneur can start.
For more details on SIDBI‘s Asset Light Scheme for Service Sector Entities, click here
Advantages of Asset-Light Business Model
An asset-light company can expand its reach to a new location at the simple click of a button and increase the number of partners in its network. Some of the other advantages of the asset-light business model are as follows:
- The costs of investment and running the Asset-Light Business Model business is less, and revenue and profits would be more.
- Start-ups can own the operational part of the company and outsource any other assets needed.
- They confer greater flexibility to tech-enabled new-age businesses to scale up much faster than traditional asset-heavy industries. This quick scalability gives them a definite edge over others in the market.
- The startup can grow new assets and sell them later at a profit.
- Businesses with high scalability and lower capital requirements are more attractive to equity investors. So, it will help entrepreneurs to get the company listed.
Working Structure of Asset-light Business Model
The asset-light business model does not require a lot of tangible assets like buildings, machines, warehouses, etc., or anything which requires heavy investment. But one thing that they cannot do without is the adoption of technology. From manufacturing and packaging to marketing and distribution, any company that integrates technology at all stages of its operations will succeed in today’s competitive marketplace.
Asset-light companies can focus their time and resources on R & D and forming strategic alliances for greater synergies, by asset sharing, franchising, and outsourcing non-critical functions.
Asset-light Businesses Ideas
The asset-light strategy is becoming popular among many hospital chains. In this model, an entrepreneur can provide the manpower and management, and bring in a partner who will put the capital for the hospital infrastructure and medical equipment.
Adopting an asset-light business model can help entrepreneurs focus on operational efficiency and value creation. You can expand into community-based asset-light chains offering innovative healthcare financing options.
Online grocery delivery
This is an asset-light business model in which entrepreneurs don’t have to own retail outlets but will control the supply chain, and stock goods in warehouses. Entrepreneurs can buy packaged goods at wholesale rates from suppliers, and sell to the customers at M.R.P., thus earning a neat profit.
Entrepreneurs can rent a shop and start an automobile repair business. The best part is that entrepreneurs need not have to take a costly place in a high-traffic area.
Asset light vs Asset-heavy Businesses
An asset-light and an asset-heavy have a lot of differences, some of which are listed below.
|Asset light business model||Asset heavy business model|
|Less capital expenditure is required to start the business.||Large capital expenditure is required to start the business.|
|They own fewer capital assets compared to their operational assets.||They own more capital assets.|
|They are usually not vertically integrated||They are usually vertically integrated.|
|They are more flexible in a fast-changing environment.||They are less flexible.|
|They do a lot of outsourcing.||Most operations are done in-house|
|This model is ideal for scaling up.||It is a bottleneck that will hamper your pace when scaling up.|
Post by Renu Suresh
Renu is experience content writer specialised in compliances and company rules.