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The Dual-Business Model

By: Steve Johnson

10/24/2008 - 34 Comments

One of the more interesting and promising business models that I've seen is the 'dual-business model’ - at least that's what I call it.

The dual-business model is to own two businesses that feed each other. Like owning a paper distribution business and the newspaper, or a coffee importer and a coffee shop.

You might say, why stop at two?  You don’t have to stop at two, but one business is difficult to manage, two is very difficult and more than two is next to impossible.  Another way is to expand your product offerings or divisions within your current business.

The problem with a single business model is that you are to issolated to have any control over the entire product cycle. Starting a business takes a lot of focused energy on a single product or service.  It’s very difficult to gain control over the entire product cycle, from the suppliers to your distribution network.  You cannot control prices, suppliers, workloads (by moving employees from one business to the other) and you cannot get a pulse of future business needs because you're too involved in your small part of the entire process of the product cycle. 

One way around this dilemma is to have a relative or close friend start a business in the same product cycle that your business is a part of.  The dual-business model can provide that extra leverage that you need to compete by giving you more control of the entire product cycle. For example, I would like my brother to start a Internet marketing business to couple with my website design business.

This idea can be very useful if you have a successful business but struggle with growth. You can leverage the most successful part of your business in a new business with a different target market or a different part of the product cycle of your industry.   

In the Personal Finance Blogosphere

Here are a few financial bloggers that are using this idea. JD of the popular financial blog ‘Get Rich Slowly’recently launched as new blog called ‘Get Fit Slowly’.  Pinyo of the popular financial blog Moolanomy has recently launched a personal finance site called www.pfbuzz.com

These are more like product extensions then a true example of the dual-business model.  The idea behind a product line extension is that once you have spent the time to figure out a business model that produces a profitable return, then why not leverage your knowledge and hard work to reproduce your system. If you have a business that produces a profit of x and you can reproduce it 6 times, then your profit becomes 6x.

A better example of the dual-business model would be to own the leading blog authority Technorati, while your brother owns one of the most popular blogs. The information shared between your businesses could create an unmatchable competitive advantage. 

The Internet is a great place to start a new business because it's relatively easy to start and has a low investment cost. The hardest part is figuring out the system of suppliers and customers. Generating traffic and finding partners to make an income with your traffic.

The dual-business model is one of the most successful means to create a competitive advantage.

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