Asset Light Business Model
Indian industry sector is going asset-light with every passing day! The ever-rising cost of land and growing levels of debt helped them recognize the need to grow by means of management contracts. An asset-light business model is a model whereby the company has relatively few capital assets compared to its operations.
How does the asset-light model work exactly?
To understand the concept of asset-light busines
s model, you have to forget the traditional business models first. Suppose a person wants to start a business and needs land to build an office for it. Instead of paying a hefty amount of money to purchase the land, the business owner makes an agreement with the land owner, sharing a certain percentage of profit. This is it.
Asset-light business model is also known as the capital-light business model, as it doesn’t require a lot of money to put a venture into action. Be it the manpower, the infrastructure, R&D or even the network; instead of spending tons of money to “own” all, you pay a certain amount of capital to get things done and share the profit.
Shared economy is the backbone of asset light business model. How else would an entrepreneur expect to move ahead on the success path faster? Success of a venture is measured in terms of the proportion of the investment made and the eventual returns. Let’s take the example of Uber. Uber has offered a platform that brings a cab driver and a passenger together, and takes the cut from the revenue generated from the ride. Uber owns the platform, but it doesn’t own the cabs or the drivers. Shared economy has become the latest trend and it is expected to be on a rise for next many years.
• Asset-light business models help companies move faster and, in the long term, may make them more sustainable.
• Asset-light business models is easy to adopt through outsourcing. For example, a firm that uses the cloud rather than buying servers and building data center can access the computing capacity more quickly.
• Asset-Light business models help emerging companies quickly achieve the scale and efficiency.