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Capital-Light Business Models: Why Some Companies Need Very Little Money to Grow

Business Analysis • Beginner Investing • 7 min

Two companies can grow revenue at the same rate, but they can be very different investments. The difference lies in how much cash that growth consumes. This is the essence of a "capital-light" or asset-light business model. A capital-light business needs less reinvestment in property, equipment, or inventory to create each extra dollar of revenue. Franchising is a classic example. The franchisor earns ongoing…

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