Anyone who has ever launched a startup knows that it can be a challenging process. No matter the business, there will be a multitude of questions to answer and puzzles to solve. Some, you’ll see coming. Others might not be so obvious. But like anything else, preparation is key and the more you can anticipate the better off you’ll be in the long term.
Deciding on the perfect business model for your startup is one of the most important decisions you’ll make. Your business model is the foundation of your new venture — it’s the strategy behind how your business makes money.
After all, you’re starting a business to make money, aren’t you?
While there is no way to guarantee that a business model will work for your startup, you can improve your chances by following one of the four models below.
Lately, more and more consumers are choosing to get their products and services via subscription rather than taking trips to brick-and-mortar retailers or making one-off purchases from their favorite online sites. That’s because subscription services offer greater efficiency and convenience!
Think of businesses like Netflix, Blue Apron or Dollar Shave Club, where consumers never even have to leave their home to get what they’re looking for. And the beauty of the subscription model is that it’s easy to set up and it gives consumers the peace of mind of knowing they can save money and stop worrying about running out of a particular product.
Subscription services don’t just provide value for consumers. The business model also has its perks for startups too! Think about how beneficial it can be to have recurring revenues. Repeat customers are the bread and butter for sustained business success. Locking in repeat customers and recurring revenue can help you better manage your inventory and predict future profits while increasing the overall value of your business.
The Upsell Model
Another popular business model is the upsell model which is where your business offers an introductory product or service at no cost but offers extra features to paying members. Popular services that have adopted this “freemium” model include Hulu, Dropbox, and Tinder.
The advantage of this model is that you can quickly attract users and grow your potential customer base without having to shell out the big bucks for marketing and ad campaigns. Free products that offer legitimate value to consumers tend to sell themselves and can grow quite rapidly.
Once they are in your system, the bulk of the business is centered around upselling the users to various paid levels.
The “Middleman” Model
Some entrepreneurs would rather focus their energy on bringing buyers and sellers together instead of creating their own products or services. Building a marketplace for facilitating transactions can be as valuable as creating your own product.
If you’re the middleman, you never have to deal with production, inventory, distribution, or any of the other number of elements in the production process. You won’t have to worry about manufacturing costs when you are simply providing a platform that enables sellers to connect with buyers and vice versa. With this type of marketplace, sellers have an opportunity to reach customers with unmet needs. And customers can finally have a place to go to find exactly what they’re looking for. It’s just a matter of bringing supply and demand together!
And best of all, in return for facilitating these business relationships, you can take a small cut of every transaction. Amazon, Uber, and Airbnb are a few of the more recognizable names in the marketplace business model world. But you don’t have to be a multimillion dollar company to make your mark with this type of business model.
The Personalization Model
Have you noticed how many businesses have shifted toward personalizing their goods and services lately? Whether it’s food, fashion, or experienced-based products, custom, one-of-a-kind designs are trendy right now. That’s because consumers are looking for products and services that reflect their individuality.
From the startup perspective, one of the perks of offering highly personalized products and services is that consumers are willing to pay more for items that are designed to their own specifications. Best of all, the ability to customize in an affordable and more efficient manner is achievable now more than ever before. With advanced technology, you can make your startup a one-stop shop for personalized gadgets and gizmos!
If you’re planning to launch a new venture, the four business models above are a grea place to start.