In our previous article, we compared MVP and Proof of Concept. Today, we would like to share startup business models. When you get ready to launch a business, you need to know what your business model will be. While you may think this is something that you can worry about later, it’s best to get organized.
Here we will take a look at the different types of business models, the benefits of having one in place, and how to factor your model into your strategic planning process.
What is a startup business model?
“Business modeling is the managerial equivalent of the scientific method – you start with a hypothesis, which you then test in action and revise when necessary” – Joan Magretta.
A business model is a summary of how your startup will make a profit. It looks at:
- The products and services your business will sell
- The target market you will sell to
- The expenses that you will incur from making and selling your product or service
- Your customer value proposition. This is a marketing statement that defines why a customer should buy your product or service and how you will solve your customers’ problems. It also should explain your unique selling points and how your product and service differentiate you from your competitors
Why is it best to have a business model in place early on?
Having a solid business model in place as soon as possible will benefit your start-up in the following ways:
- It will help you to devise a proof of concept (POC) and minimal viable product (MVP)
- It will make it easier to turn an initial profit
- The business model will enable you to review your processes and reduce costs
- It will make it easier to get early investment
- It will help you recruit exceptional talent
For example, take the audio-chat mobile app ClubHouse. It’s still in Beta and is currently invite-only but has a market valuation of $100m (€83m). This high valuation would not be possible without a thorough business model. And they used a tactic we described previously in our article 24 Tactics used by Big Startups to solve The Chicken and Egg Problem
Twelve examples of startup business models
I can sense your excitement as you embark on this entrepreneurial journey! With so many different business models available, the possibilities are endless. Whether you’re selling a physical product, offering a service, or diving into the digital world, there’s a business model that’s perfect for you. From traditional brick-and-mortar stores to e-commerce platforms, subscription-based services to affiliate marketing, it’s important to explore all your options. So buckle up and get ready to discover the perfect business model that will turn your passion into a thriving venture! The possibilities are truly limitless.
Here are twelve of the most popular.
In the exciting world of digital marketing, there’s a revenue model that stands out from the rest – advertising! This is the money-making strategy that gets marketers all fired up. It’s a popular choice for magazines, free mobile apps, and online blogs. With this model, your users enjoy your content for free while your advertisers pay you for prime ad placements. It’s a win-win situation that keeps the cash flowing and the excitement levels high. So, if you’re looking to monetize your platform and create a buzz in the industry, advertising is the way to go! Get ready to watch those dollars roll in as you provide valuable content to your audience. The possibilities are endless when you combine creativity with an effective ad strategy. So go ahead and dive into the exciting world of advertising – where every click counts and every impression brings you closer to success!
Freemium is the buzzword that’s got everyone in the tech world buzzing with excitement! It’s the perfect strategy, especially for SaaS and mobile apps, where you can offer a taste of your amazing product or service for free. But wait, there’s more! You can then charge for those premium features that will take your users’ experience to a whole new level. Think about it – you’re giving your customers a chance to test drive what you’ve got to offer without any commitment. And once they see how incredible your product is, they’ll be more than willing to pay for those extra special features that will truly make their lives easier. It’s a win-win situation – you get to showcase your awesomeness, and your customers get to enjoy the benefits of going premium. So why wait? Start offering freemium and watch as your user base grows and your revenue skyrockets! The possibilities are endless, and the excitement is palpable. Get ready to take your business to new heights with the power of freemium!
On average, freemium businesses convert between 2% and 4% of their customers, making it a potentially profitable business model.
Exciting times are ahead for businesses! The subscription business model is taking the world by storm, and it’s not hard to see why. Picture this: customers happily paying an ongoing fee to use a service that they love. It’s like a dream come true for both businesses and consumers. From mobile apps to newspaper subscriptions and online streaming services, the possibilities are endless. And here’s the best part – by 2023, over half of all software revenue will be generated through a subscription business model! That’s right, the future is bright, and the opportunities are endless. So buckle up and get ready to ride the wave of subscription success!
4. The ‘razor/razor blade’ business model
Are you ready to unlock the secrets of the razor/razor blade business model? Get excited, because this strategy is about to revolutionize your sales game! Picture this: you sell a fantastic product at an incredibly affordable price, capturing the attention and loyalty of your customers. But wait, there’s more! You also offer companion products that perfectly complement the initial purchase, and these are where the real profit lies. Just like razor blade companies that sell handles at a loss-leading price and blades at a high margin, you can maximize your revenue by strategically pricing your products.
Whether you choose to start with a low-margin initial product and sell additional items at a higher margin or vice versa, this model is a game-changer. So get ready to take your business to new heights with the razor/razor blade strategy – it’s time to embrace the excitement and watch your profits soar!
Get excited, because this strategy is about to revolutionize your sales game! Picture this: you sell a fantastic product at an incredibly affordable price, capturing the attention and loyalty of your customers. But wait, there’s more! You also offer companion products that perfectly complement the initial purchase, and these are where the real profit lies.
Just like razor blade companies that sell handles at a loss-leading price and blades at a high margin, you can maximize your revenue by strategically pricing your products. Whether you choose to start with a low-margin initial product and sell additional items at a higher margin or vice versa, this model is a game-changer. So get ready to take your business to new heights with the razor/razor blade strategy – it’s time to embrace the excitement and watch your profits soar!
This innovative approach allows you to create a platform where your customers become the heroes, generating their own content and spreading the word about your brand. Just imagine the potential! Social media platforms like Instagram, Twitter, and Facebook are perfect examples of how crowdsourcing has revolutionized the way we connect with our audience. By tapping into the creativity and passion of your customers, you can create a community that not only engages with your brand but also becomes a driving force behind its success. And the best part? You can sell advertising spots that will captivate and inspire these active users. It’s time to unlock the true potential of crowdsourcing and watch your marketing efforts soar to new heights!
7. Affiliate marketing
Affiliate marketing is similar to the advertising business model. You are providing free content, but you get your revenue from affiliate marketing.
This is when you provide links to products and receive a commission every time someone buys something you promote.
Low-touch business models offer low prices by providing no-frill products or services.
For example, think of flat-pack furniture that customers have to put together themselves or banks that only operate online.
The pay-as-you-go business model is when customers use your product or service as they need it, and you charge them at the end of a set period. For example, printer ink or electricity usage.
Franchises are commonly seen in the hospitality industry. It’s when other entrepreneurs pay you to use your business name and model. You offer branding and support in exchange for a cut of their profits.
Leasing is when you rent your product out to customers. They pay a monthly or weekly fee to use it and return it back to you when done.
Disintermediation is when you sell your product directly to the customer rather than through a supply chain. This lets you sell at a lower cost and build strong customer relationships.
In conclusion: The best start business models for you!
It definitely pays to determine the startup business model as soon as possible, even before you launch. This will allow you to optimize your business strategy planning and increase your chances of success.
One thing to bear in mind, it’s essential to update your business model as your business evolves. Internal and external factors may affect your business and as a result, the way your business generates profit may change.
We would appreciate it if you share your thoughts regarding shared startup business models
If you need advice on determining the best startup business models for your start-up, You are launched can help. We have been working with a wide range of lean start-ups since 2014, helping them to grow, develop and generate high levels of profit