The business model for a startup

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New entrepreneurs may wonder due to the rapid success of some startups. Because it takes months, even years, to make a startup profitable. But how can some people make it happen? The mystery is hidden in the business model. Having a big capital, unique product and gorgeous office do not bring you success, but the business strategy does. A business model is the base of a business you have to consider to summarize the business operation. If you struggle to find a suitable business model for a startup, this post will surely help you. We are going to talk about some profitable business models that are easier to follow and implement. Let’s dive deep.

What is the business model?

A business model simply means a plan that describes how your business will be operated. A business model is key to generate the maximum profit for a startup. A standard business model includes three common things. They are the production process, the selling strategies, and the payment gateways. But, some complex and hybrid business models also exist. As a new entrepreneur, you don’t need to follow a complicated business model to make your approach more unique. You can follow a suitable existing business model and still can generate profit. 

Check out some reliable business models for a startup.

Marketplace 

This is a very common and successful business model around the world. Some great startups in the USA, such as Amazon, also boomed their profit by following this approach. In the marketplace model, it connects both buyer and seller and makes a profit for each transaction. People also prefer marketplaces since they can easily find each other by a simple search. Though the marketplace business model seems easy to implement, it can be totally the opposite. You have to put in double efforts because you are connecting two parties and managing their transaction safely. Besides, you have to maintain your reputation as well. For instance, if you are developing a freelancing marketplace, you have to ensure that the freelancers on the platform are skilled. Satisfying both parties is crucial in the model. On the other hand, growing a business based on this model is easier than others. You only have to promote the platform and gather more members. 

Franchise

The franchise business model has several advantages. The franchisor provides a franchisee’s license to distribute goods and services using the same brand and trademark. In return, the franchisor gets a certain fee frequently. This business model can be an effective option if you have sufficient capital and want to learn a business in-depth. The franchisee does not need to cut a big budget for marketing since it is already familiar in the market. Even the franchisor also provides essential materials and training for smooth business operation. Though the franchisee does not have full control of the business, it is a proven business model for rapid growth. The profit flow seems steady as well because of the established brand value.  

Freemium 

Freemium is a combination of both free and premium services. This business model is a good option for service startups. In this model, low tier services are offered free. But, users have to pay for high tier services. Gmail is a perfect example of a freemium business model. Freemium is also a good option for unique services as well. Since it allows users to try your service free, they get sufficient time to understand the service.

On-demand

On-demand is an effective business model because it actually deals with what consumers really need. The difference between a marketplace and on-demand is the ownership of properties and employment. On-demand is a trending business model due to the higher rate of success. Uber is the best example of a thriving on-demand business. New entrepreneurs can begin with this model since it is a cost-effective and scalable approach. You just need to identify people’s demands, develop a platform, and gather freelance people to solve it. 

Pre-order

Several renowned brands follow this business model. The model name says how it works. The manufacturer markets its products and customers pre-order it with advanced payment. The pre-order model is a less risky method for most startups. It does not require a product or material stocking. When an order is confirmed, the business can collect essential materials from sources and start working to meet the deadline. Brands like Rolls Royes and Tesla follow this model for years.

Subscription

The subscription business model is a widely used approach in online-based services. The process is very simple but effective, thus it is used by a huge number of companies. Netflix is the ideal example for implementing this model. The product or service is sold on a subscription basis. Here, you have to target a customer base who is willing to renew their subscription to get the constant services you provide. Revenue prediction in this business model is easier because of the habitual sales. Most online service providers seem to apply this model with success.

Affiliate

Affiliate is particularly an online-based business model, widely used by online content creators. This is another cost-effective business model because you do not have to stock the product or provide any after-sale support. You are only responsible for promoting the product. When a customer makes a purchase, the affiliate marketer earns a commission for each successful sale. Bloggers and online celebrities perfectly utilize this business model because of their huge number of followers. The affiliate business model is suitable for a niche-specific market. You have to find potential customers, promote a product or service among them, and earn a commission per sale. 

Before you decide to apply any business model to your startup, you need to consider a few factors. Make sure that your business really can solve people’s problems. Besides, look at your budget and risk-taking capabilities. The best way to implement any business model is to try it on a small group of customers or design a pilot project for success measurement.