BUSINESS MODEL MASTERY
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9 PROVEN BUSINESS MODELS TO CONSIDER FOR YOUR STARTUP


There are many options to generate revenue that have already been proven, and as a founder it is your job to figure out which one works best with your business. If you don’t know where to start, here are 9 business models to consider for your startup that have proven to be successful for many startup and business ventures across the globe.

1. Become The Middleman (AKA The “Warby Parker” Model)

Warby Parker had the simple idea back in 2010 we all wish we would have thought of first. They decided to enter the eyewear market, noticing that the market was monopolized by Luxottica, who basically control the price of designer eyewear. With the price bar set high, Warby Parker saw huge opportunity in the market, and realized that because most brands sold the rights to huge companies like Luxottica that drastically increased their manufacturing and design costs. So what was the logical solution to this problem? Become the middleman of course! With the ability to significantly reduce the price of its product, along with the cool factor and social good elements weaved into the company’s brand, they were able to capitalize by providing their consumers with large savings. Now that’s what I call a win-win!

2. Become A Marketplace

One of the ever growing business models that continues to prove highly effective is becoming a marketplace. This means you are simply bringing supply and demand together. AirBNB reigns as one of the top success stories to implement this business model well. I’m guessing you thought renting rooms from random people’s homes via the internet was pretty creepy when you first heard the idea. We did too, but the AirBNB founders believed in the new “sharing economy”. They were convinced that the supply and demand was there, and since have convinced over 20 million+ strangers to provide and rent rooms from one another. Uber has also seen explosive growth using the same mentality to create a marketplace where strangers rent rides from strangers. Providing a service is out, and becoming the marketplace is in the ever growing e-commerce sector.”

3. The Subscription Model

Mobile payments continue to rise in popularity, and consumers are trending towards a more simple, hassle-free kind of shopping experience. These trends are leading towards explosive growth in subscription based services that consumers can easily set up, and then not worry about, knowing they will receive their product or service every month. Dollar Shave Club is one of those simple subscription services that made it much easier for men (and now women) to not worry about running out of razors, and save money. Add in some crazy, well messaged commercials with a hilarious spokesperson, and you have a brand who continues to double and even triple revenues annually.

4. Customized Everything

The fashion industry is dominating the customization trend that aligns with a consumer shift towards more personalized goods that reflects their specific tastes. This is the reason Coke added names to their bottle packaging, automotive manufacturers make cars in any color you want, and massive retailers like Nike allow you to design your own custom sneakers. Custom-tailoring in the clothing sector has been on the rise, and services like Indochino and Black Lapel have taken the market by solving this problem for men’s suits. The services make it simple to choose the sizes, colors, styles, and budget you want, that take out the hassle of going to a tailor, and delivers right to your doorstep. The rise of 3D printers has also created a surge of mass customization startups by providing a technology that previously was much more expensive.

5. On-Demand Model

As the world speeds up, consumers have a adopted a preference for instant gratification. The on-demand economy has a growing appetite for greater convenience, speed, and simplicity. Smartphones have driven transformational shifts in how we consume goods and services, and many consumers have become acclimated to purchasing at the press of a button. On-demand startups like Uber are shaking up their industries, and also provide stead contracted work for consumers who want to become solo-preneurs. Startup, Handy, has also seen explosive growth by providing handymen at a moments notice, servicing a need for consumers that was not previously available for situations where a consumer can not wait a few days to fix a problem in their home.

6. The Modernized Direct Sales Model

Direct sales companies like Avon and Amway understand there is a big business opportunity in the model. In 2009, direct selling accounted for $117B in sales worldwide. Chloe + Isabel, a fashion jewelry startup, is reinventing the direct sales model by appealing to fashion forward students who have tuition to pay and others who are unable to secure full-time employment. The startup designs, produces, and markets fashion jewelry, and interested sellers or merchandisers can sign up and create their own online store to sell their jewelry and earn a 30% commission utilizing the startups technology infrastructure. The startup has seen incredible success using this model, and increased loyalty of its sellers (who are also its customers).

7. Freemium Model

This combination of “free” and “premium” has become a widely used approach amongst startups over the last decade. Broken down, the model offers a basic service to consumers for free, while charging for premium services (advanced features and perks) to paying members. Linkedin is one of the best examples of a successful freemium model, with the free version letting users share professional profiles, while the premium offerings are talent solutions and premium subscriptions with added features. One of the most interesting reasons Linkedin’s model works is because each new member that signs up for free or premium increases the value for other members. Make sure if you choose this model that you find a balance between what you give away so that users will still need or want to upgrade to a paid plan.

8. Reverse Auction

This type of model is the reverse of Ebay where the buyers switch roles with the sellers. Buyers who care about price offer bids for a service to the seller,s and if the seller accepts the bid, the buyer must agree to all of the seller’s terms and conditions. Sellers benefit from access to a marketplace, while the buyers feel like they are getting a great bargain. One of the most successful implementations of this model is Priceline, where travelers give up convenience for low prices on airline tickets, rentals, and other travel accommodations. Priceline provides a win-win marketplace for it’s B2C marketplace, and because of that has seen significant revenue growth.

9. Virtual Good Model

We all know the game Candy Crush and its addictive qualities that have wasted more hours than most of us are willing to share. Candy Crush understands the power of the virtual good model, and made a ton of its revenues for digital products like extra lives or features like a “color bomb”. Virtual goods are online only products users pay for normally in games or apps such as upgrades, points, gifts, or weapons. The app Hot or Not used this model well by allowing its users to send virtual roses to other users costing between $2 to $10, and the game Clash of Clans has users that spend thousands of dollars each month on their in-app purchases.

REFERENCES

Nina Tomaro (2015), 9 Proven Business Models to Consider for Your Startup, The Huffington Post, June 08, 2015.


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