So you have already done lots of research. You’ve brainstormed ideas and now you need a winning business model. You will understand common business models that have worked for other entrepreneurs.
In reality, business models will help you to be professional. With a working model, you can have access to capital. You need to know how to target customers, and be sure about revenue generating areas. And we’ll show you how to do that.
Each model is unique, and ideal for specific markets. So if a model doesn’t work, consult an expert before choosing another one. Here is a detailed explanation of the most common frameworks.
1. The Freemium Model:
How do you think people make money on Telegram? Or with News blogs? It’s through advertising. But there is a good reason why it’s called the freemium model.
Freemium models should focus on providing premium information for free. For instance, Telegram channels can provide premium courses for free. News websites can offer celebrity gossip for free. And cryptocurrency blogs can offer detailed market analysis for free.
The model may not work if you offer information people can find elsewhere. When you share premium information for free, you are able to attract a lot of traffic. As a result, your business will attract advertisers, who are willing to pay you to endorse their goods and services.
Through reciprocation, freemium models can easily persuade their customers to buy premium things. Users should follow the principle of give, take and take.
2. Sourcing Model:
Have you ever thought about getting paid more for little work done? It’s possible to do that. Take work at higher prices, and outsource it to others at low prices. Many agencies use this model, where you find an agency, which works under an umbrella of other agencies. The model is like a pyramid, where we have the client at the top, a big agency to serve the client. Smaller agencies work in different departments of the big agency. Then smaller agencies have their workers. The model works best for businesses that target fortune 500 companies. Because they are able to still get a high pay, regardless of the long chain.
While outsourcing, it’s also possible to find workers from other countries, who will be comfortable working at lower rates. Don’t have a mindset of taking advantage of other people. You need to have a mindset that you are giving work to people.
3. The Subscription Model:
This model is good for offering services. The good news is that you do not need a lot of customers. For example, to use this model for an online business, begin by solving a problem. The problem should be recurrent. For instance, heart-broken people, depressed people, overweight people, people on a diet, and jobless people. It’s hard to solve their problems once.
So, you need to create a small community of people who believe in your service as a solution. You can provide a free trial. If the trial works, put low monthly subscription charges. You can also offer free services for one group, and paid services for the subscribed group. Linkedin, is an example of a business that uses this model. It’s a good model because it gives a stable income.
4. The Product Margin Model:
This model needs innovative people. You have to create a product that solves people’s problem. So, creators focus on lowering production costs. Products range from books, digital products like software, electronics, and home improvement.
Here is another way to think about it. You can take non-branded products, add some features, then brand it. Strive to have more than 50% profit margin per product. It will be easier to spend more money on advertising.
5. The Transaction Model:
In this model, you get paid a percentage per transaction, usually known as transaction fees. It’s popular among payment systems and market places. For example, cryptocurrencies, and online markets. If you create an active marketplace, you can earn big charging transaction fees. And as long as buyers and sellers exist, your business will remain stable.
6. The Premium Model:
Premium items are highly priced. The model is good for luxury products. Premium models should provide highly priced products, and there should also be a high number of people admiring the product. For example, iPhones, and expensive watches. The entrepreneur should find ways of adding value to the product through innovation, using influencers, and adding emotions to products. To access influencers, use the different types of business cards to find them.
7. The Dependent Model:
Here, the seller has a low-priced product. But the product doesn’t work efficiently without expensive add-ons. Think about laptops. Their working depend on upgrades on the memory, and processor. Printers can sell cheaply, but the Ink can be sold expensively.
8. Virtual Tokens:
In the gaming niche, it’s possible to make virtual gems people can buy. Without the virtual gems, one cannot advance into higher levels. The model works if the product is highly addictive. And the virtual gems are made to enhance the user experience. The model also works in dating and relationships niche.
To succeed, you need to research about the market, and do lot of testing. If the business fails, the problem should be with the product, and not the model. You can also integrate more than one business model in one business.