Startup- the buzz word going around now. If you’re a future entrepreneur looking to kickstart your business, we got you covered. You don’t need a college degree, a huge bank balance or even business experience. Having a successful Startup Business Model is no easy feat. It requires years of hard work, sweat, and tears. But I promise you all that trouble is worth it. It’s your brainchild, your baby.
No matter how much pain you may go through, seeing your startup succeed is one of the proudest moments of your life. Even if you don’t succeed, you try. However, you need to have the tenacity and desire to be successful. But first, let us go through a few concepts to clear our idea.
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Startup Business Model
What is a Business Model?
A Business Model is a summary of your service or product that is used to solve a consumer problem and how your company will generate revenue to balance the books. It gives a road map of your company’s future and does a cost-benefit and competitor analysis to better position yourself in the market.
Are You in a Startup or Small Business?
A small business is a self-reliant company that earns revenue from day one and doesn’t require big investments. They have a business model that works and aren’t looking to scale up. Startups require business models that work in the long run and have the ability to scale up.
Now let’s get started on the 6 types of business models you can pursue:
1. Business to Business (B2B)
This model refers to all transactions and dealings between businesses, so it allows for more market stability and predictability. Given the model involves two businesses, sales are in bulk and allows for better sales and lower costs. Most dealings are contractual so guaranteed income.
However, the market size is limited and is highly competitive which requires drawn our contract negotiations and yields more power to the consumer.
Example: Alibaba, Amazon Business.
2. Business to Consumer (B2C)
In this model, companies sell their products or services directly to the consumer or end-users. Consumers have a better attachment to the company, as it directly deals with them. So, it allows greater accountability and quality for the consumer which helps keep consumer information confidential. Also, businesses can sell through the internet by having a 24/7 open shop which makes them easy to access and reach.
However, the internet has accelerated the competition with e-commerce sites filling our news feeds. So, it’s hard to keep prices low and be profitable quickly.
Example: Amazon, Wal-Mart.
3. Consumer to Consumer (C2C)
In this model, consumers reign supreme and sell directly to each other. The earliest rendition of this model dates back to centuries ago when people sold products and rented properties using the newspaper. Consumers can now act as both buyers and sellers, providing more reliability in the system. This enables the transactions to be seamless and hassle-free all the while creating a sense of community.
However, not everyone is trustworthy and some people commit fraud, refuse to pay and be uncooperative. The biggest drawback though is quality assurance, with the lack of supervision this leads to higher rates of counterfeits.
4. Subscription Model
It is the most innovative and trendy business model currently used. The idea is simple, instead of having a one-off purchase; the services of the company are used in a recurring form of a monthly or annual payment scheme. Customers prefer having a simple, hassle-free shopping experience which helps reduce choice fatigue. Consumers are continuously in the loop, so there’s a constant revenue stream and helps with customer retention.
However, to reach profitability you need to have a large consumer base and ensure consumer retention rates are high. Also, to reach profitability you need to provide a large catalog of content and ensure the quality content to keep consumers satisfied.
Example: Netflix, Spotify, Dropbox.
5. Pay-as-you-go Model
No one likes to pay for services or products they hardly use. That’s where this model helps satisfies the consumer and companies have been able to recognize this behavior. You only pay for what you use and nothing extra. This allows gives choices to the consumer and they can pick the best plant according to their budget. The model is easy to use and convenient which makes it attractive enough for customer acquisition.
However, the consumer often has choice fatigue which is used by companies to lure them into making bad choices. Also, most pay as you go model businesses are online-based which makes them less trustworthy to some customers.
Example: Uber, Airbnb.
6. Freemium Model
The most ingenious business model of the 21st century is the Freemium Model. Instead of providing all services to consumers at premium prices, you give consumers a chance to use some of the services at free. This allows them to experience the product which makes them inclined to trust the product and probably switch to the premium model. This is a marketing tool used to lure them into opting for the premium service.
However, not everyone opts for the premium service. So, companies try to be extremely persuasive which can dissuade many from using the service. Premium services are not always better and lead to a loss in customer retention.
Example: LinkedIn, Windows 10.
In conclusion, each startup comes with its own set of hurdles and opportunities. The models laid above are just a few pointers than help better position and strategize your company. It’s not easy to choose which model suits your company the best. It requires a few sets of trials and errors to nail the best one. So, better get hustling. Sometimes, the journey is more important than the destination. Follow the road. Enjoy the journey and leap of faith. Who knows what may happen next?