9 Best Business Models for Your Startup

October 8, 2021
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Owning a business takes patience, perseverance and courage if you’re going to successfully sail through the many hurdles. That said, as a startup, there are multiple steps you need to follow before launching your business. One of the most crucial is having a solid business model.

A business model outlines how your startup plans to make money through your product or services in a specific market. There are many benefits to having a solid business model, but the main ones are that you will know what you are selling, who you are selling to, how to market yourself and, ultimately, how to make a profit.

Keep reading to learn about the nine best business models startups can use as a stepping stone to creating a profitable business.

A Monopoly

A monopoly exists when only one person or an enterprise controls the supply of goods and services for which there is no close substitute. For example, Welsh Water holds a monopoly on the supply of drinking water to large parts of Wales. As a startup, you can consider yourself a monopoly if you have a unique product or service. As the demand for the product increases, your profit increases since you don’t have any competition.

Sponsorship

Another business model a startup can use is sponsorship. People often confuse sponsorship with advertising, but they are different. Sponsorship is a more focused marketing strategy that seeks to reach out to a broader range of audiences. For example, TeamViewer sponsoring Manchester United Football club shows that they are trying to reach out to that part of their audiences that are football fans. However, sponsorships may not give you the result you need instantly, so you need to give it time.

Marketplace

The next business model a startup can use is the marketplace model or the middleman model. Businesses that use this model acts as the link between buyers and sellers of various products and services. For example, Ebay’s core business model allows buyers to find sellers on their platform. This business model reduces the overhead cost that comes with producing a product. To make a profit, Marketplaces charge both the buyer and the seller a fee.

Reverse Auction

The reverse auction model is the reverse of the marketplace model. In this model, it is the buyers that request the type of product or services they want. Then, sellers will begin to auction their products to the buyer, who will buy from one of them. For example, Upwork and Taskrabbit use this business model, where the client puts out jobs for the contractors.

Aggregator

The Aggregator model is another model that allows a company to aggregate and include the services and products offered in a particular place into its name. As a result, the company will build a business around a solution that brings service providers to customers and vice versa. An example of companies that use this model is Uber, which offers transport services to people that need them.

Advertisement

Another business model you can use for your startup is the Advertising model. This model is centred around advertising different products and services on your platform. Ultimately, the goal is to make the product or services of the company visible to their target market while you get paid for it. For example, Facebook offers people the chance to use its platform for free. However, Facebook also hosts ads for other companies and collects a fee for doing so.

Freemium

The freemium model is another model a startup business can adopt. Top companies that use this model offer free services to their customers and then create the service’s premium version. Furthermore, the free version will provide limited services to the clients while the premium version offers a more detailed service. Of course, the premium service will cost more than the free one. Companies that use the freemium model include Hulu and LinkedIn.

Crowdsourcing

The Crowdsourcing model leverages the value of the huge internet audience. It’s the collective value created by all the platform users that keeps the platform in the business. For example, iStockPhoto originally launched using a crowdsourcing model, where the general public could submit images in return for a small commission. This attracted other users hugely boosting the number of images available. The company benefited from the network effect of its platform.

On-Demand

As a startup company, another business model you can use is the On-demand model. This model offers a solution to the audience that seeks to find urgent gratification. As a result, they pay for a service, expecting it to be delivered to their doorstep. The On-demand model is sometimes linked with the marketplace model. However, this model requires more resources to be put into it. Companies that use this model include Uber and JustEat.

Conclusion

Overall, a startup business is a gamble. However, often the best starting hands in card games will win and the same is true for start-ups. Having the right business model for your start-up will help it to thrive. In this article, we’ve briefly reviewed nine of the best business models that could help your start-up get ahead. Be sure you understand what each business model entails, before choosing the one that’s right for your start-up.

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