Setting up a business can be difficult. Aside from the resources needed to start one, you must provide the best services for your consumers to stay at the top. Old and new companies often adopt different business strategies to create a plan that helps them climb the ladder among competitors and become profitable.
In this article, we will take a deep dive into the best business models to follow to make your company more profitable.
The following are best-practice business models, along with examples. You can adopt more than one of these models depending on the nature of your business.
The subscription business model works by having customers pay regular fees to receive services over a specific period. The goal of this model is to make customers loyal to your services. This way, you can generate income by receiving regular payments from your customers over days, months, or years and providing the products they want throughout the payment period. The success of this model often depends on providing quality services to make your customers keep subscribing and prevent them from moving to your competitors. Some examples include Spotify and Netflix.
In this model, customers are charged for every service they receive. This model does not allow regular payments, as consumers only pay for each service they use. The fee-for-service model lets you earn money for every service you provide; therefore, it can be challenging to predict the revenue you generate on a monthly or yearly basis. Examples include freelancing and auto repair.
This business model offers a basic version of the product for customers to use for free. This product, however, has an upgraded version with perks that are not seen on the basic type. Consumers would have to pay to access this premium version and enjoy the additional benefits of the product. An example of this business model is LinkedIn Premium.
The marketplace business model involves creating a platform where buyers and sellers meet to carry out transactions. The business owner serves as the middleman between the buyers and the sellers. Income is mainly made from fees and commissions. Examples of this model include Uber and Airbnb.
Manufacturers make finished products by investing in raw materials, machinery, and labour. The products are then sold to retailers or directly to consumers. The company’s growth depends on the level of demand and supply to prevent overproduction or shortages. Automobile companies are examples of this model.
The partner-centric business model involves collaborating with organizations that can help your business grow. You may collaborate with suppliers or distributors, depending on the nature of your business. The leading company outsources jobs to partners who excel in a specific field. The company’s success hinges on how effective its partners are. Examples include Shopify and Microsoft.
Resellers are at the bottom of the market chain. They do not own products or services; instead, they purchase them from manufacturers or wholesalers and sell them directly to consumers. Their income comes from the difference between the buying and selling prices of the product. The success of this model in the long run depends on how effective they are with supply and their relationship with consumers. An example of this model is a grocery store.
In this business model, companies pay individuals or organizations to promote their products or services via any means possible. These products are promoted on social media, blogs, and ads to reach people who might be interested. Affiliates make money by receiving a percentage of the sales generated from their promotions or a fixed salary. Social media influencers are examples of this business model.
This business model helps to build a solid relationship between companies and their customers. Companies that use this model understand empathy and do their best to solve customers’ problems, making their lives better. Some companies that use this model include Apple, Tesla, and Patagonia.
The agency-based models provide services to customers by offering their expertise in areas such as talent representation, consulting, and marketing. They are the middlemen connecting clients to the organization that needs them. Profits are made through commissions, retainers, and project fees. Examples include WPP and SmartSites agencies.
It takes a lot of effort to get a business off the ground. It calls for a significant amount of planning and commitment. In order to foster the expansion of your company, you will need to implement a variety of business models that not only satisfy the requirements of your clientele but also produce profits.