In order to attain long-term success, a startup needs to develop a powerful development strategy. You might have a great idea but strategy and implementation plan create a great impact on your Startup. There are different types of startups and each one has different objectives and needs but commonly everything connects to the same point. i.e choosing a specific business model that benefits their customers and the company.
In simple words, the business model is an outline of how a business plans to make money by using its product or services. It helps to focus on their target market and target customers and sort out how to generate revenue.
Creating effective business models for Startups is very essential to help customers and also to show your investors or partners, that how the specific startup is going to work.
In this article, we are going to see a detailed analysis of the different business models for startups.
The Most Effective Business models for Startups
Currently, there are an “N” number of business models available when you plan to build a startup but choosing the right business model will help you in the long run. So, it is mandatory to learn each of the business models before you take a decision.
Here comes the top 10 startup business models,
- Marketplace Model
- On-Demand Model
- Disintermediation Model
- Subscription Model
- Freemium Model
- Virtual Good Model
- Reseller Model
- Hook & Bait Model
- Reverse Auction Model
- Modernized Direct Sales Model
Let’s begin!
Marketplace Model
It is one of the most popular marketplace models that enables your business to work as an intermediary for sellers and buyers and operate the transactions. A famous example who succeeded in implementing this marketplace business model is Amazon – the leading online retailer, that accounted for 41% of the entire e-commerce retail market in the United States.
In this business model, you don’t have to worry about storing the inventory as all the products will be shipped by sellers. The main thing to note is why your customers should search for your marketplace. If you can find an answer to this question, then you are ready to start your business using this business model.
Here are some companies that successfully use this model,
- Amazon
- Etsy
- Uber
- Alibaba.com
- Upwork, and many more
On-demand model
The main benefit of using this model is, you can provide services to your customers any time when they need them. One primary example that succeeded in using this business model is Uber. The revenue of Uber in 2022 is $25.55 B and they currently have 120 million users across the world.
You need to build mobile apps so that your customers can order food, grocery, and any type of goods that your business model can offer. It started to evolve in 2019 and your business can grow enormously as it satisfies the daily needs of your customers in many ways. In recent years, many business owners have started to build their own on-demand apps like Uber, Postmates, etc.
Here are some companies that successfully use this model,
- Postmates
- Uber
- Instacart
- Lyft and many more
Disintermediation Model
It is one of the most common business models that are used by hundreds and thousands of companies. The main goal of using this model is to cut down the financial intermediary charges in a transaction and focus on the direct sales process. By implementing this business model, the companies can reduce the intermediaries that impact the total product costs which will be an ideal solution for many startups planning to produce and distribute their products.
Here is a list of companies that successfully use this model,
- Apple
- Samsung
- Amway
- Dell, and many more
Subscription Model
This model helps companies to sell their services via subscription. The subscription plan differs for each company and they used to charge their customers either monthly or yearly. For example, we may already be their customers if we have used their subscription services. Due to its recurring and stable cash flow, this business model stands out from other models.
Here are some companies that successfully use this model,
- Netflix
- Spotify
- Youtube Premium
- Apple TV
- Canva, and many more
Freemium Model
This model is a great chance to succeed as it is focused on service distribution combining both free and premium services. To begin with, start to provide specific services to customers free of cost in order to build a strong foundation for future transactions and when you were able to reach large audiences, you may introduce new features which should be completely unique so that your customers can upgrade to paid services.
Here is a list of companies that successfully use this model,
- Skype
- Spotify
- Evernote
- OneDrive, and many more
Virtual Good Model
It is an approach that is commonly used for online games and video game development. This business model allows their customers to purchase virtual goods that can exist only online. As the trend continues, it can be implemented in NFT and metaverse developments as well.
Some third-party marketplaces like OpenSea allow people to buy virtual real estate. It will be a great choice if you have decided to start a business using this business model as the craze for games never ends.
Here is a list of companies that successfully use this model,
- Acclaim
- JetBlue, and many more
Reseller Model
By using this model, startups can promote and sell the products that are produced and manufactured by other companies. As it completely reduces labor expenses, it allows companies to save a huge amount of money. This is one of the proven and effective methods to obtain a profit.
Here are some companies that successfully use this model,
- Macy’s
- eBay
- Amazon
- Walmart, and many more
Hook & Bait Model
By using this approach, startups can sell basic products at an affordable or cheap price to make a profit and sell complementary products at a higher price. The main focus of this model is to create brand awareness and increase the sales of the company. One of the primary examples of a company using this model is Nespresso – you cannot use coffee capsules without a coffee machine. This model gives better adaptability to business and creates customer loyalty.
Here are some companies that successfully use this model,
- Nespresso
- HP
- Gillette, and many more
Reverse Auction Model
Reverse Auction Model is a type of auction in which sellers bid for the prices at which they are willing to sell their goods and services. It’s totally opposite to regular auction methods. By using the reverse auction model, startups can implement a strategy by sourcing between buyers and sellers, where they compete with one another in order to win the business of the buyer and sell one or more products or services he markets. After that, the buyer understands the bids and selects one or more suppliers for his business.
Here are some business sectors that successfully use this model,
- Construction companies,
- Real estate companies
- Public sector companies and many more
Modernized Direct Sales Model
In this model, the employees of the companies demonstrate their product or services and sell it to end customers. The direct sales model is highly effective as it cut down middleman charges and allows the company to directly interact with its customers. This model allows startups to implement effective marketing strategies to reach customers and improve the revenue of the business.
Here are some companies that successfully use this model,
- H&M
- Mary Kay
- Arbonne, and many more