Becoming an entrepreneur can be one of the most difficult and most rewarding experiences of a person’s lifetime. Reaping the rewards of starting your own business will only add more fuel to your fire when it comes to starting up even newer ideas.
But jumping into it headfirst is not the best way to go about it. In fact, that’s only setting yourself up for failure. There has to be certain things set in motions, such as business plans, in order to ensure success. So what are the six best proven business models to get you started in the right direction?
Modernized Direct Sales Model
More and more people are using the direct sales model to supplement their income as well, as it allows them to engage in other activities outside of their regular work while still making money. It’s a great way to put hobbies to use and marketing your skills to other people looking to purchase certain items.
This doesn’t only work for crafts; the development of other tools, like restaurant bookkeeping for example, can make a real difference in other people’s lives who need these tools but don’t know how to go about getting their hands on them.
This model is great for startup who are looking to get their feet wet but don’t want a complicated model to work with. It works so well because in today’s economy, it gives regular people the chance to add more to their bank accounts while still seeking new career paths. The direct sales model is also tied in very easily to social media, where you can make posts on any of the forums that are out there to tell people what you’re up to, what you’re making, and what’s new in your store. Newer and better software is always being created too that are helping people to improve their productivity and increase their flow of sales.
Becoming a Marketplace
One of the fastest growing business models is becoming a marketplace for the public. The area of supply and demand is being met by more and more laypeople who are trying to subsidize their income, but if you take it seriously and know how to channel your energies properly, it can become one of the fastest ways to make money. For example, AirBNB is one of the best marketplace sellers, providing people with the means to advertize their places online for people looking to go on vacation for short periods of time.
This model works well because there is little to no overhead and there’s no inventory to maintain. There’s no need to establish an office either as everything can be done virtually. You’re basically serving as the middleman between customers and providers so that they can find each other and make business happen. You do get a small slice of each pie but once business gets rolling, those “slices” can start to add up pretty quickly.
This model has worked for other businesses as well, such as eBay and Amazon. These sites connect bidders/buyers to those who are selling products from their own homes, making it easy to facilitate transactions and still make money off each one.
Becoming the Middleman
This model is called the “Warby Parker” model and is named after Warby Parker. He had a simple idea back in 2010 to get into the eyewear business after noticing that it was being monopolized by another company called Luxottica. This monopoly allowed them to control the prices of designer eyewear, so that they could charge whatever they wanted, since they were the only supplier.
This is where Warby Parker came up with the great idea to become the middleman. Eyewear brands had sold their rights to Luxottica, which meant that they had to increase manufacturing and design costs in order to make anything of a profit. Warby Parker wiggled their way in and not only helped these brands to lower their costs so that they could make more money, but they also provided eyewear to customers who could actually afford it.
The reason why this model works so well is because it can give you a serious pricing advantage if you can make things more affordable for customers. They’re more willing to save money, and you have more control over the quality of the product or the service being provided. You’ll also develop strong relationships with suppliers so that you can earn a reliable reputation and gain more ground with other suppliers.
The Freemium Model
This is a combination of the words “free” and “premium,” which is becoming the latest trend when it comes to online services and programs. The freemium model starts off by offering the service to consumers for free, with the option for more features and better service at a price. It allows people to be in control and still meet a wider audience without having to do a lot of marketing. By giving customers the option, they can decide exactly what they want to get out of the service or product you’re providing. They can also choose to downgrade if they want to, if money becomes particularly tight for them.
This model works so well, especially in the beginning stages of a startup, because it gives new customers a taste of what you’re offering without forcing them to pay money to experience it. If they don’t like what they’re being provided for free, then neither they nor you are really losing out on any money. But if they do enjoy your product/service, your customers are definitely going to recommend them to other people.
Another great benefit is that it allows you to work out the kinks and create a better product/service without any interruption to what’s being provided, especially to those who are not premium. It works a lot better than the 30-day trial model, especially if customers are enjoying it but don’t have the money to go full premium.
The Subscription Model
With the development of the smartphone, people are looking more towards mobile payments when it comes to their online shopping experience. Because of this, this model is experiencing explosive growth since these services are so easy to set up and maintain. One great example of this is the Dollar Shave Club, which mails out razors to subscribers every month. It doesn’t get much simpler than that, since the entire system is automated. And when customers no longer want to continue receiving products, they can end their subscription on their own terms.
The reason this kind of model works so well is because it provides the best balance of value for both the customer as well as the startup. It’s easy and convenient to use, and customers can rely on receiving their purchases every month. That makes it easy for you to project your revenue rates each month so you can plan more accordingly for the future.
Smartphones have also made it easy for companies to provide entertainment or a way to pass the time with several games and services that require purchases in order to keep things interesting. We’ve all had at least one addictive day playing Candy Crush, where we want to beat our top scores. To make it easier, the developers of the game made purchases accessible to players so that the game would become a little easier for them with extra lives and bonus items to use.
Virtual goods are paid for normally through the app system and the use of a credit card. Because players and users want to keep doing well, and the prices for these items are somewhat inexpensive, they end up spending more and more money each month to keep their streaks going. Some smartphone games see users spending hundreds and even thousands of dollars per month.
The reason this model works so well is because there’s no inventory to maintain and you’re only paying for the cost of the bandwidth to provide these virtual items to users. In the meantime, value is created for the customers who want to keep playing and do well. In some apps, these virtual items can also be given to other players, increasing the social aspect of spending money to attain them in the first place. Many people may consider this kind of spending to get out of hand very easily, since the majority of users won’t really add up how much they’re spending each month, but if they’re happy with the product and their virtual items, why is there any reason to stop them?
Finding the right model for the kind of business you want to start up is important, since it can make or break things from the get-go. The wrong choice can lead to your idea never even getting off the ground. The right foundation will set up everything in place, helping you to stride towards success. Keep in mind that these are not the only models to work from, but are the most successful and most used business models out there today in the world.