For starters, a business model is the description of the means and methods a business or startup employs to earn the revenue projected in its plans. It views the business or startup as a system and responds to the question, ‘how are we going to make money to survive and grow?’ So a business model is simply how a business or startup makes money. There are many business models and I will highlight some of them in this article. The subject matter today is to establish how you choose a business model.

Examples Of Business Models

Subscription Business Model

There are many business models and their suitability is contextual. That is why we have to discuss how to choose a business model. One of the common business models is the subscription model. This means that for people to access products or services they have to pay a subscription. I can give an example of this in Zimbabwe.

I am sure you know the newspaper called The Financial Gazette. To access the full digital copy, you have to be a paid-up subscriber. The same goes for streaming platforms such as Netflix. If your products or services have a compelling value proposition and are highly sought after, it is easy to use the subscription business model.

Direct To Consumer Business Model

The most common business model is direct to consumer business model. This is what many businesses or startups go for because it is straightforward. You are directly selling products or services to customers. Be it online or offline, this is the easiest business model to settle for.

Ads (Or Advertising) Business Model

Due to the proliferation of eCommerce and usage of digital platforms, this has become common. We can all agree on how common it is to be bombarded by ads online. The perfect example is that of Facebook videos or YouTube videos. Imagine you are enjoying a video and midday an ad comes on and disrupts the flow. It is annoying but you have got to understand that it is a business model.

Ad placement is a means to realize revenue. For example, I recently did an article where I spoke about how to make money through YouTube videos. Those ads are pivotal to that money you make. A business or startup approaches YouTube for ad placement. YouTube charges them a certain amount. The YouTube algorithm then ensures the ad is played on YouTube videos putting out content that aligns with the ad. When the ad plays on your video, you get a percentage of the money the startup or business in question paid for ad placement. I can share more examples but the ads business model is huge nowadays.

Other business models I will not detail here are affiliate marketing, franchising, agency and freemium, amongst others.

Determining A Suitable Business Model For Your Startup Or Business: 5 Things To Look At

There are 5 things you must look at in your quest to determine the best business model. These are what your customers need (i.e. pain points), their buying habits, market dynamics, what you are uniquely offering (i.e. your unique selling point), and creating room for diversifying income (or revenue) streams.

Customer Pain Points

You do not need to choose a business model that will feed into your customers’ pain points. Imagine having a target market that generally struggles to access the internet. Then you decide to settle for an eCommerce model; that will not work.

Customer Buying Habits

You must pay attention to what and how your customers usually buy. For instance, your customers can be heavy consumers of blog content. This means you can tap into that and use business models such as eCommerce, advertising, or subscriptions, for example.

Market Dynamics

On market dynamics, you can check out what your competitors are doing. If they came way before you chances are the business models they use are tried and tested. Thus observing what other players on the market are doing can be your cue to an answer.

Unique Selling Point

Connected to the previous, yes it is good to check out or even copy what other players are doing. However, the question is what is it you will offer that will be unique to your brand. Let us suppose that other players are using the subscription model. You can distinguish yourself by using the freemium model or exploring other business models that are more alluring to the customers.

Diversifying Income Streams

Finally, the thrust is to use more than one business model. That is why you should consider trying out several business models to see which ones yield good returns. It is more or less the equivalent of doing A/B testing.

That is how you go about choosing a business model. Bear in mind that you are not necessarily restricted to sticking to just one business model. You have all the room to explore. What works now might not work later so be flexible enough to adapt and evolve. No wonder it is important to always be collecting and analysing data regarding your business operations. Doing so will make you realize what areas need changes and how.