making money

Have you ever wondered which business model is the best?

Before you start a business, you have to consider many things. One of the most important consideration is the business model.

In other words, how are you going to make money?

A business model is for the success of your business. It deals with revenue sources, customers, products/services, and money issues.

If you need an even simpler definition, a business model is about:

How you plan to make money.

Don’t confuse business model with business strategy. Your business model shows how your business runs, but your business strategy shows how you will do better than the competition.

The most important thing to understand about business models is that the great ones share similarities.

As you consider your current business model consider the following:

Answer fundamental questions

Successful business models tell your story. It outlines how your business will work. Your model should answer important questions like:

  • Who is your customer?
  • What is important to your customer?
  • How do we make money?
  • How does the business create value?
  • How much money will the business charge?
  • How do we differentiate our business from the competition?

No accident

A business model should be created on purpose. Some companies, even successful ones, stumble upon successful business models. The problem with that is you don’t want to rely on an accident to succeed. You want to succeed consciously.

Partner management

As you build your business model ask the following questions about your partners:

  • Who are your partners?
  • What will your partners give you?
  • What are expected of your partners?
  • How can you help your partners?

What are you making?

Every successful business model should deal with making something. This part deals with R & D and design, acquiring raw materials, manufacturing, product testing, etc.

How are you going to sell it?

Selling is an essential part of a winning business model. Many companies, especially those that fail, think too late about selling.

Your business model should include:

  • Identifying your ideal customer
  • Finding and reaching your customer
  • Closing the sale
  • Distributing the product

The following are some of the most successful business models:

  • Create a marketplace where you bring together buyers and sellers, charging a fee per transaction – Kickstarter, Amazon, eBay, AirBnB
  • Package related goods and services – iTunes
  • Sell your products to a membership – Costco
  • Crowdsourcing – Slideshare, YouTube, Wikipedia
  • Fire the middlemen and sell direct to the consumer – Outlet stores
  • Sell partial use of the use of something like a hotel room or a jet airplane
  • Charge a subscription fee – Netflix, Hulu, Amazon Prime
  • Freemium – Dropbox, Gmail, Google Drive, LinkedIn
  • Rent instead of buy, lease a car or equipment.
  • Decrease price while decreasing service – Aldi
  • Pay as you go, treating a service as a utility – Rackspace cloud hosting, Amazon cloud services
  • Offer low-margin item to encourage high margin product – printers and cartridges or cell phones and cell phone service
  • Reverse auction – Priceline
  • Sell the service the product performs – Zipcar
  • Offer simplified service at a lower cost – MinuteClinic
  • Give paying members access to a network – Angie’s list

 

photo credit: $20.41

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George Meszaros is the editor and co-founder of Success Harbor where entrepreneurs learn about building successful companies. Success Harbor is dedicated to document the entrepreneurial journey through interviews, original research, and unique content. George Meszaros is also co-founder of Webene, a web design and digital marketing agency.