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Pick The Best Business Model For Your Startup

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Crazy ideas become startups. Not quite. Some cofounders forget that startups are businesses while enthralled by their know-how ideas. Business is about profit. You will only survive the competition and win investments.

In startup development, you should answer the main question: how will my business make money? Your startup’s business model is the best answer.

In this article, I’ll discuss the most popular business models for startups and how to choose one that will succeed. Let’s begin!

Business Models—What Are They?

Is the Business Model just what users will pay for? The business model is complex and requires many answers. Business models answer these questions:

Your customers? And why?
Your products are sold where?
What’s the customer’s price?
The business model shows how your product/services and customers relate.

Business models matter. Some business giants we think are great products are just innovative business models.

Amazon is the largest online retailer without a storefront. Starbucks charges more for regular coffee.

4 Questions To Select Startup Business Model

As mentioned, a business model is not just about “how much my product/service will cost”? The right startup business model answers why your startup exists. Ask yourself:

My client?
My business domain?
How does my company differ from others?
What do I offer customers?

Before developing and seeking funding, answer these questions.

 

Is Iteration Possible for Startup Business Models?

Startup development’s main business model rule is to change what doesn’t work. Business models can change throughout the business cycle.

Sometimes you can replace the model. Change is usually partial. If users rarely use annual or 6-month subscriptions, cancel them.

Tip: Startup business models can change, but not drastically. Switching to annual payments is risky if your startup uses the ads business model.

 

4 Ways to Pick a Startup Business Model

Product managers help startups find business models. I always follow this 4-step algorithm.

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Step 1: Whose Problem?

First, identify your final customer:

Entrepreneurial B2B (Business to Business). You work for the same company. Software development, web design, and outsourcing companies are B2B models.
Slack, Plai, Microsoft Teams.

B2C (Business to Customer)—selling to consumers. Online shops sell products, mobile apps, and games for daily use.
Netflix, Hulu, Dollar Shave Club.

C2C platforms allow customers to trade goods and services. Peers compete for economic gain on such platforms. “Sharing economy” describes this model. Uber, eBay, Horizon.

Step 2. Assess Competitors

Know your competition before making a market niche statement. Look at the niche’s top game setters:

Targeting whom?
How do they monetize?
Value added?

Step 3. Lean Canvas Business Model

Canvas organizes your business elements. The template has nine blocks, each for a business process direction:

Problem—what’s each user segment’s issue?
Who are you serving? Your biggest client?
What’s your value proposition? What do you offer clients?
Communication routes. Consumer communication—how? How do you convey value?
Client relations. Consumer interaction: how? Personal manager or directly? Or self-service?
Income sources. Customer pays what? What is your project’s monetization strategy?
Key assets. How can you market your product? Communicate product value to consumers? Resources are financial, material, intellectual, etc.
Key actions. What makes the business work? Production, distribution, client solution search, etc.
Key partners—suppliers and integrated services—make your business possible.
Expenses: what your business needs.
Unfair advantage—consider what you can buy that others cannot.
Startups’ vagueness makes Lean Canvas useful. This artifact will help you understand your business.

Step 4. Select a Business Model

We’ve reached the algorithm’s main point—business model selection. We discussed several factors that affect this choice. Your Business Model Canvas and answers to the questions above will determine the best monetization model for your business.

7 Business Models for Startups

Many business models exist today. The most popular ones will help startups.

Freemium Model

Subscription-based services frequently use the Freemium model. An app’s basic functionality is free, but the full version is paid for.

Freemium shows customers the product’s features. It also attracts the most users, most of whom buy the premium version.

Netflix, Spotify.

How do free apps make money?

Single-Use PaymentThe simplest model is possible. This one requires a one-time purchase. Legal, psychological, and car rental services fit this model because they are rarely used.

Dutch student job platform STUDENTEN.

SaaS Model

Slack, Zoho, and Microsoft Office are Saas-based businesses. Office workers may recognize this one. This model allows a company to buy long-term software from another. Technical support and customized services are also provided to consumers. B2B companies use SaaS.

Subscription Model

When did you last pay Netflix? You’ll probably forget that. We ignore these monthly bank account payments. Netflix relies on subscriptions.

These services usually offer annual, half-annual, or monthly subscriptions. B2C companies prefer subscriptions over SaaS.

imag of Subscription Model

Subscription Model

When did you last pay Netflix? You’ll probably forget that. We ignore these monthly bank account payments. Netflix relies on subscriptions.

These services usually offer annual, half-annual, or monthly subscriptions. B2C companies prefer subscriptions over SaaS.

Famous Apps’ Business Models

Popular apps use famous business models.

Airbnb Market Model

Airbnb is a global marketplace. Airbnb connects hosts with guests worldwide. Airbnb’s business model is to be the world’s largest accommodation provider without owning any properties. It connects people and earns from user fees.

Netflix—Subscription Business Model

Netflix has 193 million subscribers from 190 countries and $20.16 billion in revenue. To create high-quality content, Netflix works with top filmmakers, scriptwriters, animators, and production companies. Subscribers can watch this content 24/7 without ads.

AWS Pay-Per-Use Business Model

Amazon Web Services (AWS) offers individuals, businesses, and governments cloud computing. AWS users can access a virtual computer cluster 24/7.

AWS users receive free credits upon signup. Thus, this resembles freemium. Users can buy more cloud space and server capacity when needed. Pay-per-use works like this.

Conclusion

Startup success depends on choosing the right business model. However, choosing a business model answers specific business questions. Lean Canvas helps you answer these questions and organize your business.

Based on Lean Canvas and data, Uptech has extensive experience finding the best startup business model.

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