How to choose the right business model for your startup

How to choose the right business model for your startup

As an entrepreneur, solving a problem that people are facing and monetizing the solution is probably the most exciting thing to look forward to. But the path you’re about to take might feel a little uncertain and confused without having a proper roadmap to follow, right?

If you are an emerging founder or an entrepreneur who is confused about how to navigate through, then we have a very detailed and simple solution to help you through it.

To begin with, let’s say you just have an idea about your startup but have no clue about the next step, then read this 10 step guide for a basic roadmap to follow. After you have the right mindset and adequate data collected through in-depth market research, the next step would be to opt for the right business model for your company.

So, before we move on to find which would be the best option for your company, let’s first start from the basics where we define the term ‘business model’ for you and walk you through the different types of business models and some crucial factors that you should take into account while you decide one for your company.

What is meant by the term ‘business model’?

A business model is a framework or the strategically planned model that defines every aspect of managing the company in clear terms. It includes everything from operations, costs, pricing to supply channels and feedback mechanisms.

It defines the way the business needs to be run and what will be the plan to generate the revenue and capital for the company to be profitable

What are the types of business models?

There are a lot of different business models that companies across the globe have adopted and have made a good amount of revenue out of it. However, the wisest thing would be to not just stick to one but combine certain aspects of other models too, according to your specific business requirements. Let’s find out about the different business models that can make your startup into a scalable business

1. Subscription model

Let’s start with the easiest to understand. This model of business is something you would be already aware of and might be using as well. In this, you charge people to consume the data or use the service that is exclusively available on your platform and make money out of it.

All OTT (over-the-top) platforms like Netflix or Amazon are examples of companies using this subscription model for their business.

2. Affiliate Marketing model

With the massive shifts of businesses to online platforms, this marketing model is a way you can take for your business and make money out of it.

In this model, the person or the company is paid to promote and market the product of other companies in exchange for a monetary commission.

3. Razorblade model

This model is named after the first-ever business that made this model a huge success. In this model, the main product is sold at a minimal rate while the reusable components of the same, are sold at a higher rate which the consumer is bound to buy regularly.

Gillette is one such company that uses the razorblade business model. As a part of the strategy, the razors are sold at a lower rate while blades that are required in larger quantities by any user are sold at a price that compensates for the loss incurred to sell the razor.

4. Bundling model

The bundling model basically involves combining or bundling multiple products and selling them as one single unit. The uniqueness of this model is that the bundles are sold at a lesser price than the individual products if sold separately.

This model can be used to get greater sales volume but can result in a decrease in the profit margin. Thus, when any particular product is doing so well in the market, then using this model and selling can be a good idea to proceed with.

The happy meals that McDonald’s provides, or the bundled deal of mobile phones with the telecom service plan are good examples of companies using the bundling model for their business.

5. Franchising model

This model can be considered the most ideal model for those businesses that have a very strong brand image that is already established and can attract a good number of customers from the name itself.

In this business model, the franchiser who is the founder of the company makes revenue as a fixed amount to be received each month for running a business under the company’s brand while the franchisee pays that in order to make good money without involving the risk factor of failing to attract customers and running in loss.

KFC, Dominos, and Tim Hortons can be excellent examples of scalable businesses that have adopted this particular business model.

6. Ecommerce model

This is the easiest business model to adapt in the coming times as all you need to do is get a domain name, get a website designed professionally and begin an e-commerce page or business and get your products and services listed.

This way you can directly work in the D2C (direct-to-consumer)segment and avoid the trouble of making business through supply chains and distribution channels.

7. Freemium model

Freemium model is one such business model that has the widest user database because of the dual mode of service it provides. In this model, a wide range of services on the platform is provided for free, along with some additional benefits that one can get by paying for the premium model of the same.

Some businesses that have done extremely well using this model are Spotify and Youtube.

What are the factors to consider when deciding the most ideal business model for your company?

Here are some factors you should take into consideration before you choose the business model that you would want to adopt for your company.

  • Find out about the uniqueness of your product/ service that can make your company stand apart in the market competition
  • Do a survey to check the customer’s willingness to buy a product like yours.
  • Find out about the price they would be willing to pay for it.
  • Think of all the possible streams to generate revenue.
  • Brainstorm and find out which model will be the best for your business based on the conclusions drawn from above mentioned factors.

Developing a perfect business model, even after having so much data and so many suggestions can still feel daunting. If you are feeling the same and want some ease in the process then you can reach out to Team Kedden for a free 30 min consultation call and discover the way to find out the best business model for your company.

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