Business Models for Startups: Choose the Best One

Business Models for Startups – Learn and Earn!

Young entrepreneurs are enthralled to venture into new businesses to quench their thirst to succeed in the market. The adrenaline rush in their business-focused mind pushes them to make things faster –whether it is to work on a business idea, hire remote developers, kick start the project, or deploy the product, the startup owners aren’t afraid of taking risks.

Nevertheless, for a seasoned businessperson or a novice, you must need the best business model for the startup in place or else your all efforts may end up in vain. Also, having knowledge about the ideal business model will also help to hire developers that are best fitted for your requirement.

What is a business model for startups?

While companies have fancy goals, visions, and missions, the ultimate aim is to lead the market to the top list. Nevertheless, a business model is an umbrella term that includes several other factors, and if you want to make it simple, ask yourself these questions –

  • Who is your target audience, customer, client, or consumer?
  • How would they buy your products or avail of your services?
  • How much do you feel your targeted customers would pay for your products/services? And, would they find it worth it?

Simply put, the business models for a startup would establish a strong bond or connection between your business (products or services) and your clients. This is the factor your entire venture depends on; this is the pillar of your project and the backbone of your future prospects. It is worth noting that if you choose the wrong business model, your business would suffer despite having great products and unparalleled services.

Young business owners are known to adopt aggressive strategies as they want quick ROI and revenues due to the intensely competitive market; however, they often confuse business models with revenue models. Hence, it is important that you clearly distinguish between the revenue model and the business model.

Revenue model vs business model

A revenue model houses all of your revenue sources. It is, as compared to a business model, a narrow term. Any transaction of money through any source would be considered a revenue model.

On the flip side, a business model for a startup is a broader term that involves, of course, the revenue model as well as other factors and processes that build your business and help your business to perform effectively, such as the cost of production.

For instance, if only customers’ transactions are considered as a revenue model for a retailer, their business model would also include suppliers, marketing, staff, transportation, and the like.

Factors that help you decide the best business model for a startup

Before we get on to the types of business models that help your startup boom, having a glance at different factors that impact your choice is will help have a better insight. Here is the chunk you would mind before putting your finger on an appropriate business model for your startup –

Jump on the bandwagon (success stories)

You don’t need to reinvent any strategy! There are many players already in the market and also in the past. Use a blueprint that has proved itself in leading the markets among tough competitors. Established players in the market are the epitome of success and hence you shouldn’t ignore their journey. Certain business models have always worked (for instance, say freemium) for all companies. There is no harm in adapting something that is a sure shot for any business.

Another aspect, as industry experts opine, is to apply the same successful model to the places where they are not being experimented on yet. Though riskier, this model has a fair chance to boost your startup business. Booking.com, for instance, implemented the online marketplace business for the hospitality industry (as they got inspired by eBay).

Business Model Factors

Assure the scalability

The volatile market and uncertainty in consumer demands have made all industries quite riskier. Hence, the business model should be flexible because depending on the circumstances, the model can be modified.

Miscellaneous costs

Running a service or building a product involves several costs and so does storing and delivering it. Also, competitive analysis and market costs should be considered while choosing the startup business model. Cost structure or pricing and marketing costs should be considered while finalizing the business plan. If you are going for a freemium model, calculate all the risks plus the pros and cons of it. This goes true with other models as well; hence, choose everything carefully.

Revenue model

Don’t ignore the sister concern of the business model – the revenue model. Depending on the revenue streams, your business model shall change, and hence it cannot be ignored. Subscription-based models and freemiums are the most common among startup owners.

Business models for startups: A broad classification

Young entrepreneurs are visionary and present-day business owners have better tools to market and manage their businesses of all kinds. A few decades back, the traditional business models worked well but they took quite a long to reach every potential customer. Today, with the advent of the latest technologies, it is possible to boost any business. Nevertheless, we shall start with the basic (broad classification) of the business models for startups before the super seven models.

Business Models For Startups

Business to Business (B2B)

The business-to-business model involves two businesses -it could be a manufacturer and wholesaler or a retailer and a wholesaler. Not between a company and a consumer, this model works between two companies. The transaction terms, methods, and types could be larger and different than day-to-day trades.

Business to Consumer (B2C)

Here, the model describes the business between a company and a consumer. Direct sales to consumers through a company can be called as a B2C model. Most startups these days still rely on this traditional model because of its promising results.

Customer to Customer (C2C)

Unlike between two businesses or a business and a client, this model works between two customers. The classified section in a newspaper shows a deal between two customers where one wants to sell and another wants to purchase. Such digital platforms are available in the market based on C2C models.

Super seven business models for startups

As technology evolves, the business models for startups also grow. Today, entrepreneurs have contemporary ways to handle businesses. Super seven business models have been serving various industries with their assured results. Still, you need to be careful choosing the one.

There is no one size fits all because each startup has its own strategies and hence the business model for startups would differ from case to case. It all depends on the targeted audience, cost to develop and deploy the customized solutions, storage and delivery, and top of all marketing and maintenance. Here we present to you the top seven innovative business models for startups proven to have excelled in the market by all accounts.

Standard Business Models For Startups

Freemium

The freemium business model for startups tops the list as most businesses must have run this model at least once in their tenure. The best part of this model is the perfect blend of free and premium products/services that startups have to offer. While the free services can attract any consumer, creating a free premium service with more features and perks has an even mightier impact on the consumers.

For instance, if the startup is based on web design and development offering a free package of basic designing and developing services would attract a certain number of customers; on the other hand, a premium package that includes extra features such as video making more design revisions would attract and retain more customers.

Subscription

Another popular business model for a startup is the subscription model which works on subscriptions of various kinds and prices for a particular product or a service. Such a model is generally an apple of mid-sized to large-size companies’ eyes because they are more into generating stable revenue. The cash flow is recurrent and customers turn into loyal clients through this model.

Giants like Netflix and Spotify run on subscription models that offer music, movies, and even channels. Even further, most companies create an option of ‘auto-renewal’ of the subscription which guarantees a smooth and regular cash flow.

Disintermediation

The business model of disintermediation has been a pet model for wholesalers, direct sales companies, and manufacturers. The primary reason for adapting the disintermediation business model for startups is to keep middlemen at bay. In a standard-retail business model, the middlemen had a significant cut. But here, as a result of disintermediation, the cost of the product or service markedly goes down, and the chances of increased business profits are manifold.

The best example we can quote for this model is a retailer who would take an order and ship it directly to the consumer cutting down on any perks paid to intermediary agencies. The ideal startup business model could be disintermediation as there is always a budget constraint in the initial stages of any such business. Walmart, Alibaba, Amway, and Dell are a few giants in the market who worked on the disintermediation model at least once in their tenure of success.

Marketplace

The marketplace business model is actually a platform that just provides a digital ground where buyers meet sellers. This digital fun-and-fair provides enormous opportunities for companies and consumers to have long-lasting and trustworthy relationships. The biggest advantage of having a marketplace business model for startups is that they don’t need to maintain the supply chain or inventory. Nor do they need to bother about the product development services and manufacturing; being a digital marketplace platform, this business just maintains the transactions between buyers and sellers.

Amazon, the best example of a marketplace model, offers zillions of products worldwide without manufacturing and direct selling them. Nevertheless, they put a gigantic amount of bucks into creating the best user experience through their UI and innovative marketing methods.

On-demand

Exactly going by its term, the on-demand business model for startups is something that is provided to the seeker (customer or client) as and when needed. The clients would request a service and will obtain it in time. Uber could be the best example to quote for an on-demand customized business model that allows a traveler to request a ride and get it right then.

Another business that works on an on-demand model is the laundry business and other businesses such as Postmates wherein consumers can order groceries and even foods through mobile devices and the goods are delivered to their doorsteps. While a model for on-demand delivery app could focus on a niche business, newer models have a blended approach to develop a potential over-the-top on-demand business model for startups. For example, last-minute or 10-minute delivery option for groceries and food has been the rage these days in the market.

Virtual goods

Chiefly for the gaming industry, virtual goods’ selling has been getting immense popularity these days as a newer effective business model for startups, with the best monetization strategies. Virtual goods models offer virtual products to consumers which could range from weapon or vehicle upgrades, coins, credits, and much more.

While for the gaming industry, this is the backbone, smart business owners can also implement virtual goods models innovatively in their businesses. For instance, Facebook offered a digital (virtual) gift that a user can send to another user.

Cafu fuel app

The Cafu fuel app is transforming the car service industry by making it simpler, smarter and hassle-free. It helps car owners save their most precious asset which is time by offering 24/7 petrol and diesel delivery. Cafu is among the successful on-demand fuel delivery apps. It provides two fuel delivery business models, one is an on-demand method and the other is a subscription model.

With an on-demand fuel delivery app, customers can quickly and conveniently get their cars fueled up at the same price as the petrol station without any delivery fees.

Reseller

Also known as a magic model, the reseller business model for startups is quite similar to the marketplace model. Here, one can use different types of reseller models depending on the products or services sold and investments or budgets. For instance, eBay promotes products and sells on its platform; nevertheless, when the goods are sold it is the listed company that has to take care of deliveries.

Such reselling model is a perfect fit for startups that don’t want to get into the hassle of handling deliveries. In this model, the cost is brought down significantly because the staff required for deliveries isn’t required by the reseller.

What are the business models for market leaders?

Let us take some examples of the world’s most renowned companies and their business models.

Zepto

The quick eCommerce grocery delivery application, Zepto, has set the epitome of 10-minute hyperlocal delivery where customers can order groceries and get the goods delivered to their doorsteps within the shortest possible time, ten minutes, approximately.

Delivery charges, Membership fees, Advertisements, and Dark Store charges are some of the monetization models that are used in 10-Minute Grocery Delivery Apps like Zepto, Gorillas, and BlinkIt,

TaskRabbit

This marvelous marketplace application provides ample opportunities for skilled workers, handymen, and service seekers to be on the same board and solve their purposes. This model has provided a fair example of a digital marketplace to many young entrepreneurs all over the world. Based on a simple business model, TaskRabbit can be customized with many other features and facilities.

Marketplace apps like Taskrabbit, Thumbtack, Handy, and Upshift can have additional revenue generation models and features such as Usage fees, Peak Pricing, Advertisement, Paid plans, Pay-per-Lead, Brand Partnership, and more.

BookMyShow

BookMyShow is a 360-degree solution for entertainment in multitier towns and cities. Initially developed as a ticket booking application, this digital platform has grown manifold in just a few years of its establishment. BookMyShow is a perfect answer to the ever-increasing global mobile ticketing market which has been growing at a whopping 18% CAGR.

Movie review and cast, proper display of seats, short trailer of the movie, review rating and offer, and bifurcation of theatres according to the city are top features that should be added in the ticket booking app like BookMyShow.

Uber

Probably the most popular taxi booking application in the world, Uber houses a wide range of services from carpooling to hourly car rent and regular cab booking for on-demand purposes. Uber helps set powerful transport networking and thus makes various jobs and businesses flow smoothly in urban settings.

With several monetization options such as profit sharing, premium accounts and in-app advertisements, a taxi booking application like Lyft, Cabify, Gett, & Uber can be immensely beneficial for your business.

Netflix

Should one quote a proven application that works on a subscription-based business model for startups, Netflix is the example. With a revenue of billions of dollars, this video streaming application has successfully attracted 220+ million paid subscribers worldwide. The application has several subscription options from running the content on one to several devices.

SVOD, TVOD, and AVOD are the Business model followed by video streaming app like Netflix, HBO Max, Acorn TV, Disney+ Hotstar, and Amazon Prime.

UberEats

Extending its service benchmark, Uber ventured into UberEats, a decent food ordering and delivery application that enables its users to order their favorite dishes from their favorite eateries and restaurants. Even further, UberEats with customized features also allow users to book tables at their favorite places to avoid waiting.

Premium advertisement services, 3rd party sd services, a commission from restaurants, user subscriptions, and delivery charges are some of the ways to generate revenue that food delivery apps like GrubHub, Uber Eats, Doordash, Instacart, and Postmates use.

PagarBook

Unique in its approach, PagarBook combines a foolproof method to manage employees and their payrolls smoothly. This digital platform combines the best features of human resource management software and accounts in a way that the company can handle everything from the same application. The employee attendance and payroll application simplify the heftiest tasks of managing employees’ records in small to mid-sized and large enterprises.

Integrating employee payroll and attendance management software like PagarBook, Paylocit, and Paychex will help to improve your organization’s benefits such as happy employees, stress-free process, avoid costly errors, save money on taxes, better RoI, and makes the process fast.

Ajio

The huge potential of face-paced eCommerce growth brought the idea of Ajio to the market. The cost of developing an eCommerce application depends on various factors such as the size of the business, app location, and the complexity of the app features. This eCommerce application is fashion-focused and houses plenty of varieties of apparel and accessories for all genders.

Conclusion

All the business models for startups have their own advantages but picking up the right one depends on the nature of your business, the budget you have, and the targeted clients. If you are not sure about a suitable business model, you may take the help of professional consultants.

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