If you’ve never gone into business for yourself before, you might have some questions pertaining to how you’ll run it. Specifically, how will you make money? That means you’ll need to consider things like which startup revenue model is right for you. But before you decide, you’ll need to know exactly what a startup revenue model is so that you can determine which one is best for the kind of business you’re thinking of starting.
WHAT IS A BUSINESS STARTUP REVENUE MODEL?
A business startup revenue model determines how your business is going to make its money. It’s essentially an explanation of how you’re going to deliver value to your customers and at what cost. There are several ways to go about defining your business startup revenue model. Let’s take a look at some of the most popular startup revenue models people are using these days.
MOST POPULAR STARTUP REVENUE MODELS
1. Free Products (with added cost to upgrade)
This startup revenue model means the company offers a free standard model of its product. But users have to pay to upgrade. A good example is HubSpot’s basic (free) products where users get the standard version of products like CRMs with basic features but customers have to pay for more advanced features when they upgrade.
2. Direct Selling
Another popular startup revenue model is a direct selling model. Trust and customer loyalty are essential to a business using this model. You might have heard rumors about one of the biggest multi-level marketing companies (that Amway is a scam) and wondered if all MLMs are. A simple Google search can help clear that up. Direct selling is actually a legitimate business strategy that plenty of top companies use to sell their products, including makeup companies and health and nutrition companies.
3. Free Products (with Revenue from Ads)
YouTube and Facebook use this kind of model by allowing people to access their platforms for free, while they get their revenue from advertising partners. Companies large and small pay these platforms to advertise their products and services and each site gets a percentage of those sales.
Subscription-based revenue models are popular for startups selling internet services or internet-based services, such as music and video streaming platforms like Netflix, Hulu, Disney Plus, Pandora, Tidal, and Spotify.
5. Percentage-Based Revenue
This model is popular for e-commerce, online platforms, and affiliates where the revenue is based on a percentage of each completed transaction. According to Inc., Amazon led the way for this model online; however, distributors have been using it in retail for years.
6. Cheap Products (with extra for support)
This startup revenue model charges customers for things like training, customization, or installation while the cost of the product is cheap or free. It’s not too popular among customers. But it’s a great way to get started if you’re just getting into business for yourself.
7. Person-to-Person Exchanges
This startup revenue model can help you bring in lots of revenue by putting a buyer of goods in contact with a seller of goods. In real estate, it is called a wholesaler. In retail, sites like Amazon and eBay use this revenue model to earn a commission on each sale made through their websites for introducing the buyer to the seller.
WHICH MODEL IS RIGHT FOR YOU?
Now that you’re well versed in some of the most popular startup revenue models, you can figure out what kind of business model is best for your startup. Do some additional research if needed. Gather all of the information you need to make an informed decision that’ll help you get closer to accomplishing your business goals.