A startup business model is an efficient outline of how a business plans to make money through its products or services and customer base in a specific market. A business model focuses on a company’s products or services. On their expected performance in the market, possible marketing expenses, and how the company expects to make a profit.
Creating effective business models for startups is necessary. Not only to build a powerful long-term development strategy, but also to prove to potential investors that a particular startup will work.
A business model provides a model-like, holistic description of the core ideas of how a company can create value for its customers. Thus, a business model covers all aspects of a business. Including the revenue model and revenue streams. But it also explains how they can work together effectively.
Let’s look at some of the business models for startups.
Disintermediation Model (Produce and Sell Without Intermediaries)
One of the most common yet successful business models in active use today is disintermediation. It is a strategy used by hundreds of thousands of wholesalers, manufacturers and businesses with direct sales processes. The most notable example of this business model is the world’s major manufacturers of gadgets, phones and electronics.
With this approach, companies can reduce the number of middlemen that contribute to the overall cost of a product. This is ideal for startups looking to manufacture and distribute their products themselves.
Benefits of a disintermediation model for startups include:
- Lower prices for goods or services for end users;
- Providing easier and better access to goods and services;
- Ability to test different production scenarios. Allows to gain better competitive advantages for the business;
- Increasing company profits.
Subscription Business Model
Many global companies operate on a subscription model. Netflix, Spotify, YouTube Premium or Apple TV. They all sell a subscription service rather than one-time products. The main feature that distinguishes this model from other business models for startups is that the business receives stable cash flows that are recurring.
Benefits of a subscription business model for startups:
- Targeting large pools of clients looking for convenient services;
- Receiving and retaining clients for a long time;
- A stable, regular income stream provides more opportunities to improve the quality of products and services.
Marketplace Business Model (Trading Platform)
The marketplace model is a popular model. It allows your business to act as an intermediary for sellers and buyers. You can manage transactions, and provide various additional services that can benefit your customers. One of the most well-known companies that have successfully implemented the marketplace business model is Amazon. It is a leading online retailer that accounts for 41% of the total US e-commerce retail market. There are other well-known trading platforms as leaders. The Chinese marketplace Alibaba, the Russian Ozon and Yandex market.
Advantages of the marketplace model for startups:
More effective customer acquisition and easier expansion of the customer base;
There is no need to store inventory – all goods are shipped by sellers;
There is no overhead since trading platforms only take a small percentage of each transaction.
However, due to the presence of large market players when choosing this business model, you will have difficulty convincing people to work with your marketplace. But you can focus on a smaller, more specific niche market and target a niche audience.
On-demand Model
An on-demand business model involves providing your customers with specific services that they can access on demand whenever they need them. One of the most prominent examples of this business model is California-based Uber. It generated $18.3 billion in revenue in 2021 alone. It currently has nearly 120 million users worldwide.
After analyzing the business models of successful companies, it’s clear that this one works for more than just curbside pickup. You can now order food, groceries, and other items through a mobile app. A concept that became extremely popular in 2020 and is now just in its early stages of evolution.
Benefits of the on-demand model for startups:
Possibility of providing various services within one application;
This model is mainly aimed at the younger generation;
Allows the use of freelance workers.
Niche Market Online Casino Model
A particularly lucrative area within the disintermediation model is the real money casino platform. By creating a targeted online casino, startups can cater to a specific demographic of gamers, offering them exclusive gaming experiences without the overhead of a physical location.
However, keep in mind that if you choose an on-demand business model, you will have to invest heavily in developing a digital product. You’ll have to hire top-notch UX/UI designers and application developers with outstanding skills.
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