For a startup business to be successful, you need more than a clever idea for its product or service. If startups cannot figure out how the business will sustain itself in the long run, they may struggle to find success, regardless of how innovative an idea is.
In this regard, you should develop a business models for startups that will guide you on how to run your business. In order to create an effective business model, you will need to identify your target market, any revenue streams, financing information, and the products and services that you will be providing.
Different business models for startups are used for different types of startups. But to understand this, first let us see what is a startup business model?
Startup business models help you to explain which problem your startup can solve for consumers, why your business solution is superior to your competitors, and how much profit your startup can earn.
- 1 Below are the 7 Business Models for Startups
- 1.0.1 1. Business to Business Model
- 1.0.2 2. Business to Consumer Model
- 1.0.3 3. Customer to Customer Model
- 1.0.4 4. Freemium Business Model
- 1.0.5 5. SaaS Based Business Model
- 1.0.6 6. Subscription Based Business Model
- 1.0.7 7. On Demand Business Model
Below are the 7 Business Models for Startups
1. Business to Business Model
Business-to-business (B2B), also known as B2B, refers to a transaction that involves two businesses, like a manufacturer and wholesaler or a wholesaler and retailer. Rather than between one company and one consumer, business-to-business is conducted between two companies. Transactions between business and business are different from those between businesses and consumers, or between businesses and governments.
Advantages of B2B Model
- Market Consistency
Business-to-business eCommerce has a higher level of market stability than the other strategies. B2B sectors can adapt smoothly to a variety of market conditions. It helps a business to gain more clients and resellers by strengthening its online presence and business opportunities.
- Improve sales
B2B has a higher sales opportunity as the purchase made is usually in bulk, a larger quantity, leading to a long term contractual relationship. This would increase the scope of growth for the overall product as well as the startup and create a large network and reach.
- Minimal cost
The online business model lowers costs for businesses since they are selling in bulk and there is an effective supply chain management process. In addition, the work is done most often by automation, which eliminates errors and unnecessary expenditures that are associated with traditional business models.
2. Business to Consumer Model
B2C means business-to-consumer, and refers to businesses that sell directly to consumers or end users. The most reliable way to evaluate B2C companies in India is to evaluate e-commerce portals such as Amazon, Flipkart, and Snapdeal.
The three companies mentioned above cater directly to individuals and the public, and stand out with their brand identity and voice.
Advantages of B2C Business Model
- Cost Management
A B2C startup model has the lowest startup costs, since you communicate and deal with the end consumer directly, eliminating the middleman costs that many businesses incur.
- Full Time availability
B2C startup business models will have the added advantage of having a 24/7 online shop with the advent of the digital age and e-commerce platforms, in addition to being easy to search on the internet and apps.
- Transparent Information
With B2C, you have direct contact with your end customers. Other business models lack this advantage. This allows them to share data easily with their end users. In fact, you can ask them directly for their feedback via emails, apps stores, etc.
3. Customer to Customer Model
Consumer to consumer business models are when consumers sell directly to consumers; for example, the classified section of any newspaper is the oldest and best example of C2C.
Whether you’re auctioning a product or selling it via OLX. The customer – and not the business – sells the goods or services directly to another customer in both cases.
Advantages of C2C Model
C2C businesses have the advantage that their buyers and sellers are easily reachable, and their transactions are effortless and mutual.
- Role switch
In some cases, a customer can be both a buyer and a seller.
4. Freemium Business Model
The freemium business model draws customers to their service with a free version while offering certain features exclusively to premium users. Dream 11 is one of the most famous examples of this. As well as competing against each other, it offers players the opportunity to earn money from investing money into their app.
Advantages of Freemium Model
- Experience and use
The greatest attraction of the freemium business model is that the clients can see and experience your administration with the expectation of complimentary first and afterward settle on a decision. This makes them more leaned to believe in you and look at what you bring to the table.
- Wide customer base
It is not difficult to get a huge client base when you offer your item free of charge. While firing up, your free clients can be your future clients. These clients can be your wellspring of income when they move up to a paid rendition. In addition, you can utilize allowed to assemble brand mindfulness that you can later use for cross-deals or updates.
- Cost Benefits
Clients utilizing premium applications anticipate a specific degree of administration and responsibility from the engineers. This can mean reducing down on expenses and diminished personal times if there should arise an occurrence of any issues. In that capacity, free clients might move up to get the help of the designer.
This is particularly evident on the off chance that the contribution is essential to the business activities of the client. For instance, WordPress module designers normally offer premium help to paid module clients.
5. SaaS Based Business Model
The SaaS plan of action implies selling a cloud-based programming (regularly got to through web application or versatile application, yet in addition in some cases by means of a work area application) at a month to month or yearly membership expense. SaaS — which represents programming as a help — is presently utilized by practically every business and most shoppers.
Shopper SaaS items incorporate planning applications like EveryDollar and Adobe Creative Cloud. While it’s not difficult to fabricate a B2C SaaS, it’s a whole lot harder to make something of significant worth and develop it economically, when numerous customers expect applications of any kind to be free or incredibly minimal expense. Then again, SaaS organizations that take care of issues in B2B markets can develop to enormous valuations considerably more rapidly, and typically.
Advantages of SaaS Based Business Model
Scalability within the SaaS model is not limited to just information processing. SaaS providers often offer several subscription tiers to meet the different needs of their user base, and a customer can usually change between options on the fly. In addition, software in the cloud allows for teams with users based in different locations to collaborate using the same solution.
- Cloud Deployment
With deployment and installation of software in the cloud, the SaaS company provides membership to the end user simply by granting them access through their online account credentials. All that’s needed is a web browser and connectivity. There’s no need for on-premise software installation or costly infrastructure on the part of the customer to host the software, nor is there a need for an end-user license to activate the software.
6. Subscription Based Business Model
The membership based plan of action is normally given by programming organizations and additionally application based organizations. Here, they offer their item as an oddball buy, and consequently organizations involving their administration appreciate repeating income in types of month to month or yearly installments.
The best and greatest model for this is administrations like Netflix and Hotstar who construct an agreement with various organizations like HBO and give their shows to end buyers as a trade off for membership expenses.
Advantages of Subscription Business Model
- A win-win
Subscription services benefit customers by making payments as frictionless as possible. When customers initiate a recurring payment — typically monthly — they know they can expect regular delivery of goods or services
- Recurring revenue
The plan of action additionally turns out standard revenue. Rather than requesting a significant direct front venture, they give the choice of purchasing choice to the end shoppers at a moderately low introductory expense. This holds them for longer. This likewise gets individuals to contribute Rs.500 each month for quite some time than effective financial planning Rs. 5000 on the spot.
7. On Demand Business Model
There’s no point in waiting in a queue when you can call a taxi-driver in just a few seconds? Isn’t it better to have your parcel delivered to you the same day as opposed to waiting 3-5 days? If you can order the pizza online after a long day at work, why bother cooking? These are just a few examples of on-demand business models.
Most smartphone users today have used a mobile app to book on-demand services. Due to this, businesses have shifted their focus to include mobile apps in their business models.
Additionally, startups have been encouraged to offer on-demand services due to the growing dependence of customers on mobile apps. Additionally, the on-demand business model is not limited to the transportation sector; rather, it reaches a wide audience.
A number of startups are adopting the Uber for X business model and thus contributing to the on-demand delivery market.
While every one of these new company models enjoys its own benefits and detriments, remember that picking the right plan of action for your startup is a cycle and you won’t figure it out in the short-term.
You likewise need to endlessly explore well to realize what is the best plan of action for your startup. Keep every one of the choices, upsides and downsides before you to be aware if they could make the business fruitful and productive.
Related Article: How to Start a Startup in India