Startups, Business Model

Which Business Model To Choose For Your Startup?

Which business model to choose for your startup?

5/10/2021 9:28:00 AM
Startups, Business Model, Revenue Model

Which business model to choose for your startup?

While the innovative nature of a startup entails that its exact business model would be a somewhat unique combination of different factors and involves multiple key choices related to the business, you don’t always have to reinvent the wheel.

The second option is to take a business model from another industry and to apply it to an industry where this model hasn’t been established yet. This is riskier, but being the first company to do it successfully has big benefits. For example, Booking.com did this by creating an online marketplace (similar to eBay) for the hospitality industry.

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Use A Scalable ModelScalability isa requirement rather than a choice for most startups. The extremely risky nature of the business implies that for the venture to be worthwhile, the potential needs to be big. Because of this, your business plan needs to be scalable.

A consultancy that charges by the hour is not particularly scalable, while a software solution with close to zero marginal costs (the cost of adding an additional customer) is extremely scalable. That’s why the vast majority of successful tech startups are in the digital world. headtopics.com

Understand Your Cost Structure, Pricing, And Marketing ChannelsHow much does it cost to develop the product or to run the service? How much does it cost to deliver it to your customers? How much are competitors charging customers for similar offerings?

Knowing the exact cost structure of your business would let you price your offering, which in turn would help you choose the correct marketing channels and revenue models.Because of the low marginal costs of most software products “free” has become a popular pricing choice. That said, while giving away something for free is a great way to attract customers, it creates an obvious problem – how do you actually earn money?

Ads, affiliate offerings, and most importantly freemium offerings (i.e. part of your offering is free, another part is paid for) are the most common solutions to that problem, but they are not perfect.Speaking in general, it’s safer to avoid “for free” business models in the very

. That way you can validate more easily if people truly want what you are making. You can always add free offerings when your startup project reaches the growth stage.Understand Your Revenue ModelOn the highest level, there are two types of revenue models—transactional and subscription models. The main difference is that in the first option you are selling ownership with one-time transactions, while in the second you are selling temporary access. headtopics.com

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The subscription model makes a lot of sense in the scalable digital world because it provides predictable, recurring revenue to the company (and hopefully higher customer lifetime value) while at the same time requiring a smaller upfront investment by the customer.

Because of this, a lot of the older software giants (Microsoft, Adobe) are putting effort into migrating from a transactional to a subscription-based revenue model.If you are building a scalable, digital startup, the subscription model should be the default choice in 2021.

In summary:Use your competitors or tech startups in other industries as a blueprint.Make sure your business model can scale.Understand your cost structure as it will define your choice of marketing channels and pricing.Choose your revenue model.Abdo Riani is the founder and CEO of VisionX Partners, a startup development company that works with entrepreneurs to start, build, market and run their startup from the

… Read MoreAbdo Riani is the founder and CEO of VisionX Partners, a startup development company that works with entrepreneurs to start, build, market and run their startup from the ground up through product development and design, marketing, and a dedicated operation and growth team. headtopics.com

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