Everything You Need to Know About Business Models

When you are starting a business, one of the most important aspects you have to get right is planning the business model you will adopt. At the first stage, you would want to determine what you will be selling and to who you will be selling. You will need to select a model that has proven to work and incorporate it into your planning and research. You will need to emulate a business that has consistently performed well and research on what they do right and things they get wrong to avoid those pitfalls.

What is a business model

A business model is an outline of how a company plans to make money with its products and services, in a specific market.  At its core, a business model will have four key things;

–         What products or services a company will sell

–         How the company intends to market its products and services

–         The kind of expenses it will face

–         How it expects to turn a profit

There are many different types of business models and these models keep on constantly changing.  Here are the most common types of business models you should know.


Subscription Model

With a subscription model, it can be applied to both traditional brick and mortar businesses as well as online businesses. Essentially, the customer will be paying a recurring payment every month, or at another specified time, to access a product or service. Examples of businesses using subscription models include Netflix and streaming sites such as Hulu, HBO among others.


Bundling model

A bundling model is as it sounds. It is a business model that involves companies selling two or more products together as a single unit, for often a lower price than they would charge while selling the products separately. This type of business model is used to allow companies to generate a greater volume of sales and perhaps market products and services that would otherwise be a bit difficult to sell.

Freemium Model

A freemium business model is one that has gained a lot of popularity due to the prevalence of online software as a service business. It has a simple basic framework. A software company will host and provide proprietary tools for their users to have free access such as an app or tool suite. However, the company will withhold or limit the use of certain key features that with time, their users will likely want to use on a regular basis. To gain access to those key features, users must pay for a subscription.

Crowdsourcing model

A crowdsourcing model involves receiving opinions, information, and work from different people on the internet or social media. This type of business model allows companies to tap into a vast network of talent without having to hire in house employees. An example is how many traffic apps encourage drivers to report accidents in real-time for the benefit of other app users. Others employing this model include Wikipedia, IMDB among others.

Leave a Reply

Your email address will not be published. Required fields are marked *