Business Models: Types And Explanation

Do you want to open a startup? But before you do, you need to plan. You need to learn how a startup works, its benefits and drawbacks. Is is important to decide what you’re going to sell, customer base, funding, etc. Though this process is very tedious but it is essential. Right market reasearch and analysis as well as business model will decide the future of your venture. Your business will become a success story only after effective planning. So here’s a list of some common and important business models. I have also listed examples so you can understand better.

Subscription Business Model

Entrepreneurs employ this model in brick-and-mortar as well as online businesses. In this type of model, customers pay a recurring fee for a product or service on a monthly basis. The company can either ship you the product or you can buy it on their app. A classic example would be Netflix. In addition to Netflix, Disney+, HBO Go also employ this business model.

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Freemium Business Model

Online and Software-as-a-Service (SaaS) businesses are constantly expanding their domain. Consequently, freemium business model is also becoming popular. Companies following this model offer certain proprietary tools such as an app for free. However, they reserve or lock certain key features. Users are likely to want to use these key features later regularly. And then users subscribe to avail these features.

A good example would be Spotify. Spotify plays ads in between music. Users need to subscribe for availing the premium ad free version. Other examples include Skype, LinkedIn.

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Add-on Business Model

Companies such as Apple use this business model. In this case, you pay for a certain product. But for accessories associated with the product, you’ll have to bear additional costs. For example, when you buy a car, you pay additional costs for accessories like music system. In case of iPhone, you bear additional costs for services such as Apple Care.

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Franchise Business Model

Probably, you are all familiar with this business model. After all, we visit these business often. To summarise its working, franchise is an established business blueprint which a buyer purchases and reproduces. Original owner or franchiser helps the buyer or franchisee with marketing, financing, etc. In return, the franchisee pays a part of profit to the franchiser. For example, Domino’s, Starbucks, Subway.

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Advertising-Supported Business Model

In these type of businesses, ads are a major source of revenue. This is very common in print as well as online media. Generally, media earns revenue through ads and customer subscription. For example, scoopwoop, The Indian Express.

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This ends the list of some common business models. I hope it proves to be a help.