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8 Types of Business Models & the Value They Deliver

Stacks of coins in a garden

  • 26 May 2016

You want to start a company but aren’t sure about a viable business model. How might you create something that people are willing to pay for and could earn you a profit?

Before diving into potential strategies, it’s important to understand what a business is and does. At its heart, a business generates value for its customers. A business model is a specific method used to create and deliver this value.

What Is Value in Business?

A successful business creates something of value . The world is filled with opportunities to fulfill people’s wants and needs, and your job as an entrepreneur is to find a way to capitalize on these opportunities.

A viable business model is one that allows a business to charge a price for the value it’s creating, such that the business brings in enough money to make it worthwhile and continue operating over time. Whatever the business is offering must also satisfy the customer’s needs and quality expectations.

It’s important to note that value is subjective. What’s valuable to one person may not be to another. Moreover, the concept of value excludes any moral judgments about the intrinsic worth of an offering. For example, while most would agree that human life is more valuable than sports, some professional athletes make far more money than the average brain surgeon.

Nonetheless, the concept of value provides a useful bedrock on which to begin building your business model. In particular, consider what forms of value people are willing to pay for. Here are eight potential business models and the forms of value they deliver—as well as the pros and cons of each—to help you get started.

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8 Types of Business Models to Explore

A product is a tangible item of value. To run a successful product-focused business, try to produce the item for as low a cost as possible while maintaining a reasonable level of quality. Once the item is produced, your objective should be to sell as many units as you can for as high a price as people are willing to pay to maximize profit.

Products are all around us. From laptops to books to HBS Online courses (products don’t have to be physical), products are a classic form of value with high upside if you can get them right.

  • Pros: Many products can be easily duplicated. Thus, firms can achieve economies of scale after bearing some upfront costs of production.
  • Cons: Physical products need to be stored as inventory, which can increase costs. They can also be damaged or lost more easily than, say, a service.

Related: How to Create an Effective Value Proposition

A service involves offering assistance to someone else for a fee. To make money from your service, provide a skill to others that they either can’t or don’t want to do themselves. If possible, repeatedly provide this benefit to them at a high quality.

Like products, services are in abundance, especially in the knowledge economy. From hairdressers to construction workers to consultants to teachers, people with lucrative skills can earn good money for their time.

  • Pros: If you have a skill in high demand or a skill that very few others have, you can charge a fair price for your time and stand out in your field.
  • Cons: If you don’t charge enough for your services, or many people have your skill, your business may not be as lucrative.

3. Shared Assets

A shared asset is a resource that many people can use. Such resources allow the owner to create or purchase the item once and then charge customers for its use. To run a profitable business around shared assets, you need to balance the tradeoff of serving as many customers as you can without affecting the overall quality of the experience.

For instance, think of a fitness center. A gym typically buys treadmills, ellipticals, free weights, bikes, and other equipment and charges customers monthly membership fees for access to these shared assets. The key is to charge customers enough to maintain and, if needed, replace their assets over time. Finding the right range of customers is the key to making a shared asset model work.

  • Pros: This model provides people access to a lot of assets they wouldn’t otherwise have access to. In addition, many people are willing to pay a lot for access to trendy social spaces.
  • Cons: Because they don’t own the assets, customers have little incentive to treat your resources well. Make sure you have enough in your budget for quick fixes, if necessary.

4. Subscription

A subscription is a type of program in which a user pays a recurring fee for access to certain specified benefits. These benefits often include the recurring provision of products or services. Unlike a shared asset, however, your experience with the product or service isn’t affected by others.

To have a successful subscription-based offering, build a subscriber base by providing reliable value over time while attracting new customers.

The number of subscription services has exploded in recent years. From magazines to streaming services to grocery and wine delivery subscriptions, businesses are turning to the subscription-based model, often with great success.

  • Pros: This model provides certainty in the form of predictable revenue streams, making financial forecasting a bit easier. It also benefits from a loyal customer base and customer inertia (for instance, customers may forget to cancel their subscription).
  • Cons: To run this model, your business operations must be strong. If you can’t deliver value consistently over time, you may want to consider a different business model.

5. Lease/Rental

A lease involves obtaining an asset and renting it out for an agreed-upon amount of time in exchange for a fee. You can lease virtually anything, but it’s in your best interest to rent assets that are durable enough to be returned in good condition. This ensures you can lease the good multiple times and, perhaps, eventually sell it.

To profit from leases, the key is to ensure that the revenue you get from leasing the asset before it loses value is greater than the purchase price. This requires you to price the rental of the item strategically and potentially not lease to those who may not return it in good condition. This is why many rentals of high-value items require references, credit checks, or other background information that can predict how someone may return the leased item.

  • Pros: You don’t have to have a novel idea to make money using a lease business model. You can purchase assets and rent them to others who wouldn’t buy them for full value and earn a premium.
  • Cons: You need to protect yourself from unexpected damage to your assets. One way to do so is through insurance.

6. Insurance

Insurance entails the transfer of risk from a customer to a seller of an insurance policy. In exchange for the insurance company (the seller of the policy) taking on the risk of a specified event occurring, they receive periodic payments ("premiums" in insurance lingo) from the policyholder. If the specified event doesn’t happen, the insurance company keeps the money, but if it does, the company has to pay the policyholder.

In a sense, insurance is the sale of safety—it provides value by protecting people from unlikely, but catastrophic, risks. Policyholders can take insurance out on almost anything: life, health, house, car, boat, and more. To run a successful insurance company, you have to accurately estimate the likelihood of bad events occurring and charge higher premiums than the claims you pay out to your customers.

  • Pros: If you calculate risk accurately, you’re guaranteed to make money using the insurance business model.
  • Cons: It can be difficult to accurately calculate the likelihood of specific events occurring. Insurance only works because it spreads risk over large numbers of policyholders. Insurance companies can fail if a large portion of policyholders is impacted by a widespread, negative event they didn’t see coming (for example, the Global financial crisis in 2007 and 2008).

Related: 5 Steps to Validate Your Business Idea

7. Reselling

Reselling is the purchasing of an asset from one seller and the subsequent sale of that asset to an end buyer at a premium price. Reselling is the process through which most major retailers purchase the products they then sell to buyers. For example, think of farmers supplying fruits and vegetables to a grocery store or manufacturers selling goods to a hardware store.

Companies make money through resale by purchasing large quantities of items (usually at a bulk discount) from wholesalers and selling single items for a higher price to individuals. This price raise is called a markup.

  • Pros: Markups can often be high for retail sales, enabling you to earn a profit on the items you resell. For example, a bottle of water might cost 10 cents to produce, whereas a customer may be willing to pay $1.50 or more for the same bottle.
  • Cons: You need to be able to gain access to quality products at low costs for the reselling business model to work. You’ll also need the physical space to store inventory to manage sales cycles.

8. Agency/Promotion

Agents create value by marketing an asset, which they don’t own, to an interested buyer. They then earn a fee or a commission for bringing the buyer and seller together. Thus, instead of using their own assets to create value, they team up with others to help promote them to the world.

Running a successful agency requires good connections, excellent negotiation skills , and a willingness to work with a diverse set of individuals. One example is a sports agent who promotes players to teams and negotiates on their behalf to get the best deal. In return, they typically receive compensation equal to a certain percentage of the contract.

  • Pros: You can highly profit from expertise and connections in your industry, be it publishing, acting, advertising, or something else.
  • Cons: You only get paid if you seal the deal, so you have to be able to live with some uncertainty.

So You Want to Be an Entrepreneur: How to Get Started | Access Your Free E-Book | Download Now

Setting Your Business Up for Success

These eight types of business models each have pros and cons and deliver value in their own ways. If you’re looking to start a business and need a place to start, one of these could be the best fit for your venture and entrepreneurial skill set .

Interested in honing your entrepreneurial skills? Explore our four-week online course Entrepreneurship Essentials and our other entrepreneurship and innovation courses to learn the language of the business world.

This post was updated on February 19, 2021, and is a compilation of two posts, previously published on May 26, 2016, and June 2, 2016.

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50 Types of Business Models (2022) – The Best Examples of Companies Using It

top 10 business model

Last updated: Jan 30, 2021

Are you looking for ideas to unlock your long-term business value? If you shook your head in yes, remember that business model is one of the ways to streamline your business process.

Precisely, a business model is a holistic framework to define, understand, and design your entire business in the industry. Often novice entrepreneurs do not understand the significance of the business models.

Check out 50 different types of business models , along with examples of companies for better insight. Try to adopt these business models in your startup.

Table of Contents

1. Franchise model

Best for the company’s expansion, franchising allows the franchisor to license its resources, brand name. Intellectual property and rights for a franchise to sell its products and services in exchange for a royalty.

McDonalds’s is the best example, which has 93% of its franchised restaurants worldwide.

McDonald’s is the leader in the global foodservice. It operates 36,059 franchised restaurants out of a total of 38,695 restaurants worldwide. Its franchise restaurants have increased year-on-year for the last 13 years.

Example: Subway , McDonald’s , Gold’s Gym

top 10 business model

2. Multi-sided platform model

Any company that offers services to both sides of business carries out a multi-sided business model. The perfect example is LinkedIn , which provides subscription services to people to find job opportunities as well as to HR managers to find candidates for their vacancies. 

  Example: LinkedIn , Freelancer.com

Linkedin - Multi-sided platform business model

3. Cash machine business model

Also known as the cash conversion cycle (CCC). It basically means how quickly a company converts cash to good and services and then again into cash. This model is used by the companies who make low-profit margin but survive in the market with a disruptive position. Like, Amazon generates a massive amount of cash from its online store before it pays to its suppliers. Another way to look is that Amazon runs its supply chain on vendor credit.

Cash Conversion Cycle : Cash ==> Product & Services ==> Cash

Example: Amazon , Alibaba , Apple

Pro tip: This type of business model is most suitable for inventory type of businesses.  

Cash machine business model

4. Freemium business model

A mix of free and paid services, the freemium model is mostly used by tech companies in the Software as a Service (SaaS) or apps business model. To grow business and acquire customers, companies offer free (lite) versions to customers but for a limited time or with limited features. To unlock the upgraded features, the customer has to opt for paid services.

Examples : Zoom , Dropbox , MailChimp , Evernote etc.

Pro tip: It’s an excellent way to encourage customers to try the software or application. 

Freemium Business model

5. Subscription business model

This model allows the customer to get services by paying a fixed amount every month or year. In this case, the company has to provide enough value to its customer, so they visit the website over and over again. 

It allows companies to segment the market and offer a specific number of items in its content under different plans and prices known as tiered offerings.

For example, Netflix offers monthly subscriptions under the Basic plan for $8.99/month, Standard plan for $12.99/month, and Premium plan for $15.99/month.  

Examples: Netflix , LinkedIn , Amazon Prime , Dollar Shave Club , are few of its examples.

Pro Tip: This model is useful for content or service-based websites. 

Subscription business model

6. Peer-to-peer business model

As per this model, a company acts as a middleman between two individual parties and create value for both demand and supply side. It’s different than a typical relationship of a business selling its services to consumers (B2B or B2C). It makes money through commissions. Airbnb is the right example that allows transactions between hosts and hostees.

Example:  Airbnb , Uber , eBay , Offerup , Freelancer.com,  

Peer-to-peer business model

7. One-for-one business model

The one-for-one business model can be referred to as a social entrepreneurship business model. It’s a hybrid solution, a combination of both profit and not-for-profit services. Although there are some debates about its long-term sustainability, many companies are pivoting their business models to cater to socially conscious millennials. The best example is TOMS Shoes that provides shoes to underprivileged children globally for every pair of shoes sold.   

Examples: TOMS Shoes , Warby Parker (donated eyeglasses), Two-degree Food , Soapbox Soaps .  

One-for-one business model

8. Hidden revenue business model

This model refers to a revenue generation system in which users don’t have to pay for the services offered, but the company still earns revenue streams from other sources. Like, Google earns from advertising money spent by businesses to bid on keywords while users don’t pay for the search engine.

Examples: Google , Facebook , Instagram , Twitter

Hidden revenue business model

9. Razor and blade business model

In this model, one item (Razor) is sold at a low price while another associated item (blade) is sold at a premium price. It is also known as a printer and cartridge business model. For example, the price of inkjet printer itself was just a one-time expense, however, getting a new ink cartridge replaced is an ongoing expense for consumers. The model is great if you have a loyal customer base and if you can create some sort of lock-in situation with customers.

Example: Xbox or PlayStation Video Games , HP Printers , Nespresso coffee machines , AT&T Mobile phones with 2-year contract .

Pro tip: Use this model, if there is a need for recurring sale of an associated item, which can generate a continuous flow of revenue.

Razor and blade business model

10. Reverse Razor and Blade business model

The business model is contrary to the razor blade model. It implies offering low priced products to encourage customers to buy high priced items as well.

This business model uses the strategy with a one-time offer for the premium product and acquires more revenue from secondary items in the long term. 

Example: Apple employs this business model perfectly. Apple’s App Store and iTunes sell apps, movies, songs, etc. at reasonable rates but charges premium prices on its devices like iPhone, iPad, and Mac. 

Reverse Razor and Blade business model

11. Direct sales business model

In this model, products are directly sold to the end customers either in a one-on-one conversation or small gathering, remember Tupperware house parties ? The salesperson gets a share of every sale. Although technology has superseded the direct sales method in many ways, still many companies prefer to give a personal touch to its customers.

Examples: Tupperware , personal care & nutrition brands ( Avon , Arbonne , and Herbalife )

Direct sales business model

12. Affiliate marketing business model

In this model, companies make money by featuring, reviewing, and recommending other company’s products or services.  Think about product review websites. These websites are paid based on sales opportunities that they bring to their vendor companies.

Examples : NerdWallet , Capterra , MoneySavingExpert.com , and thewirecutter .

13. Consulting business model

Companies that provide consulting services by hiring experienced and qualified people and having them assigned on client’s projects follow the consulting business model. These companies tend to charge on the hourly basis and/or they take a percentage share based on the successful completion of the project (cost reduction project). Mckinsey and Boston Consulting Group are multi-billion-dollar businesses that are based on this model.

Examples: Deloitte , Mckinsey , BCG, software or website development firms

Pro tip: if you are a subject matter expert (SME) in a field, and when the duration of the project is uncertain (based on the change in client’s requirements) then consulting business model is an excellent way to charge your clients.

Consulting business model

14. Agency-based business model

This is a project-based business model, where an outside firm is hired to complete a specific task. Traditionally, businesses that lack internal expertise hire agencies to get a customizable solution for their needs. Remember Mad Men ? Acclaimed Netflix series that focuses on advertising agency and their clients. Some niche agencies are digital marketing, design & architecture, survey, promotion, media, public relationship, branding, website development, social media, etc.

Example: TBWA\Media Arts lab (Apple’s go-to ad agency), Leo Burnett Company (United Airlines, McDonald’s , Kellogg’s are some of their notable clients)  

Agency-based business model

15. User-generated content business model

Allowing users to generate quality content on websites for free to answer other users’ questions and provide reviews, this business model is new yet fast-growing.

This model is driven by a wide range of digital commodities, from videos to reviews, pictures, blog posts, testimonials, and any other type of content created by users of a brand. And made accessible via social media.

User-generated content is compiled and sold to companies seeking to exploit consumers’ ideas and content to promote their brands.

Examples: The top examples are YouTube , Quora , Yelp , Yahoo Answers , Reddit .

User-generated content business model

16. Online educational business model

Targeting the educational industry, including students and teachers, this business model allows them to get access to educational resources via flat course fees or subscription. It can be said as a combination of freemium, course fees, and a subscription-based model.

Examples: Khan Academy , LinkedIn learning , Coursera , Udemy , edX , etc.

Online educational business model

17. Instant news business model

This model focuses on sharing and updating news instantly without any intermediary.

Companies that use this model provide open and reliable channels allowing trusted primary or secondary sources to communicate breaking news or urgent announcements directly to their audience.

In the past few years, some social media platforms have emerged as the go-to option for instant news from primary sources like presidents, CEOs of companies, and so on. 

Example: Twitter is the best example. Users can access the news in real-time by checking the trending hashtags.

Instant news business model

18. Multi-brand business model

This model is based on marketing more than two products, almost similar yet competing with each other and come under a single organization but having different brand names. It is done to create economies of scale and to build an empire.

Examples: Procter & Gamble , Unilever , and Nestle are a few examples.

Multi-brand business model

19. E-Commerce business model

A simple yet most promising business model, e-commerce allows buyers and sellers to connect and transact using an online platform (online shop).

There are several types of e-commerce business models, including Business to Business (B2B), Business to Customer(B2C), Customer to Customer (C2C), and Customer to Business (C2B).

Example: Amazon , Alibaba , eBay , OLX , Walmart , etc.

E-Commerce business model

20. Distribution based business model

A company that works by having one or a few key distribution channels to integrate with its final customers follows this model.

Companies that use this model provide channels for businesses to sell to customers via dealers, brokers, supermarkets, retailers, and so on.  

Example : Unilever  spends its major part of revenue in maintaining a proper distribution.

top 10 business model

21. Drop-shipping business model

A cost-effective as well as an exciting business model. In drop-shipping, a business owner contacts many different suppliers/ wholesalers to sell their product on the website. Once an order is placed on a business owner’s website, wholesaler drop-ships the products directly from the manufacturer to the customer. In this case, the business owner does not have to hold any an inventory and uses the third party to manage all the shipping and logistics needs.

Pro tip: It’s an excellent way to start a niche e-commerce business website with a limited upfront cost.

Examples: Doba , Oberlo , Dropship Direct , and Wholesale 2B are few examples.

Drop-shipping business model

22. Enterprise business model

Targeting and focusing only the large clients, enterprise business model is all based on getting big deals. It is built on complex sales with a good few potential clients. Like the clients of Fortune 500 usually have multi-billion dollars budget.

Example: Boeing , Raytheon, SpaceX , Goldman Sachs is an example of Enterprise business model because their sales motion is targeted towards very large business enterprise customers or governments .  

Enterprise business model

23. Social enterprise business model

This model is based on the fundamental that companies should make profits without causing any harm to anyone, and a part of it should be spent in humanitarian works to improve human living conditions.

Example: Brunello Cucinelli is an Italian luxury brand that donates about 20% of its profits towards a social cause.  

24. Direct-to-consumers business model

This model allows companies or brands to sell their products to final customers directly. Highly effective marketing campaigns and advertising activities are required to retain customers.

Example: Unilever is the best example while being one of the world’s largest advertisers.

25. Family-owned business model

Any business that is run by a family, and its decision-making processes are controlled by two or more family members is a family-owned business.

The leadership of the company is passed to the heir, who will hand over the reins to their children.

Examples: Ford , Walmart , Estee Lauder , Prada , Comcast are few examples.

top 10 business model

26. Blockchain-based business models

The most advanced, futuristic, and modern technology of Blockchain has changed the entire landscape of transactions, involving decentralized network system on a global scale.

Using a decentralized network enhances trust and allows consumers to transact peer-to-peer. Blockchain-based businesses make a profit using tokens and offer Blockchain as a service .

Many crypto-currencies like Bitcoin , Ethereum , and Litecoin use Blockchain technology-based business model.

Blockchain-based business models

27. Vertically integrated supply chain business model

This model is about owning and managing the supply chain activities (manufacture, distribution, and retail) for its products by the company itself. When a company has better control over how a product is produced and delivered to end users, it can provide products at lower prices (with better margin) to consumers.

On the contrary, for example, if a company only manufactures a product, and uses a distribution and retail partner. Then at every step of the supply chain, the additional cost is added (markup) by the time the product reaches the end customer.

Examples : Think about companies having both factories and retail/online stores. Amazon , Tesla , Luxottica , Apple , Walmart , and other grocery stores.

Vertically integrated supply chain business model

28. Combination of chains and franchise business model

This model is simply a mix of operated chains and licensed stores (franchising). Starbucks is the most famous example that owns both company-operated stores and licensed stores. 

In Starbucks’ model, all 15,041 stores in the U.S. are company-owned, and all international stores are franchised.

Combination of chains and franchise business model

29. Data licensing business model

A business model of ‘data’ has gained a new meaning in this modern world, especially in the technology sector. Data is a critical component in web technology where companies require critical information to carry out operations and earn revenue.

Example: Twitter sells real-time data to its partners, which is then used for advertising and customer insight.

Data licensing business model

30. Attention merchant business model

Attention merchants or influencer operate through advertising model and make money by grabbing the attention of their target audience .

Apple CEO Tim Cook once wrote , “ When an online service is free, you are not the customer. You are the product. ”

Examples : Snapchat & Instagram allows brands to market themselves through advertising on their platform.

From YouTube to Tik Tok and other social media platforms, you can watch videos for free, but you will be targeted by endless adverts . 

top 10 business model

31. Discount with high-quality business model

This kind of business model is usually practiced by supermarkets and departmental stores that get products in bulk and sell on the wholesale rate.

Examples: discounted products with high quality like ALDI , Tesco , Lidl , Ross Stores , and ASDA Stores.

32. Pyramid Scheme Business model

  A pyramid scheme is a business model often considered illegal or controversial. The model functions on the sole principal of recruiting members by promising them a reward in the shape of payments or services if they agree to enroll others into the scheme, rather than supplying investments or sale of products.

As the recruiting circle grows with infinite speed, the actual recruitment becomes quickly impossible, which leaves member without any profit.

Example: Amway is a billion-dollar company which has used these pyramid schemes.

33. Nickel and Dime business Model

This business model consists of the lowest price strategy for the basic product or service. By keeping the basic price as low as possible, an additional amount is charged for the other perks and services that are offered with the main basic service.

Example: Spirit and Frontier Airlines are a budget airline that charges the lowest possible price for the flight tickets and charges fee over additional services like printed boarding pass fees, carry-on/ check-in luggage, seat preference, priority boarding, Wi-Fi, beverage, meal/snack, phone booking fees, etc.

top 10 business model

34. Aggregator Business Model

Aggregator Business Model is a network model which provides collective information about a particular service and sell them under their brand name.  Under this business model, most companies provide information and sources on a single industry.

Example: Companies like Zillow and Oyo for Hotels, Uber for taxi service, Yodlee for financial service, all use Aggregator business model. 

35. API licensing Business Model

API stands for application programming interface (API). It is basically a set of subroutine definitions, communication setups, and tools for developing software. API licensing business model provides licensing protocols which allow developers’ community to create third-party plugin/add-on apps for well-known platforms. And developers pay a fee to get API access.

Example: Microsoft , Apple , LinkedIn , and Twitter , they all provide API license services.

36. Crowd Source Business Model

Crowdsource business Model facilitates companies with access to operational solutions like ideas and technologies, upgraded consumer interaction, opportunities for co-collaboration, operation optimization, and reduced costs.

Example: Companies like Wikipedia , YouTube , Kickstarter , LEGO ideas , Unilever , Coca Cola (new flavor of beverage) are involved in crowdsourcing.

Crowd Source Business Model

37. High Touch Business Model

In the high-touch business model, customers’ interaction and involvement are on the highest level to make the experience personalized. It is a phenomenon in which a customer gets involved in a kind of partnership with the business. High touch is needed for larger accounts because they pay more and are sticky.

Example: Buying a car at Auto dealership, house, enterprise SaaS requires multiple interactions with the salesperson.

High Touch Business Model

38. Low Touch Business Model

Low touch business model is, of course, the opposite of high touch business model where the product or service is delivered by minimum customer interaction. Low touch is good for low price software tools where acquiring customers is easier.

Example: Companies like Amazon , Zendesk , SurveyMonkey uses low touch business model.

39. Flex Pricing Business Model

Flexible pricing model operates through a business strategy in the final price of an item is negotiable. In short, buyers and sellers can bargain the price to suit their purpose the best.

Example : Letgo

40. Auction-Based Business Models

The model is based on the biding option to buy a product or service. The model is although not very common now, it is still used for industries like antiques, real estate, collectibles, and the sales of businesses.

The modern version of the auction model can be witnessed on online platforms trade’s new and used items like eBay and Amazon

41. Reverse Auction Business Model

This business model follows a strict pattern of setting the highest prices and let the buyers bid accordingly until the prices start to drop.

A reverse auction is popularly used by businesses seeking suppliers. Eligible suppliers bid lower and lower at each subsequent round to entice the business and win the contract.

Example: Bidding for government contracts

42. Brokerage Business Model

Brokerage business model provides a single platform to buyers and sellers for communicating the deals. It charges a fee for any transaction between the parties either from the buyer or the seller depending on the featured category.

Example: Expedia , Century 21

43. Bundling Business Model

Bundling is a business strategy that combines products or services to offer a package gathered as a single combined unit to sell at a comparatively low price. It is the form of convenient purchasing for several products and services from a single business unit.

Example: Microsoft Office 365 (PowerPoint, Excel, Word, OneNote, Outlook) Value meal at Burger King or McDonald’s , Printer and ink

Bundling Business Model

44. Disintermediation Model

Disintermediation Model removes the capacity of outsourcing or a third-party intermediary. In fact, the organizations following this model deal with the clients and customers directly via different channel like the internet. 

Example: Dell , Tesla are good examples of companies which follows disintermediation model.

45. Fractionalization business model

Fractionalization model is selling a product or service for partial usage or separate parts. It’s a strategy which divides products and services into further subcategories to introduce variety in the products, charging for each category separately.

Example: You can sell a pizza by the box or individual slices of different varieties( cheese/ pepperoni)

Fractionalization business model

46. Pay as Go (Utility) Business Model

The business model charges as per the usage of the product or service.

In recent years, the Pay-As-You-Go model has been adopted by governments and organizations to distribute common goods like solar panels to rural communities , which they pay for gradually over a long period. 

Example: This model includes electricity, water, and cell phone companies and Amazon Web Services

Pay as Go (Utility) Business Model

47. Product as a service

Product as a service means to sell the service of a product rather than selling the actual product.

Example: Zipcar , Fedex Printing service follows the product as a service business model.

Product as a service

48. Standardization business model

Standardization means to make a service universal, which was once a customized one. This attracts customers due to convenience and low prices.

Example: MinuteClinics (a subsidiary of CVS health) is a good example of Standardization.

49. User Base Communities

User base communities earn by developing an interactive platform where users communicate on their own with each other and can advertise at the same time. The model generates revenue with both subscription and advertising fee.

Example: Craigslist , Angie’s list

50. Leasing business model

Leasing refers to renting large or high-profile items like machines and electronic equipment instead of them selling it. 

Example: Home Depot (Tool rental) MachineryLink , Hertz , Enterprise , etc. have adopted a similar business model.

In addition to the business models mentioned above, there are many others. While these are most commonly used by companies today, you need to wisely and smartly choose one or combination for your business.

Leasing business model

Tell us what you think? Did you find this article interesting?                                                     Share your thoughts and experiences in the comments section below.

top 10 business model

A management consultant and entrepreneur. S.K. Gupta understands how to create and implement business strategies. He is passionate about analyzing and writing about businesses.


Cancel reply.

Great.. Thank you so much!

Well presented in uniform format to make comparison easy. Clearly and succintly written

Very useful and informative, many thanks!

very informative and useful as it made it easier for me to decide what can be done next thank you very much

What are some good examples of number 22 – Enterprise business model?

Companies such as Boeing, Lockheed Martin (aircraft manufacturers), Goldman Sachs, BlackRock (investment firms) are good examples of the enterprise business model because their primary customers are large enterprises or governments.

Good example for the enterprise business model…

Life long learning

Very useful

Thank you !

Thank you for this summary of business models.

Glad you liked it Alex. Happy Reading !

I must admit that this is quite a wonderful compilation.

I found it very useful and well summarized.

Thank you for sharing the comprehensive list of 50 business models along with examples of companies implementing them. It’s a valuable resource for anyone seeking to better understand the diverse ways businesses can operate and succeed. In addition to the information you provided, I’d recommend checking out this article at https://www.cleveroad.com/blog/startup-business-model/ . It provides practical insights into selecting the most suitable business model for startups, which complements the list you shared and could guide entrepreneurs toward more informed decisions.

I am from South Sudan, if I want to implement one of online business which one will suit our situation here in the country, and that will generate income for me?

The Bussiness model which you mentiontioned is very useful an informative. Thank you.

Nilesh, glad you like it. Happy Reading 🙂

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Künstliche Intelligenz in Unternehmen: Innovative Anwendungen in 50 erfolgreichen Firmen

Der Bestsellerautor und Geschäfts renommierter KI-Experte Bernard zeigt, wie sterben Technologie des maschinellen Lernens das von Unternehmen verändert. Das Buch bietet einen Überblick über einzelne Unternehmen, beschreibt das spezifische Problem und erklärt, wie KI die Lösung erleichtert. Jede Fallstudie bietet einen umfassenden Einblick, der einige technische Details wichtige Lernzusammenfassungen enthält. Marrs Buch ist eine aufschlussreiche und informative Untersuchung der transformativen Kraft der Technologie in der Wirtschaft des 21. Jahrhunderts.

top 10 business model

Bernard Marr

Bernard Marr is a world-renowned futurist, influencer and thought leader in the fields of business and technology, with a passion for using technology for the good of humanity. He is a best-selling author of over 20 books, writes a regular column for Forbes and advises and coaches many of the world’s best-known organisations. He has a combined following of 4 million people across his social media channels and newsletters and was ranked by LinkedIn as one of the top 5 business influencers in the world.

Bernard’s latest books are ‘Future Skills’, ‘The Future Internet’, ‘Business Trends in Practice’ and ‘ Generative AI in Practice ’.

Generative AI Book Launch

Bernard Marr ist ein weltbekannter Futurist, Influencer und Vordenker in den Bereichen Wirtschaft und Technologie mit einer Leidenschaft für den Einsatz von Technologie zum Wohle der Menschheit. Er ist Bestsellerautor von 20 Büchern, schreibt eine regelmäßige Kolumne für Forbes und berät und coacht viele der weltweit bekanntesten Organisationen. Er hat über 2 Millionen Social-Media-Follower, 1 Million Newsletter-Abonnenten und wurde von LinkedIn als einer der Top-5-Business-Influencer der Welt und von Xing als Top Mind 2021 ausgezeichnet.

Bernards neueste Bücher sind ‘Künstliche Intelligenz im Unternehmen: Innovative Anwendungen in 50 Erfolgreichen Unternehmen’

The 9 Most Successful Business Models Of Today

2 July 2021

Times are changing so fast, particularly in the world of business. How businesses interact with their customers, how companies innovate, and even the very business models that organisations are built on – all are undergoing rapid change.

top 10 business model

Yet, from what I’ve seen, many businesses are failing to keep up, and far too many are operating on outdated business models.

If you’re leading a company – whether it’s small or large, a brand-new start-up or an established business – you’ll need to understand the latest business models and assess how they might apply to your company. That’s why I’ve picked some of the most successful business models for 2019 and beyond. Let’s take a look.

The servitisation (subscription) business

Instead of selling a product or a service as a one-off, servitisation companies operate on a subscription or ongoing service model, building a more intimate understanding of their customers in the process. As an example, let’s compare content creators Netflix and Disney. Disney produces a film, releases it in cinemas, and the film is either a hit or it’s not. They won’t necessarily understand exactly how many people watched it and how much those viewers liked it. Netflix, on the other hand, has an intensely close customer relationship, understanding exactly how many users have streameda movie or series, whether they gave up part-way through and watched something else, whether they then went on to watch more content starring the same actor, etc. Another example is Dollar Shave Club (grooming subscription company) versus Gillette (razor manufacturer with limited direct customer relationship).  

The platform-based business

This model is closely linked to the sharing economy and subscription models (see above– in fact, platforms are particularly powerful when combined with a subscription model). Well-known examples of platform businesses include Facebook, GitHub, Uber and Airbnb. As you can probably guess from these examples, platforms provide a mechanism or network – this could be a physical network, not necessarily online – for parties to interact with each other. Platforms deliver value for users by facilitating direct connections and exchanges between people (the more valuable the network is to the user, the more successful it is). In return, the platform gets incredible insight into its user communities.  

The social, authentic business

The traditional, corporate business model,with its hierarchies, silos and endless formal meetings is changing. These days, customers want to see the people behind the brand; they want to really “connect” with a business. Remember how companies and, more specifically, the people who work for them were discouraged from voicing personal view points or discussing the company outside of work? That’s now an outdated way of operating. Today’s authentic businesses share their opinions and stand up for their values. Typically,the CEO is active on social media and employees are actively encouraged to be brand ambassadors. And crucially, the brand itself has a lively and engaging social media presence, with a strong brand message that really connects with the target audience. Some of today’s most authentic brands include Adidas, Apple and Lego.

The employee-centric business

The way we work is changing. People are more nomadic in their work, and the days of a “job for life” are well and truly gone. To be successful, companies still need great people, but the way they go about attracting those people is changing.The “gig economy” has played a huge role in this transformation, since it gives businesses the means to create a fantastic team in lots of different ways – not just the traditional, full-time, permanent employee route. As such, businesses are increasingly happy for people to come and go, and to work for more than one company at a time. In this changing environment, it’s vital companies become employee centric. This means offering people an attractive place to work, flexibility, space to grow, and the means to develop their career.Google is a prime example of such a business.

The partner-centric business

As well as becoming more employee centric, companies are also becoming more partner centric. They are almost like networked businesses, outsourcing work, tapping into on-demand services, partnering with providers, and in sourcing expertise where necessary. They create attractive networks of partnerships – and are a valuable partner to others.Just look at the average small or mid-sized business these days and you’ll likely see an example of a networked, partner-centric business. They might, for instance, outsource their social media strategy to one firm, partner with a web design company, bring in a brand consultant, enlist external training providers, and so on. In today’s rapidly changing business world, larger companies have a lot to learn from this flexible, scalable model.

The customer value-obsessed business

For me, this model applies to absolutely every business because it’s all about solving customers’ problems,anticipating their needs,making people’s lives easier and removing any friction or hassle. Amazon is an obvious example of this. Online personal styling subscription service Stitch Fix is another great example. With Stitch Fix, users detail their size and style preferences by filling out a questionnaire (they can also link to their Pinterest account). Then, using artificial intelligence, the system pre-selects clothes that will fit and suit the customer, and a (human) personal stylist chooses the best options from that pre-selected list. And voila, the perfect clothes for you arrive at your door every month. No more shopping in crowded shopping centres, queueing for changing rooms, or ordering items online only to find they don’t fit.

The constant-innovation business

The ability to innovate is crucial to business success. But, today, the pace of innovation isn’t just fast, it’s constant. Some of the most successful businesses in the world are constantly innovating and transforming, even if it means cannibalising their own products and services to create something new. Take Apple’s iPod, for example. By introducing smart phones that could hold your music, the company effectively killed off the need for a separate device. Sure, some people still love their iPod. But even die-hard iPod lovers won’t be surprised to learn that iPod sales have been in decline since 2008 – which, funnily enough, was the year after the iPhone was introduced. 

The data-driven business

Smart organisations recognise that data is one of their critical business assets.  Really  smart organisations encourage a data culture, where the importance of data is recognised at every level of the business, and decisions across the company are based on data, not assumptions. The data-driven business has measures in place to understand exactly what’s happening now, and uses that information to make better decisions, refine operations and even create new revenue streams. Companies who really value data are well placed to experiment and innovate at a faster pace, which ties in with the previous business model.

The tech-savvy business

We live in a time of break-neck technological innovation. AI,big data, blockchain, 3D printing,augmented reality and virtual reality are just some of the massive changes that are taking place right now.So it’s no surprise that many of the most successful companies on the planet are tech businesses. Apple, Alphabet (Google’s parent company), Microsoft, Amazon and Facebook are, at the time of writing, among the six most valuable companies in the world; the only non-tech company in the top six is Warren Buffet’s Berkshire Hathaway. Regardless of your sector and company size, it’s vital your organisation embraces technology. If you don’t, you risk being left behind.

Many of today’s most successful businesses have managed to combine a number, if not all, of these business models to catapult their companies to stellar success.Over the years, I’ve helped companies big and small reshape their businesses and create more successful business models.So,if you’d like help with your business model transformation, get in touch . 

Where to go from here

I hope you’ve enjoyed my list of successful business models. If you would like to know more, check out my related articles:

  • How to Build a Platform Strategy for Your Business
  • Why Every Company Needs A Plan-On-A-Page
  • How To Develop Your AI (Artificial Intelligence) Strategy – With Handy Template

Business Trends In Practice | Bernard Marr

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Bernard Marr is a world-renowned futurist, influencer and thought leader in the fields of business and technology, with a passion for using technology for the good of humanity.

He is a best-selling author of over 20 books, writes a regular column for Forbes and advises and coaches many of the world’s best-known organisations.

He has a combined following of 4 million people across his social media channels and newsletters and was ranked by LinkedIn as one of the top 5 business influencers in the world.

Bernard’s latest book is ‘ Generative AI in Practice ’.

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21 Different Types of Business Models With Examples

Different Types of Business Models

Having a solid, well-thought-out business model is essential for both new and established companies. These models work to attract new customers and anticipate any upcoming trends or unseen challenges. It also can allow the company to differentiate itself from competitors. Potential investors use business models to quickly and effectively analyze a company’s plans and flesh out information such as how they plan to generate income. Even if you are a small business with no plans of taking on investment, knowing and understanding your business model is crucial to your success.

There are many different types of business models to choose from. It can become overwhelming to decide which model would work best for a company’s individual needs and preferences. This article will analyze and define 21 of the top business models currently used to better understand what each type offers your company.

What is a Business Model?

Through the years, the term business model has had several different definitions. But essentially, a business model is simply an outline of how a company plans to make money with its product or service . Peter Drucker defined the term as “assumptions about what a company gets paid for”. A t their core, they all work to identify revenue sources, the customer base for their products and services, and the expenses the company anticipates to allocate to marketing these products and services.

Understanding your business model is important for many reasons. One of those reasons is that when you understand your business model, you are also closer to answering many other important questions about your business. When your business model is clear you get a better idea of who your customers are. And once you understand that, you also can answer the question “how does our business model add value to our customer”.

Not knowing, understanding, and choosing the right business model can be detrimental to your business. Later in the article, we explain how choosing the wrong business model is costing one company hundreds of millions of dollars. But for now, all you need to know that if your business model does not match up well with your product and what the market demands, you may soon see your profits dwindle as competition increases.

 If you are not sure if you have the right business model for your business, or if your current business model is running out of gas, read our list of 21 business models to see if there is another, better, solution for you.

21 Types of Business Models

1. freemium business model.

Freemium is a combination of the words free and premium. Companies following the freemium business model offer the most basic version of their product or service for free to entice consumers to purchase the more advanced features, capabilities, or add-ons of the product or service in the future. The freemium business model works for new companies by cultivating strong relationships with customers. It also works best for internet-based service companies.

Freemium business model examples:

2. subscription-based model.

top 10 business model

Image by mjimages from Pixabay

The subscription-based model allows companies to charge consumers monthly or yearly subscription fees to access their product or service. This model depends on these consumers continuing to love and utilize the service. To keep consumers satisfied and paying monthly subscription fees, companies need to continually improve their products or services to keep up with changing trends or competitors. The subscription-based model is popular with streaming services like Hulu, Netflix, and Spotify. It is also popular among monthly subscription boxes for beauty and fashion such as Ipsy or FabFitFun. The ideal profit margin varies depending on the type of subscription.

Physical subscription based businesses should aim for 30%-40% profit margins. Streaming services do not directly report profit margins but the figures can somewhat be figured out by the average revenue per user. Although it may be hard to find those numbers for all services, most services only make between $4-$10 revenue per user.

Subscription-based model examples

  • Streaming services
  • Dollar Shave Club
  • XBox Game Pass

3. Peer-to-Peer Business Model

Peer-to-peer business mode

Image by postcardtrip

In a peer-to-peer business model, a company acts as the go-between businesses and the customers interested in purchasing their products or services. The companies using this model provide the platforms, navigate the regulations, and set pricing for the products or services. A well-known example of this business model would be ride-sharing services such as Lyft and Uber. These platforms allow people to receive rides to and from requested destinations by those who apply to be drivers for the service.

Peer-to-peer business model examples

4. franchise model.

top 10 business model

Sometimes the franchise model is referred to as a hybrid model. It provides a sense of working for oneself with the added security of having a company’s backing with familiar trademarks and products. There is a legal and commercial relationship between the franchisor, the parent company owner (usually a corporation), and the franchisee. The franchisee (or business owner) is allowed to sell the franchisor’s products or services in exchange for paying a royalty fee. Both parties sign contracts to clarify the specifics, spelling out each side’s role in the business relationship.

Franchise model examples

  • Merry Maids Residential Cleaning

5. Direct Sales Business Model

In the direct sales model, a company’s employees will be the ones who demonstrate and sell the products or services being offered directly to the intended consumers. This effectively eliminates steps within the distribution process, such as wholesalers and the regional distribution centers. Direct sales is a great way to build strong, lasting customer relationships. One common direct selling types is single-level marketing (SLM). This is when a salesperson is compensated for their sales. Another second type is called multilevel marketing (MLM). This model is when a person is compensated for sales made by salespersons recruited by them and under their authority.

Direct sales business model examples:

  • Stella & Dot

6. Affiliate Marketing Business Model

People using the affiliate marketing business model promote and sell products from other companies online to get paid a percentage of the sales they make. This business model is common with “influencers” on Instagram or other leading social media apps. They will post about a company’s product to entice their followers to buy it through them. Many of their followers will buy the product through the supplied link. It is a win-win situation for both the influencer marketing the product and the company selling it. Affiliate business models are also popular among bloggers and online publishers.

There are 4 primary ways an affiliate can earn money from an affiliate program.

  • Pay Per Sale (PPS) – Affiliate earns a commission when a sale is made.
  • Pay Per Click (PPC) – Affiliate earns a commission whenever an affiliate link is clicked.
  • Pay Per Impression (PPI) – Affiliate earns a commission when a visitor lands on the merchant’s site.
  • Pay Per Lead (PPL) – Affiliate earns a commission when someone clicks on affiliate link and then takes an action such signing up for a free trial or completing a form.

Affiliate marketing business model examples:

  • Amazon Affiliates
  • Commission Junction (CJ Affiliate)

7. E-Commerce Business Model


Photo by PhotoMIX Company

Electronic commerce, or “e-commerce,” is a business model in which companies and individuals buy and sell products and services online. Because the business is entirely online, the products and services offered are nearly limitless. An e-commerce business offers companies the extra convenience of not needing a physical store. This increases the selection of products available to consumers. A business might combine the e-commerce model with the drop-shipping model.

Types of E-commerce business models

  • B2B: Business to Business Ecommerce- The B2B model focuses on providing products from one business to another.
  • B2c: Business to Consumer Ecommerce- B2C model focuses on businesses providing products to the consumer base
  • C2C: Consumer to Consumer Ecommerce- C2C model focuses on consumers selling directly to other consumers. Sites like eBay and Craigslist are examples of C2C companies.
  • C2B: Consumer to Business Ecommerce- This model is when a consumer sells products or services to businesses. Those in this line of work will often times be freelancers and sole proprietors.

8. Drop-Shipping Business Model

Companies using the drop-shipping business model sell various products on their websites, but supplying and shipping these products is done by a third-party wholesaler. The significant upside to this business model is that you do not need to pay for or maintain inventory for any of the products you sell. It can be costly to store, package, and mail out orders. In the drop-shipping model, a third party (which is typically the wholesaler) will handle the logistics of shipping and making sure the customers receive the products they ordered. The individual who marketed the products gets a percentage of the sales.

9. Vertically Integrated Business Model

The vertically integrated supply chain business model is when the company controls both supply and distribution.   The company controls all costs of production, inventory stocked, marketing, and pricing. Because the company has complete control of the product from start to finish, it can decrease transportation costs and improve sales and profitability.

Vertically integrated business model examples

10. consulting business model.

top 10 business model

There are two parts to the consulting business model. First, hiring experts or developing a list of freelancing consultants, and second, charging a fee to provide access to these experts by your clients. Typically, your experts will provide a service that speaks to the consumer’s needs. Hopefully, the customer will return to you as further needs arise. Common examples of this could be online tutoring, mentoring, and freelance work in several different fields.

11. Ad-Supported Business Model

Advertising is a significant component in why some companies are incredibly profitable and why some will financially fail. Failure to advertise a product or service can lead to people not even knowing a company exists. The ad-supported business model emphasizes the importance of advertising and the sales generated from it. Popular platforms to advertise products or services include print media, online media, and television.

Ad-supported business model examples

12. enterprise business model.

In the enterprise business model, specific aspects of a business are modeled, such as infrastructures and asset groups. The company leaders will see what needs to be altered within the business to maximize profits. The enterprise model is more about evaluating how the business is functioning than it is about the overall structure of the business.

13. Lock-In Business Model or Lock-In Strategy

The lock-in business model takes customer loyalty and kicks it up a notch. This is done by essentially locking customers into a company’s product or service by making it difficult to abandon the company without dealing with negative consequences. Some of these consequences include increased costs or making it difficult to switch. For example, Apple compels customers to stick with them by making it extremely simple to sync every Apple product. But, also make it challenging to use their products alongside competitors. For example, the Apple watch is nearly impossible to use with an Android phone. A lock-in business model ideally leads to customers sticking with one company for the long haul.

Lock-in examples:

  • Apple utilizes this strategy
  • Some major banks utilize this strategy as well
  • Microsoft Office Suite

14. Multi-Brand Business Mod el

top 10 business model

Old Spice has done a brilliant job marketing their multi-brand business with clever and hilarious advertisements.

With the multi-brand business model, a parent company will offer similar products with different brand names to increase their market share. By doing this, the company effectively reduces any potential competition. A company with many similar products at different price points will appeal to a significant number of customers.

Multi-brand companies examples:

  • Procter & Gamble

15. Razor and Blade Model

The razor and blade model works by selling products or services to consumers at a lower price. Then later selling a related product or service to the consumer for increased profits. The name razor and blade comes from King Gillette. Gillette effectively worked to overtake the men’s razor market by offering a sturdy and reliable razor that required the use of blades only sold by Gillette. As a result, the company cornered the market on razors for a time and is still dominate today.

Examples of razor and blade business model:

  • Playstation
  • Computer printer manufactures

16. Distribution Based Business Model

The distribution-based business model facilitates the distribution of products or services offered from the manufacturers to the consumers. With this model, the business ensures that the mode of distribution chosen to get the product or service to the consumer is the most direct, and more importantly, the most cost-efficient manner possible. No one distribution method is universal for all companies. The chosen methods depend on such factors as your product’s perishability, target market, and geographic area covered by your company.

17. Direct-to-Consumers Business Model

top 10 business model

With the direct-to-consumer business model, consumers buy products or services directly from a company’s website, eliminating the middle-man. The model not only saves the company money but can be convenient for the customer as well. Consumers would have to physically visit a store to purchase the product they desire but know they can order the product directly from the company or manufacturer. There is no longer a need for a brick-and-mortar store, saving the company money. The company tends to have greater control over their branding and stronger relationships with their customers with this model, leading them to buy from the company again.

In recent years, however, the DTC model has struggled to scale on its own for many larger companies. One of the pioneer companies in this type of business model was the DTC mattress company Casper. This company was once seen as a unicorn startup a decade ago but has seen its market share and valuation plummet. The company’s IPO attempt in 2020 was nothing short of a disaster. At one point, Casper was valued at more than $1 billion. But, at the time of its regulatory filing, it had cut its IPO target share price to $12 to $13 from $17 to $19. That valued the company at around $500 million. A lawsuit was even filed accusing Casper of misleading investors into pouring $100 million into its IPO, knowing its financial prospects were far dimmer than it promised.

Examples of direct-to-customers business model:

  • Apple Store
  • Warby Parker
  • Casper Mattresses

18. Low-Touch Business Model

Some customers want the least amount of interaction with the company possible. Businesses that want to meet that need should adopt a low-touch business model. Products sold using this model can be consumed or used with little interference from salespersons or customer service. Due to the pandemic of 2020, many businesses learned to adapt to the threat. These businesses adopted low-touch strategies to help keep their doors open. For example, more take out restaurants began using kiosks for ordering instead of placing an order with a human team member. 

Other sectors such as hotels began using virtual check-ins through apps. This limited contact with other guests in the hotel lobby as well as employees of the hotel. As we return to normal, it is believed that many of these businesses will retain their low-touch option and many other businesses will begin using this practice also.

Low-touch business model examples:

  • Wal-mart Online
  • e-commerce sites

19. Fractionalization Business Model

In this model, companies will sell partial usage of their product or service to consumers, such as offering a timeshare deal for a condominium in a desirable location. Consumers will receive full benefits of the timeshare when they are there, but they can only be there for a pre-determined time each year.

20. Pay-As-You-Go Model

top 10 business model

Photo credit: Mike Motzart

As the name suggests, consumers will pay for the service or product as they use it.  Meaning there is no recurring bill or subscription necessary. This model should entice those who do not like to be tied down. If the product or service is of high quality and worth the price paid, they will continue using it.

Pay-as-you-go model examples:

  •  Cell phone carriers
  • Power companies
  • Internet service providers

21.User-Generated Content Business Model

User-generated content business is a type of content distribution platform where the users create the content. Social media platforms and sites like Youtube and Quora are successful due to the content that is nearly 100% user-generated. This model eliminates the need to create content as a primary way to engage visitors. This is another type of business model that is often combined with the advertising model. But unlike traditional content distribution platforms like CNN and Fox News, UGC sites typically adopt the personality of their users.

User-generated content business model:

  • Online forums

In conclusion, the different types of business models mentioned will appeal to a wide range of companies’ needs and preferences, including highly niched marketed ones. When picking a company’s business model, it is vital to consider what would be appropriate for the company as a whole and the intended consumer. Which model will entice the target market to buy (and continue to buy) from the company? Using the right business model will maximize profits and provide clear, practical ideas to sustain profitability for years to come. 

Additional photo credits: Under CC

Thomas Martin

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Tom is a member of the Editorial Team at StartUp Mindset. He has over 6 years of experience with writing on business, entrepreneurship, and other topics. He mainly focuses on online businesses, digital publishing, marketing and eCommerce startups.

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10 Business Models That Will Inspire You

Innovative business models are changing the world as we know it. We know their secret sauce. Check out these ten companies and their business models to get inspired for your own business ideas.

WhatAVenture team during a workshop.

Innovative business models are changing the world as we know it. Airbnb is the biggest accommodation provider worldwide without owning a single room, Uber is the biggest cab company without owning a single cab and Alibaba is the biggest retailer with no stock at all.

All of them have come up with new business models to deliver, create, and capture value and many others do follow. We know their secret sauce. Check out these 10 companies and their business models to get inspired for your own business ideas.

FREE DOWNLOAD: Download our business model cards and discover 29 important business model strategies that can help you adjust to the current reality. >>

Airbnb is an online marketplace that enables people to list, find, and rent accommodations (single rooms, apartments, houses, …) for a processing fee.

Secret Sauce : The biggest accommodation provider in the world does not own a single room. Airbnb does not rent the accommodation from the host but conveys only between supply and demand. Their business model builds on the sharing economy and on the strong belief that house owners are willing to rent out free space to strangers.

top 10 business model

Alibaba Group is the largest (online) retail company in the world.

Secret Sauce : Alibaba Group has no inventory. Long-tail competitors like Amazon buy merchandise and sell these to their customers by using their own infrastructure. Alibaba`s main focus is to connect buyers with sellers. Momentarily, it mainly relies on bringing together Chinese sellers with buyers around the world. The value of Alibaba lies in the software interface, not in the products.

top 10 business model

Hilti is a Liechtenstein multinational company that develops, manufactures, and markets products for construction, maintenance, and mining industries, primarily to the professional end-user.

Secret Sauce: Hilti has disrupted the market by shifting from a purchase to a transaction/rental based business model. They realized that their customers’ need is not to own a reliable tool rather than having the right tool at the right time. They are handling the maintenance of the tools and their customers simply rent their tools whenever they need it. Thus, their customers don’t have to have every single tool they would possibly need in their stock.

top 10 business model

IKEA is not only our first source of candles and a reason for a quarrel on a Saturday afternoon. It’s also a group of companies that designs and sells ready-to-assemble furniture appliances and home accessories.

Secret Sauce : Its business model includes global sourcing of components, accessible suburban stores, quality products with sophisticated European design at low cost, and in-store amenities, such as coffee shops, restaurants, and day-care facilities.

top 10 business model

Tesla Motors, Inc. is an American automotive and energy storage company that designs, manufactures, and sells electric cars, electric vehicle powertrain components, and battery products. It aims to accelerate the advent of sustainable transport by bringing compelling mass-market electric cars to the market.

Secret Sauce : By offering a wide range of high-quality services Tesla makes the use of an electric car easy and uncomplicated. This positive experience leads to the fact that 9 out of 10 customers would recommend their Tesla car. In order to enhance further growth, Tesla invests heavily in their infrastructure.

top 10 business model

6. Wikipedia

Wikipedia is a free Internet encyclopedia that helps to improve common knowledge. It allows its users to edit almost any article accessible. It is the largest and most popular general reference work on the Internet and is ranked among the ten most popular websites.

Secret Sauce : The company is able to motivate a large community to participate in the project without offering financial benefits. With the contribution of the online community, Wikipedia ensures the quality of the articles.

top 10 business model

Zara is a Spanish clothing and accessories retailer. It is one of the world’s largest international fashion companies.

Secret Sauce : Zara produces where it sells. It utilizes a very tight supply chain from initial design through to final production. This allows the company to adapt to new fashion trends and ideas within two weeks. As a result, short lead times for new products and fast replenishes of sold-out merchandise, are being made possible.

top 10 business model

8. Local Motors

Local Motors is an American motor vehicle manufacturing company focused on low-volume manufacturing of open-source motor vehicle designs using multiple micro-factories.

Secret Sauce : Local motors searches for new and forward-looking problems of whole industries and solves them in a much faster way and with lower development costs than traditional companies with the contribution of a large online community.

top 10 business model

9. Easybank

Easy Bank is the second-largest direct bank in Austria.

Secret Sauce : Easy Bank offers a wide range of financial products via online banking and without a branch network. By keeping the infrastructure costs to a minimum, the bank is able to offer services without transaction and account fees.

top 10 business model

10. Red Bulletin

is a lifestyle magazine that features breathtaking sports, culture, music, nightlife, entrepreneurship and lifestyle stories. The focus of the magazine is to press further ahead with establishing the Red Bull brand around the world.

Secret Sauce : Red Bulletin creates revenue through the subscription fees before the costs of the production of the magazine occur. Besides, of that the magazine creates further value by advertising Red Bull activities.

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How to design good business models

All of these companies have realized their customer needs and are putting their pains in the center of their focus. It’s key to have a good knowledge of your customers to build a successful business.

A genius business model can change your business works and even determine whether your business is successful or not. Try to think out of the box. What other ways are there to deliver value to your customers. A subscription model instead of just selling goods? The sky is the limit. Stay open-minded and don’t stick to the status quo. Our Innovation Platform helps you to come up with a good business model and lets you play around with various scenarios.

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29 business model strategies to inspire you

Uncertain situations require more strategic thinking and choosing the right business model can be a game-changer. To get you inspired, we put together a list of 29 business models, with examples of successful companies from all industries using them.

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10 Proven Business Models for Startups To Try In 2023

Mar 7, 2022 8 min read

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Robert Krajewski

Co-founder and CEO of Ideamotive. Entrepreneur, mentor and startup advisor.

Business Models To Try In 2023

The co-founder of 500Startups David McClure defined a ‘startup’ as a company that is confused about:

  • What its product is
  • Who its customers are
  • How to make money

No matter how great the idea is, any startup needs to develop a powerful development strategy for its long-term success. As we know, different types of startups have different needs, objectives, and approaches, and the specific business models should ideally meet these criteria, as well as the industry it’ll operate in, and help companies to make a profit.

In other words, a business model is an effective outline of how a business plans to make money with its products or services and the customer base in a specific market. Overall, it is focused on the company’s products or services, their expected performance on the market, the possible marketing expenses, and how the company expects to turn a profit. 

Unlike the revenue model, which explains the structure of how the revenue or income is generated, the business model makes a model-like, holistic description of the basic insights of how the company can generate value for its clients. Thus, it encompasses all the business aspects, including the revenue model and revenue streams, yet explains how they can effectively work together.

After all, Warren Buffet, the Berkshire Hathaway Chairman said: Price is what you pay. Value is what you get.

Creating effective business models for startups is essential not only for building up a powerful long-term development strategy, but also to prove to your potential investors that the specific startup will work, reasonably assess the risks and provide them with all the essential information regarding the project. With a wide range of approaches introduced so far, in this article, we’ll provide a detailed analysis of the different business models for startups, introduce the famous companies that succeed with each of the strategies, and finally, explain what benefits you will get once you implement the right business model in your business project. 

The Most Popular Business Models for Startups for 2023

At present, there are dozens of different business models for startups that are successfully used by small enterprises and large corporations. However, having more options does not necessarily help us make better choices. The selected development strategy can either result in great success or else end up with the project failure. 

That is why it’s essential to learn more about each of the startup business models types: the major advantages and outstanding case studies to be able to select the business model that meets your needs.

Let’s now find out the top 10 most popular yet efficient business models that have already been implemented by such businesses as Amazon, Walmart, Uber, Airbnb, and many others!

Short description, how it works, why it works, pros & cons, real-life examples of each model

#1 Marketplace Model

The marketplace model is a popular model that enables your business to work as an intermediary for sellers and buyers, operate the transactions and deliver a variety of add-on services that might be useful for your clients. One of the most famous startups which succeed using the marketplace business model implemented is Amazon – the leading online retailer, that accounted for 41% of the entire e-commerce retail market in the US. 

Advantages of the Marketplace model for startups include: 

  • More effective customer acquisition and easier enlarging of the customer base
  • No need to store the inventory – all the products are shipped by sellers
  • Doesn’t require any overhead costs, since the marketplaces will only take a small percentage of each transaction

However, what you should really pay attention to when choosing this business model is that you’ll need to find out the key reason why people should search for your marketplace specifically. The reputable business analysts warn that it’s no use creating a similar service to Amazon, as it’ll take years to gain competitiveness for your startup. Instead, you can focus on a smaller and more specific marketplace first, and reach out to the exact audience that’ll want to convert into your loyal clients. 

10 Proven Business Models for Startups To Try In 2022 - marketplace model

#2 On-Demand Model

The on-demand business model implies providing your customers with the specific services they can obtain anytime they need them. One of the most prominent examples of this model is a California-based Uber company, which generated $18.3 billion of revenue only in 2021 and so far has nearly 120 million users across the world.

Having analyzed the business models of successful companies, it becomes clear that this one works not for pickup services only: you can now order food, groceries, and other goods using your mobile app – that concept became extremely popular in 2020 and is now only in the first stages of evolving. 

Advantages of the On-Demand model for startups include:

  • The ability to provide different services within a single app (however, keep in mind that you’ll need to invest significant costs into the digital product development , hire top-notch UX/UI designers and app developers with prominent skills in working with Ruby on Rails and React frameworks)
  • Is mostly focused on younger generations
  • Allows using freelance labor

10 Proven Business Models for Startups To Try In 2022 - on-demand model

#3 Disintermediation Model

One of the most common yet successful business models that are actively used today is disintermediation – the strategy which is applied by hundreds of thousands of wholesalers, manufacturers, and businesses with direct sales processes. The most notable business model example you’ve surely been aware of is Apple, a giant mobile vendor with the world’s largest market share. For the last year, the company’s showing 29.49% of all the devices, according to GlobalStats data, which makes it one of the most outstanding examples of a successful business model performance, business strategists claimed. 

Taken from: https://gs.statcounter.com/vendor-market-share/mobile  

With this approach, the companies are able to reduce the intermediaries that impact the total product costs – an ideal solution for startups that are ready to produce and distribute their products. However, do consider hiring a well-qualified CTO for a startup to ensure your business model is producing first-class products that stand out from the competition from others within a certain field. For instance, if you’re planning to make a startup based on software product development, you’ll surely want to hire the best developers that use the latest development tools such as React Native or Ruby on Rails to design competitive apps for your business. 

Advantages of the Disintermediation model for startups include: 

  • The lower product or service prices for the end-users
  • Providing simpler, better access to the goods and services
  • The ability to test various manufacturing scenarios to gain better competitive advantages for a business
  • Increasing the profit margins for the company

10 Proven Business Models for Startups To Try In 2023 - Disintermediation model

#4 Subscription Model

If we start listing the businesses that are using a subscription model, we’re more than sure you’ll realize that you have been already involved in it as a consumer at least once in your life. Netflix, Spotify, YouTube Premium, or Apple TV – all these are companies based on a subscription principle: they’re selling a service via a subscription (usually, monthly or yearly) as opposed to one-off products. The core feature that makes it stand out from other business models for startups is that it obtains stable cash flows that are recurrent. 

Advantages of the Subscription model for startups include:

  • Targeting the large customer pools that are searching for the convenient services
  • Locking customers in for a long duration
  • Steady, recurring revenue stream
  • More opportunities for improving the quality of products and services (for example, you can hire the best specialists with the use of a nearshore software development strategy)

10 Proven Business Models for Startups To Try In 2023 - Subscription model

#5 Freemium Model

This approach is another great chance to succeed with a startup focused on service distribution, as it allows combining free and premium services within a single product. How does it work? Simply put, a business gives away specific services (for instance, music streaming) to a consumer for free to establish the foundation for future transactions. When the free list of services helps your business to reach large audiences, introduce the basic features of your services and why it’s better compared to others, the paid functions will open up complete access to the top-notch components and perks compared to a free service, offering much better user experience (as an example, offline music and ad-free listening to it).

It’s more than likely that you have at least some real-life examples in your mind, like Spotify – the free cross-platform music streaming service that features different subscription plans for nearly any type of persona, offering offline listening and lots of personalized music recommendations. 

Advantages of the Freemium model for startups include: 

  • The ability to access a large audience and different types of persona buyers
  • Balanced versions of free and premium plans
  • A compelling list of features to attract customer’s attention and appealing functions to encourage them to an upgrade

10 Proven Business Models for Startups To Try In 2022 - Freemium model

#6 Virtual Good Model

Originated over 15 years ago, this business model is now being reconsidered with a completely new meaning. Simply put, the virtual goods model is the approach that is commonly used for video game development and provides customers with the ability to purchase virtual goods that can only exist online (usually, within the app it’s purchased for). Today, this concept has a huge potential for being implemented in other businesses as well, such as for instance, NFT games and Metaverse development. 

By the way, the last one has already announced the first cases of purchasing virtual real estate using the largest third-party marketplaces like OpenSea and Non-Fungible.com. Due to the fact that this field has only started to develop, it’s never been a better chance to successfully launch a startup that goes viral. 

Advantages of the Virtual Good model for startups include:

  • Offering a first-class gaming experience with the in-app purchase options
  • Enhancing the user experience and engagement
  • Virtual goods are unique, context-bound items that feature individual ownership, which adds to their exclusivity

10 Proven Business Models for Startups To Try In 2023 - Virtual Good model

#7 Reseller (Magic) Model

Similar to a marketplace model, this approach enables startups to promote and sell the products which are produced and manufactured by another company or individual. If compared to the marketplace, the reseller model delegates all the marketing efforts to the startup, encouraging them to be more proactive in the market. This model commonly implies delivering the product by the company (or individual) that has listed the item for sale, which helps resellers to avoid the common inventory problems, and delivery chores as well. Finally, the “magic” model allows you to reduce the HR and labor expenses, which is another important advantage for startups with a limited budget. 

Advantages of the Reseller model for startups include:

  • No inventory issues reduced costs for HR
  • Product delivery is usually delivered by the enterprise that listed item for sale
  • The proven method of obtaining a profit

10 Proven Business Models for Startups To Try In 2022 - Reseller model

#8 Hook & Bait Model

Also known as “razor and blade”, “product and service” or the “tied products” model utilizes the approach, in which selling the basic products at a cheap price to make a profit by selling the complementary products or refills for a higher price or else increasing the sales of the profitable complementary products. This business approach is often associated with Gillette – the inventor of disposable razors, the company inspired competitors to develop the bait and hook idea based on this concept. 

Advantages of the Hook & Bait model for startups include:

  • Suitable for customers, profitable for companies: you can’t use one of the supplies only – the “blade” must be locked to the “razor” similar to the coffee capsules, that can’t be used without the coffee machine
  • Enhanced client loyalty – you’ll either need to create a loyal community or prevent other companies from entering your market field
  • Better adaptability to the market and target audience needs

10 Proven Business Models for Startups To Try In 2023 - Hook and Bait model

#9 Reverse Auction Model

Among the other business marketing strategies for startups used nowadays, you can also try a reverse auction approach – the strategy used in sourcing between buyers and suppliers, where they compete with one another to win the business of the buyer and sell one or more products/services he markets. After that, the buyer learns the bids and selects one or more suppliers for his business. 

Advantages of the Reverse Auction model for startups include:

  • Significant time savings and better ability to meet the deadlines
  • Lower purchase costs through increased competition
  • Enhanced compliance and data security provided by reverse auction providers

Companies that successfully use this model: Construction companies, real estate companies , and some public sector companies (in case they’re in search of a contract). 

#10 Modernized Direct Sales Model

The direct sales business model implies a business’ own employees demonstrate and sell their products or services directly to the end consumer. This model is opposite to the retail marketing approach, where a business sells products in large volumes to distributors and stores instead of the end buyers. The direct sales approach allows for cutting some middlemen and provides much higher margins from a more direct, more personal interaction with consumers. 

Advantages of the Modernized Direct Sales model for startups include:

  • Closer connection with a customer through a shorter distribution chain
  • More effective marketing strategies and enhanced marketing messages
  • Advanced control of the prices and better distribution supervision 

10 Proven Business Models for Startups To Try In 2023 - Modernized Direct Sales Model

These are the most effective business models you can easily use for nearly any startup regardless of its field. Now that you have all the essential insights about the best strategies to use for your company’s development, we hope that there are some really good options that can ideally fit your company’s needs and objectives. 

However, if you still need any help or want to get a second opinion before making your final choice – feel free to contact our team ! Our best funding consultants and qualified startup experts are 24/7 here to help you make the best decisions that empower your business from day one! 

Robert is a co-founder of Ideamotive. Entrepreneur, who with passion spreads digital revolution all around the internet. Mentor and advisor at startup accelerators. Loves to learn and discover new business models.

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Take a Look at These 10 Business Models Which Have Been Successfully Implemented by Top Firms

Jan 14, 2024

Top 10 business models that every major company uses

In today's business landscape, selecting the right business model is pivotal for a company's success, surpassing even groundbreaking products. Business model innovation not only adds value for customers but also boosts operational efficiency and reve...

1. Subscription service

Subscription models, epitomized by industry behemoths such as Netflix and Amazon Prime, operate on the premise of customers paying recurring fees for uninterrupted access to a service. This business model not only ensures a constant influx of revenue but also ...

2. Freemium

The freemium model has been adeptly employed by industry leaders like MailChimp and LinkedIn, and operates on a dual-service structure, blending free and paid offerings to convince users to upgrade. This approach serves multiple strategic purposes for business...

3. Affiliate marketing

Affiliate marketing operates on a commission-based collaboration, wherein businesses promote products or services from other companies, earning a commission for each successful sale. Renowned for its low-cost and low-risk attributes, this model has found favor...

4. Franchise

Pioneered by industry giants like Domino's Pizza and McDonald's, the franchise model is a strategic approach wherein a company licenses individuals to operate its established business under its brand. By granting entrepreneurs the right to replicate ...

5. Direct sales

Direct sales represent a business model wherein products or services are sold directly to consumers, sidestepping traditional retail channels. Industry leaders such as Amway and Starbucks have harnessed the direct sales strategy, reaping the benefits of forgin...

6. Peer-to-Peer (P2P)

Peer-to-Peer (P2P) models embraced by Uber, Airbnb, eBay, and Upwork, act as a conduit, linking buyers and sellers directly through an intermediary platform, effectively circumventing the necessity for traditional production, labor, and shipping expenses. By e...

7. Razor and blade

The razor and blade model is a strategic approach where a company sells a core product at a lower initial cost, to drive subsequent sales of complementary, higher-priced items. A quintessential illustration of this model is found in Amazon's Kindle ecosys...

8. Consulting

Consulting models strategically deploy subject-matter experts to offer specialized advice to clients, positioning businesses as authoritative and trustworthy sources in their respective industries. This model is exemplified by industry leaders such as Deloitte...

9. Hidden revenue

The hidden revenue model is a strategic approach adopted by companies offering free services while generating income through alternative streams, most notably through advertisements. Two prominent exemplars of this strategy are Google and Meta or Facebook, whi...

10. Open source

The open-source model is a strategic framework wherein companies offer free products or services while generating revenue from support and supplementary offerings. This model has proven successful for entities like MongoDB, Wikipedia, and Mozilla. These organi...

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What Is a Business Model?

Understanding business models, evaluating successful business models, how to create a business model.

  • Business Model FAQs

The Bottom Line

Learn to understand a company's profit-making plan

top 10 business model

Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

top 10 business model

The term business model refers to a company's plan for making a profit . It identifies the products or services the business plans to sell, its identified target market , and any anticipated expenses . Business models are important for both new and established businesses. They help new, developing companies attract investment, recruit talent, and motivate management and staff.

Established businesses should regularly update their business model or they'll fail to anticipate trends and challenges ahead. Business models also help investors evaluate companies that interest them and employees understand the future of a company they may aspire to join.

Key Takeaways

  • A business model is a company's core strategy for profitably doing business.
  • Models generally include information like products or services the business plans to sell, target markets, and any anticipated expenses.
  • There are dozens of types of business models including retailers, manufacturers, fee-for-service, or freemium providers.
  • The two levers of a business model are pricing and costs.
  • When evaluating a business model as an investor, consider whether the product being offered matches a true need in the market.

Investopedia / Laura Porter

A business model is a high-level plan for profitably operating a business in a specific marketplace. A primary component of the business model is the value proposition . This is a description of the goods or services that a company offers and why they are desirable to customers or clients, ideally stated in a way that differentiates the product or service from its competitors.

A new enterprise's business model should also cover projected startup costs and financing sources, the target customer base for the business, marketing strategy , a review of the competition, and projections of revenues and expenses. The plan may also define opportunities in which the business can partner with other established companies. For example, the business model for an advertising business may identify benefits from an arrangement for referrals to and from a printing company.

Successful businesses have business models that allow them to fulfill client needs at a competitive price and a sustainable cost. Over time, many businesses revise their business models from time to time to reflect changing business environments and market demands .

When evaluating a company as a possible investment, the investor should find out exactly how it makes its money. This means looking through the company's business model. Admittedly, the business model may not tell you everything about a company's prospects. But the investor who understands the business model can make better sense of the financial data.

A common mistake many companies make when they create their business models is to underestimate the costs of funding the business until it becomes profitable. Counting costs to the introduction of a product is not enough. A company has to keep the business running until its revenues exceed its expenses.

One way analysts and investors evaluate the success of a business model is by looking at the company's gross profit . Gross profit is a company's total revenue minus the cost of goods sold (COGS). Comparing a company's gross profit to that of its main competitor or its industry sheds light on the efficiency and effectiveness of its business model. Gross profit alone can be misleading, however. Analysts also want to see cash flow or net income . That is gross profit minus operating expenses and is an indication of just how much real profit the business is generating.

The two primary levers of a company's business model are pricing and costs. A company can raise prices, and it can find inventory at reduced costs. Both actions increase gross profit. Many analysts consider gross profit to be more important in evaluating a business plan. A good gross profit suggests a sound business plan. If expenses are out of control, the management team could be at fault, and the problems are correctable. As this suggests, many analysts believe that companies that run on the best business models can run themselves.

When evaluating a company as a possible investment, find out exactly how it makes its money (not just what it sells but how it sells it). That's the company's business model.

Types of Business Models

There are as many types of business models as there are types of business. For instance, direct sales, franchising , advertising-based, and brick-and-mortar stores are all examples of traditional business models. There are hybrid models as well, such as businesses that combine internet retail with brick-and-mortar stores or with sporting organizations like the NBA .

Below are some common types of business models; note that the examples given may fall into multiple categories.

One of the more common business models most people interact with regularly is the retailer model. A retailer is the last entity along a supply chain. They often buy finished goods from manufacturers or distributors and interface directly with customers.

Example: Costco Wholesale


A manufacturer is responsible for sourcing raw materials and producing finished products by leveraging internal labor, machinery, and equipment. A manufacturer may make custom goods or highly replicated, mass produced products. A manufacturer can also sell goods to distributors, retailers, or directly to customers.

Example: Ford Motor Company


Instead of selling products, fee-for-service business models are centered around labor and providing services. A fee-for-service business model may charge by an hourly rate or a fixed cost for a specific agreement. Fee-for-service companies are often specialized, offering insight that may not be common knowledge or may require specific training.

Example: DLA Piper LLP


Subscription-based business models strive to attract clients in the hopes of luring them into long-time, loyal patrons. This is done by offering a product that requires ongoing payment, usually in return for a fixed duration of benefit. Though largely offered by digital companies for access to software, subscription business models are also popular for physical goods such as monthly reoccurring agriculture/produce subscription box deliveries.

Example: Spotify

Freemium business models attract customers by introducing them to basic, limited-scope products. Then, with the client using their service, the company attempts to convert them to a more premium, advance product that requires payment. Although a customer may theoretically stay on freemium forever, a company tries to show the benefit of what becoming an upgraded member can hold.

Example: LinkedIn/LinkedIn Premium

Some companies can reside within multiple business model types at the same time for the same product. For example, Spotify (a subscription-based model) also offers a free version and a premium version.

If a company is concerned about the cost of attracting a single customer, it may attempt to bundle products to sell multiple goods to a single client. Bundling capitalizes on existing customers by attempting to sell them different products. This can be incentivized by offering pricing discounts for buying multiple products.

Example: AT&T


Marketplaces are somewhat straight-forward: in exchange for hosting a platform for business to be conducted, the marketplace receives compensation. Although transactions could occur without a marketplace, this business model attempts to make transacting easier, safer, and faster.

Example: eBay

Affiliate business models are based on marketing and the broad reach of a specific entity or person's platform. Companies pay an entity to promote a good, and that entity often receives compensation in exchange for their promotion. That compensation may be a fixed payment, a percentage of sales derived from their promotion, or both.

Example: social media influencers such as Lele Pons, Zach King, or Chiara Ferragni.

Razor Blade

Aptly named after the product that invented the model, this business model aims to sell a durable product below cost to then generate high-margin sales of a disposable component of that product. Also referred to as the "razor and blade model", razor blade companies may give away expensive blade handles with the premise that consumers need to continually buy razor blades in the long run.

Example: HP (printers and ink)

"Tying" is an illegal razor blade model strategy that requires the purchase of an unrelated good prior to being able to buy a different (and often required) good. For example, imagine Gillette released a line of lotion and required all customers to buy three bottles before they were allowed to purchase disposable razor blades.

Reverse Razor Blade

Instead of relying on high-margin companion products, a reverse razor blade business model tries to sell a high-margin product upfront. Then, to use the product, low or free companion products are provided. This model aims to promote that upfront sale, as further use of the product is not highly profitable.

Example: Apple (iPhones + applications)

The franchise business model leverages existing business plans to expand and reproduce a company at a different location. Often food, hardware, or fitness companies, franchisers work with incoming franchisees to finance the business, promote the new location, and oversee operations. In return, the franchisor receives a percentage of earnings from the franchisee.

Example: Domino's Pizza


Instead of charging a fixed fee, some companies may implement a pay-as-you-go business model where the amount charged depends on how much of the product or service was used. The company may charge a fixed fee for offering the service in addition to an amount that changes each month based on what was consumed.

Example: Utility companies

A brokerage business model connects buyers and sellers without directly selling a good themselves. Brokerage companies often receive a percentage of the amount paid when a deal is finalized. Most common in real estate, brokers are also prominent in construction/development or freight.

Example: ReMax

There is no "one size fits all" when making a business model. Different professionals may suggest taking different steps when creating a business and planning your business model. Here are some broad steps one can take to create their plan:

  • Identify your audience. Most business model plans will start with either defining the problem or identifying your audience and target market . A strong business model will understand who you are trying to target so you can craft your product, messaging, and approach to connecting with that audience.
  • Define the problem. In addition to understanding your audience, you must know what problem you are trying to solve. A hardware company sells products for home repairs. A restaurant feeds the community. Without a problem or a need, your business may struggle to find its footing if there isn't a demand for your services or products.
  • Understand your offerings. With your audience and problem in mind, consider what you are able to offer. What products are you interested in selling, and how does your expertise match that product? In this stage of the business model, the product is tweaked to adapt to what the market needs and what you're able to provide.
  • Document your needs. With your product selected, consider the hurdles your company will face. This includes product-specific challenges as well as operational difficulties. Make sure to document each of these needs to assess whether you are ready to launch in the future.
  • Find key partners. Most businesses will leverage other partners in driving company success. For example, a wedding planner may forge relationships with venues, caterers, florists, and tailors to enhance their offering. For manufacturers, consider who will provide your materials and how critical your relationship with that provider will be.
  • Set monetization solutions. Until now, we haven't talked about how your company will make money. A business model isn't complete until it identifies how it will make money. This includes selecting the strategy or strategies above in determining your business model type. This might have been a type you had in mind but after reviewing your clients needs, a different type might now make more sense.
  • Test your model. When your full plan is in place, perform test surveys or soft launches. Ask how people would feel paying your prices for your services. Offer discounts to new customers in exchange for reviews and feedback. You can always adjust your business model, but you should always consider leveraging direct feedback from the market when doing so.

Instead of reinventing the wheel, consider what competing companies are doing and how you can position yourself in the market. You may be able to easily spot gaps in the business model of others.

Criticism of Business Models

Joan Magretta, the former editor of the Harvard Business Review, suggests there are two critical factors in sizing up business models. When business models don't work, she states, it's because the story doesn't make sense and/or the numbers just don't add up to profits. The airline industry is a good place to look to find a business model that stopped making sense. It includes companies that have suffered heavy losses and even bankruptcy .

For years, major carriers such as American Airlines, Delta, and Continental built their businesses around a hub-and-spoke structure , in which all flights were routed through a handful of major airports. By ensuring that most seats were filled most of the time, the business model produced big profits.

However, a competing business model arose that made the strength of the major carriers a burden. Carriers like Southwest and JetBlue shuttled planes between smaller airports at a lower cost. They avoided some of the operational inefficiencies of the hub-and-spoke model while forcing labor costs down. That allowed them to cut prices, increasing demand for short flights between cities.

As these newer competitors drew more customers away, the old carriers were left to support their large, extended networks with fewer passengers. The problem became even worse when traffic fell sharply following the September 11 terrorist attacks in 2001 . To fill seats, these airlines had to offer more discounts at even deeper levels. The hub-and-spoke business model no longer made sense.

Example of Business Models

Consider the vast portfolio of Microsoft. Over the past several decades, the company has expanded its product line across digital services, software, gaming, and more. Various business models, all within Microsoft, include but are not limited to:

  • Productivity and Business Processes: Microsoft offers subscriptions to Office products and LinkedIn. These subscriptions may be based off product usage (i.e. the amount of data being uploaded to SharePoint).
  • Intelligent Cloud: Microsoft offers server products and cloud services for a subscription. This also provide services and consulting.
  • More Personal Computing: Microsoft sells physically manufactured products such as Surface, PC components, and Xbox hardware. Residual Xbox sales include content, services, subscriptions, royalties, and advertising revenue.

A business model is a strategic plan of how a company will make money. The model describes the way a business will take its product, offer it to the market, and drive sales. A business model determines what products make sense for a company to sell, how it wants to promote its products, what type of people it should try to cater to, and what revenue streams it may expect.

What Is an Example of a Business Model?

Best Buy, Target, and Walmart are some of the largest examples of retail companies. These companies acquire goods from manufacturers or distributors to sell directly to the public. Retailers interface with their clients and sell goods, though retails may or may not make the actual goods they sell.

What Are the Main Types of Business Models?

Retailers and manufacturers are among the primary types of business models. Manufacturers product their own goods and may or may not sell them directly to the public. Meanwhile, retails buy goods to later resell to the public.

How Do I Build a Business Model?

There are many steps to building a business model, and there is no single consistent process among business experts. In general, a business model should identify your customers, understand the problem you are trying to solve, select a business model type to determine how your clients will buy your product, and determine the ways your company will make money. It is also important to periodically review your business model; once you've launched, feel free to evaluate your plan and adjust your target audience, product line, or pricing as needed.

A company isn't just an entity that sells goods. It's an ecosystem that must have a plan in plan on who to sell to, what to sell, what to charge, and what value it is creating. A business model describes what an organization does to systematically create long-term value for its customers. After building a business model, a company should have stronger direction on how it wants to operate and what its financial future appears to be.

Harvard Business Review. " Why Business Models Matter ."

Bureau of Transportation Statistics. " Airline Travel Since 9/11 ."

Microsoft. " Annual Report 2023 ."

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Top 10 Influential Business Models

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Henry Ford, famous for using the assembly line in his car factories, neither founded the world's first car company nor invented the assembly line. Borrowing an idea originally used in the meat-packing industries, Ford was able to go after a new market in his industry to great success. It goes to show that in the dog-eat-dog world of business, it's often not as much about the product as it is about the process.

Business strategy may not be a science, but using the right method with the right materials in the right place at the right time can create explosive results. We've gathered some examples of the most successful business models that have gone on to make lasting impacts on industry, consumers and the world at large. What's particularly fascinating is how each of the following companies rode to success largely on the strength of their business models. Sure, McDonald's has a great-tasting burger, but it was the business model that catapulted the company (and ultimately the fast-food industry ) to widespread popularity and renown.

Keep in mind that the following list isn't exhaustive and is in no particular order. Rather, the purpose of this list is to offer a smattering of some of the most interesting, influential business models and the major companies that implemented them successfully.

With that said, let's get down to business.

  • Name Your Price: Priceline
  • Offer Aggregation: Kayak, eBay, Amazon, Invisible Hand
  • One Day, One Deal: Woot, Groupon, LivingSocial, Moolala
  • Just In Time: Dell
  • Growth First: Amazon.com
  • The Modern Franchise: McDonald's Corporation
  • Software First: Microsoft
  • Lifestyle Takeover: Apple and Google
  • The Everything Store: Walmart
  • The P2P Revolution: Etsy, Kickstarter, Paypal, Craigslist

10: Name Your Price: Priceline

top 10 business model

Priceline, a travel site , distinguished itself early during the travel wars of the '00s by introducing their name-your-own-price concept, in which vendors bid to meet the prices customers set for hotel stays and air tickets. While the company offers conventional travel planning as well, the name-your-own-price option continues to intrigue companies in other industries.

Bookings offered under the name your own price program are not disclosed by name (or itinerary, in the case of airfares), which protects suppliers by not linking them to the discounted quotes that would otherwise change the prices they regularly charge. By concentrating on hotel bookings and high-end overseas travel, Priceline also protects itself from the risks of putting too much emphasis on products in the volatile air travel market -- fares which attract users to the site and get them interested in higher-margin hotel bookings .

Although airline Web sites have, in recent years, begun to outperform most regular online travel agency bookings -- since they don't have to add profits with booking fees -- the customized hotel options added into travel bundles have helped Priceline to continue in their success.

On the downside, customers are gambling without some fairly important information: The provider, the itinerary and exact times of travel aren't available under the name your own price option until you've already committed to your non-refundable trip. However, going in with these assumptions can mean unbeatable prices and a fairly straightforward agreement. While a business traveler may not have the time or leisure to book partially unknown flights with unknown carriers, regular travelers can take advantage of great deals.

9: Offer Aggregation: Kayak, eBay, Amazon, Invisible Hand

While Priceline pioneered the "reverse-auction," brokerage model of travel deals, many different industries and sites now work on the opposite standard: By listing deals and prices from around the Web, customers can be assured of getting the lowest price on any specific product or package they desire. Kayak searches the Web for all travel offers -- airfare , hotel, transportation -- based on trip specifications you select, then produces a list of options for the customer to compare. If you don't like a particular air carrier or seating option, for example, you can compare other similar packages to find the one best suited to your preferences and needs.

Likewise, installable browser add-ons like Invisible Hand -- or simple shopping results inside some search engines, such as Google -- can automatically show you the lowest prices for any product the second you begin searching for it. While there are often showcase or featured suppliers who've paid an incentive to come out on top of these lists without regard to whether their prices really are competitive, it's simple enough to compare top results and find out for sure.

While eBay has made offer aggregation and price comparisons a major part of its online auctions and buy-it-now sales, bringing the concept into the mainstream, Amazon has combined regular and offer-aggregate sales into its pricing for every product: Search for a book, and you'll get prices for other online retailers, used booksellers, and even private individuals selling single new or used copies at a stated (non-auction) price.

While incentives exists for consumers to use Amazon's own trailblazing fulfillment setup (including Amazon's shipping discounts and reliable customer service), if you're simply looking for a low-priced, used copy of a book, this internal price aggregation can be a lifesaver. After all, even "Super Saver" shipping isn't always as cost-effective as paying a simple $4.00 for one of millions of books. That's 1 cent for the book, $3.99 shipping -- and it's a price you'll see on tons of books all over Amazon's site.

8: One Day, One Deal: Woot, Groupon, LivingSocial, Moolala

top 10 business model

Woot, until recently, was the gold standard in one day, one deal -- they even use that phrase as their tagline. But as other services entered the picture, Woot's simple idea -- making a limited amount of one product available at an amazing price each day -- began to transform. First diversifying into minisites offering daily Woot deals in specific areas (wine, toys, T-shirts), Woot has now begun delving into the social networking interests of its customers, playing with ideas like simple online adventure games to "earn" the deal info.

Taking the one day, one deal model to a new extreme, tipping point sites like Groupon , LivingSocial and Moolala all provide discounts on meals, products and services with local merchants. In different ways, each of them use crowd-sourced buzz to make sure the deal is worthwhile for merchants and the site itself. The deals only become active and purchasable after a certain number of people have expressed interest.

Recently, this particular industry sector has come under heavy fire, both from those who compare the setup to pyramid or Ponzi schemes , and often from researchers and analysts who question whether the business model may even be detrimental to the vendors it's attracting. Any deeply discounted deal like these is going to work as a loss leader for the local merchant, and if it doesn't result in repeat customers -- or if the people buying the deals are already customers -- then the loss is never remunerated by future business.

In fact, some merchants seem to be financing previous deals like these by entering into future deals within the same model -- behavior that some critics compare to our recent credit and mortgage crises. This social online coupon model, while clearly influential, is a bubble that could soon burst.

7: Just In Time: Dell

top 10 business model

"A huge inventory!" You hear companies boast this on commercials, and it sounds like a great thing. However, for many businesses, inventory is a bane. Until Dell came along, a vast inventory was considered a necessary evil for computer companies, who watched as their shelves of pre-ordered parts grew outdated by the second.

Dell adopted a process Toyota used first in the 1960s called the Just-in-Time (JIT) method. Under this process, Dell no longer had to predict the right parts to order. Instead, it almost completely eliminated inventory. At one point, this meant keeping one week's worth of inventory on hand, and later as little as two hours' worth of supplies [source: Holzner].

The JIT method combined with Dell's direct-to-consumer process made for a dynamite business model. In the end, Dell was able to cut out the retail middleman and instead sell its products directly to the consumer. This cut down on costs (resulting in a competitively low price for the consumer), and it also contributed to faster service.

Customers order what they want, and after they pay, Dell orders the necessary parts from suppliers and builds the custom PC . Dell can wait up to a month before paying its suppliers, so the company earns interest on customer payments in the meantime.

Dell raised consumer expectations for good, fast service in the PC industry -- and companies such as Apple are following suit. The Dell business model paved the way by streamlining and increasing efficiency on the supplier end [source: Breen ].

6: Growth First: Amazon.com

top 10 business model

In the mid-1990s, entrepreneurs were scrambling to find ways to take advantage of a tool emerging from infancy and bound for great things: the Internet . Although it was thought to be a considerable gamble at the time, Jeff Bezos's plan was one of the few that ultimately worked. His business model proved the axiom "slow and steady wins the race" -- even on the information superhighway.

Challenging brick-and-mortar bookstores, Bezos started Amazon , an Internet company that sold a wider collection of books than stores could carry. Bezos bought warehouses to hold a vast inventory so Amazon could offer direct-to-consumer service. The catch? He and his investors had to postpone seeing profits [source: Roncal]. Bezos allowed readers to criticize products through reader reviews, and he built a faithful community of users. And like Dell, Amazon earned interest on immediate customer payments before paying its suppliers.

Although it didn't see profits until the early 2000s, Amazon survived the burst of the dot-come bubble . It began offering products ranging from CDs and electronics to apparel. Amazon also fueled profits by acting as a portal for third-party affiliates, who handled the warehousing while the company took a share.

Putting off profits for the sake of growth earned Bezos plenty of critics, but his model ultimately paid off. By creating a business that sought customer convenience first and foremost, Bezos defied the odds and came out swinging.

5: The Modern Franchise: McDonald's Corporation

top 10 business model

Two all-beef patties, special sauce, lettuce, cheese , pickles, onions on a sesame-seed bun: That's good food. But speed, quality, consistency and real estate? That makes for a great business model. When the McDonald brothers had the brilliant idea to incorporate the assembly line into the restaurant business, they created fast food -- and it was a match made in business heaven.

However, it wasn't until a salesman named Ray Kroc came along that this new industry discovered its full potential. By partnering with the brothers and eventually taking over the business, Kroc started the McDonald's Corporation, a company dedicated to franchising the restaurant. Franchising wasn't a radical idea: McDonald's and other restaurants had been doing it before Kroc came along. But Kroc took a different slant on the concept.

Kroc kept strict control over his franchises, making sure that every restaurant across the country upheld his business practices and standards of cleanliness. His business methods turned off large investors, and the cost of leasing land made it hard for Kroc to turn a profit. So he adopted a policy of subleasing his properties to the franchisee. Real estate provided the cash flow Kroc needed for more down payments on additional land for his growing franchises.

As a landlord , McDonald's Corporation has built the largest restaurant chain in the world, and its business model inspired enough imitators to launch the fast-food industry .

4: Software First: Microsoft

top 10 business model

Whether you love it or hate it, you can't deny that Microsoft has had a sweeping impact. At the emergence of the computer age, the company got a head start by developing the operating system (OS) for IBM's personal computer (PC) in 1981. Since then, Microsoft's ability to adapt to new developments and challenges has kept it at the top of the industry.

In the race to develop software for the non-techie community, Microsoft used its OS to dominate the market -- specifically, its Office suite of applications for word processing (Microsoft Word) and spreadsheets (Microsoft Excel). What's more, any other company that wants to develop software that's compatible with the OS has to pay royalties (licensing fees).

This market dominance allowed Microsoft to get in on the rising Internet phenomenon in the 1990s. Though Microsoft was a relative latecomer on the scene, the company developed a Web browser, Internet Explorer (IE), and pitted it against Netscape, which was considered a superior browser [source: Marks ]. But by attaching IE to the rest of its successful applications in the Office suite, Microsoft gained a stronghold in the information superhighway and beat out its competition.

In "Business Darwinism," author Eric Marks explains that Microsoft's business model is strengthened by the company's forays into other markets [source: Marks ]. And as Microsoft spread its software influence, the company outpaced competitors in other arenas, which today includes not only operating systems and Internet browsers but also gaming .

3: Lifestyle Takeover: Apple and Google

While Apple and Google may appear at first to work in very different ways -- Apple as a consumer products and software manufacturer, Google as a suite of free online services -- they share one pioneering interest: you.

Apple, in practice, is more like three different kinds of companies working in concert: software engineering, hardware manufacturing and retail. Each of these gets to consumers in a different way, but they all work around the same core concepts of suiting the consumer's needs before he or she can even anticipate them: products for the home, business and entertainment, in-home and portable, for young and old, at price points high enough to make their products aspirational, but just low enough they're still attainable.

Apple brands itself, software and hardware alike, as the standard for quality, innovation, design aesthetic and usability. Each Apple product is created, in part, to sell the Apple brand and create Apple loyalty throughout the home. And if a household isn't fully Apple-supplied, chances are it still contains at least one or two iPhones, iPods or iPads.

And what Apple accomplishes in the world of retail, Google has created online. By offering the majority of its products and partnerships -- search, Gmail, Google Docs, blogging software, online photo collections, etc. -- for free, Google creates a similar 360-degree feeling of comfort and familiarity that engenders consumer relationships across its divisions.

In fact, the only real difference between the companies' approach is in terms of revenue. While we're giving our money to Apple, Google's getting money from other companies for its rich stores of data about us. Either way, they're making money off us, but Google does this indirectly, by putting advertisers in front of us, in more and more intelligent ways. Privacy concerns aside, Google's consumer data creates connections between individuals and companies that was previously unimaginable. And Google, like Apple, does this by knowing us better than we know ourselves.

2: The Everything Store: Walmart

top 10 business model

Like Henry Ford, Sam Walton was a businessman who recognized a good idea when he saw it and, more importantly, knew how to apply it in a way that would have the biggest impact. As a result, the company he founded, Walmart , is now the largest retailer in the world.

The advent of supermarkets in the 1930s proved to the business world that cutting costs to deliver low prices can turn a profit. Retailers brought this logic over to general stores soon afterward. By sparing the frills and getting back to the bare necessities, stores could save money on presentation. They also saved money by cutting back on personnel, which meant less personal service . But saving money in these areas meant the store could charge competitively low prices, which drew customers in despite the bare-bones setup.

Walton saw that general stores were turning a good profit, but he found a way to perfect the business model. Instead of catering to heavily populated areas , which conventional wisdom would advise, Walton started building stores in rural areas. Specifically, he built stores in towns with populations of 5,000 to 25,000 people [source: Magretta ]. Customers preferred to shop at these stores rather than drive to the nearest city. Because Walton was the first to go after these small markets, he had a significant advantage over any competitor that dared enter that terrain afterward. Today, Walmart wields so much power that a company's survival may depend on landing a deal with the retailer.

1: The P2P Revolution: Etsy, Kickstarter, Paypal, Craigslist

In opposition to Walmart's global hegemony and financial power -- the highest expression of basic corporate success to date -- we have the newest and in some ways most fascinating business model of all: the personal, customizable, one-on-one transactions of sites like Etsy and the most basic, early operations of eBay -type sites.

What the Internet gives us is the possibility of linking up with one other person, who is willing to sell us one custom or specific product, at an agreed-upon price. Add up those transactions, or aggregate them like Etsy, and you end up with more business than with one simple high-volume, high-demand product. When people refer to the "long tail," that's what they're talking about: While a bestseller may do brisk business for an online bookseller, for example, on any given day the bookseller is making way more money on the total of items they're selling for which there is less demand.

Sites such as the one-of-a-kind craftseller aggregator Etsy, the T-shirt design site Threadless and micropayment sites like Kickstarter and Donors Choose all operate on this concept: Even a single, customized, one-of-a-kind piece of art is worth enough, in the long tail, to make the sites worthwhile. That means doing business with likeminded, single individuals and knowing where your money is going.

Never before in human history have we had this capability to shop, pay for, ship and deliver such a grand assortment of merchandise. Even 10 years ago, the idea of a person-to-person (p2p) economy of art goods or books that is commonplace today would have been unheard of. Thanks to the Internet , p2p commerce is now a real idea, and one that is quickly becoming the most influential of all, as other business models begin to change and shift to incorporate its qualities into their own.

Without the threat of person-to-person sales, for example, would businesses ever have gotten so obsessed with involving themselves in our social networking? Something worth thinking about.

Lots More Information

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More Great Links

  • Internet Business Models: The Google Business Model
  • Agrawal, Rocky. "Why Groupon Is Poised For Collapse". Tech Crunch, Jun 2011. (Dec. 4, 2011) http://techcrunch.com/2011/06/13/why-groupon-is-poised-for-collapse/
  • The Apple Loop. "Monograph On The Apple Business Model." The Apple Loop, 2003. (Dec. 4, 2011) http://www.theappleloop.com/Home/monograph.html
  • Aston, Adam. "The World's Most Influential Companies: Wal-Mart." BusinessWeek. Dec. 22, 2008.
  • Baratz, Debbie. "Here's Why Groupon's Business Model Looks Eerily Like a Ponzi Scheme". Wall Street Cheat Sheet, Nov 2011. (Dec. 4, 2011) http://wallstcheatsheet.com/stocks/heres-why-groupons-business-model-looks-eerily-like-a-ponzi-scheme.html/
  • Bennett, Colette. "Small Business Model - Etsy PDF to Print". Colour Lovers Business Blog, May 2011. (Dec. 4, 2011) http://www.colourlovers.com/business/blog/2011/05/11/small-business-model-etsy-pdf-to-print-featuring-dolls-and-daydreams
  • Blum, Jonathan. "Happy Customers - And No Service Staff". CNN.com, May 2008. (Dec. 4, 2011) http://money.cnn.com/2008/05/19/smallbusiness/customer_service.fsb/index.htm
  • Breen, Bill. "Living in Dell Time." Fast Company.com. Dec. 19, 2007. (Dec. 4, 2011)
  • http://www.fastcompany.com/node/51967/print
  • Carpenter, Steven. "TechCrunch Teardown: Etsy's Business Model". Tech Crunch, Sep 2010. (Dec. 4, 2011) http://techcrunch.com/2010/09/11/tc-teardown-etsy/
  • Cheyfitz, Kirk. "Thinking Inside the Box." Simon and Schuster, 2003. (Dec. 4, 2011)
  • http://books.google.com/books?id=UUSVN6-pY6oC
  • Cohen, William A. "A Class with Drucker." AMACOM Div American Mgmt Assn, 2008.
  • Duesterberg, Thomas J. "The Apple Business Model Is Good for US Manufacturing". Huffington Post, Nov 2011. (Dec. 4, 2011) http://www.huffingtonpost.com/thomas-j-duesterberg/us-manufacturing-apple_b_1072089.html
  • Elgan, Mike. "Google's Business Model: YOU Are the Product". Internet Business Models.org, Feb 2009. (Dec. 4, 2011) http://itmanagement.earthweb.com/article.php/3801006/Googles-Business-Model-YOU-Are-the-Product.htm
  • Enos, Lori. "The Priceline Model Is Right - Or Is It?" Tech News World, Jun 2001. (Dec. 4, 2011) http://www.technewsworld.com/story/11159.html
  • Hansell, Saul. "A Big Bet on Kayak for Travel Search". New York Times, Dec 2007. (Dec. 4, 2011) http://bits.blogs.nytimes.com/2007/12/21/a-big-bet-on-kayak-for-travel-search
  • Holzner, Steven. "How Dell Does It." McGraw-Hill Professional, 2005.
  • Levy, Steven. "The Secret of Googlenomics". Wired, May 2009. (Dec. 4, 2011) http://www.wired.com/culture/culturereviews/magazine/17-06/nep_googlenomics
  • Magretta, Joan, et al. "What Management is." Simon and Schuster, 2002.
  • Marks, Eric A. "Business Darwinism: Evolve Or Dissolve, Adaptive Strategies for the Information Age." John Wiley and Sons, 2002.
  • Martin, H. Lee. "Techonomics." CRC Press, 2006.
  • McGrath, Rita. "Groupon's Business Model Is Leaking". Oct 2011. (Dec. 4, 2011) http://blogs.hbr.org/hbr/mcgrath/2011/10/groupons-business-model-is-lea.html
  • Miller, Kerry. "An eBay For The Arts And Crafts Set". Business Week, Jul 2007. (Dec. 4, 2011)
  • http://www.businessweek.com/magazine/content/07_30/b4043085.htm
  • Mourdoukoutas, Panos. "Is Groupon's Business Model Sustainable?". Forbes, Oct 2011. (Dec. 4, 2011) http://www.forbes.com/sites/panosmourdoukoutas/2011/10/22/is-groupons-business-model-sustainable/
  • ibid. "Can Google replicate Apple's business model?". Forbes.com, Aug 2011. (Dec. 4, 2011) http://www.forbes.com/sites/panosmourdoukoutas/2011/08/15/can-google-replicate-apples-business-model
  • Plotkin, Hal. "Priceline Business Model Seen Flawed". Plotkin.com, Oct 2000. (Dec. 4, 2011) http://www.plotkin.com/cnbcs164.htm
  • Reeves, Jeff. "Can Apple Business Model Save JC Penney?" Investor Place.com, Nov 2011. (Dec. 4, 2011) http://www.investorplace.com/2011/11/jc-penney-ceo-ronald-johnson-jcp-apple-aapl/
  • Roncal, Jose D., et al. "The Big Gamble." Wheatmark, Inc., 2008.
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  • Stewart, Thomas A. "The Institutional Yes." Harvard Business Review. Oct., 2007. Vol. 85, Issue 10, p. 74 - 82.
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  • Yu, Roger. "Travel Q&A: Five questions with Kayak CEO Steve Hafner". USA Today, Dec 2008. (Dec. 4, 2011) http://www.usatoday.com/travel/flights/2008-12-09-qa-kayak-steve-hafner_N.htm

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Ever wondered how your favorite comedy website makes money?

How about that free file-sharing program you use everyday?

And what about that RPG that you’re spending all of your free time playing (and some of your not-so-free time)?

Some businesses make their money in obvious ways—put a product on a shelf, person buys it, get money—but many others generate revenue in more mysterious ways. With the ubiquity of purely online, “free” businesses, and the price of information falling to zero or close to it, the strategies companies use to keep the lights on, much less pay server costs and employee wages, aren’t always so straightforward.

Although the internet has certainly opened new and exciting doors into entrepreneurship for many of us, it has at once vastly cheapened information and raised competition. Many online businesses selling media, information, or software are faced with having to compete with something previously unthinkable: people and companies giving away things for free.

As a result, a slew of creative business models have come into being. These businesses models have allowed service, information, and media-based businesses to carve out places in the competitive online landscape. People have taken notice – in fact, this article was inspired by this list crowdsourced on GitHub, which in turn was inspired by a list on Y Combinator .

So why should you, as an entrepreneur, care?

Exploring these available business models will allow you to better understand how to make money from your business or business idea. If you’ve attracted a great base of people to your product or service, but still are trying to figure out how to monetize it all, this article is for you. Even if you have some idea of how you might build revenue, considering the range of possibilities might make you think twice.

Even if you’ve yet to start a business, and are still searching for good ideas, this article is also for you. Starting out with an ideal business model in mind before settling on an idea will greatly help you make the right decision before investing resources, and allow you to sketch out important aspects of your business, such as strategy and marketing techniques. Certain industries just don’t align that well with certain models.

Finally, for anyone simply interested in the state of modern business, this article is a fascinating (if I do say so myself) look into the creative approaches fueling today’s successful startups. In this digital age, the business world has become a lush ecosystem of diverse approaches, people, and products, limited only by imagination and the public’s wants and needs. Take a tour of the many colorful ways that you can monetize your project or business.

Types of Web Business Models

Advertising, commerce business models, subscription business models.

  • P2P (Peer to Peer)

Open Source

Cooperative business models.

  • Transaction Processing

Ah advertising, the classic money-making technique, integral to the continuing functioning and growth of capitalist economies. Advertising has and continues to be huge business, accounting for $111.14 billion dollars of revenue at the US alone. Advertising isn’t going away anytime soon, and it might be that you can grab a piece of that huge pie if your business attracts a large number of eyes and/or ears.

Businesses that have enough attention paid to them to monetize through advertising include any and all types of media, such as newspapers, radio, blogs, and television. But there are new opportunities, as more people are spending their hours staring at search engines, online classifieds, job listing services, and email.

The problem is that these days, ad-supported media business models all depend on scale, because rates are dropping lower every day. As a result, success in online media generally requires near-constant posting with broad or diversified appeal to build up a sufficiently big audience. It’s generally a tough game to play, and it’s getting tougher all the time. Increasingly, media companies are using ad revenue as just one component of a multifaceted model.

However, if it is a fit for your work, check out how you can make money using advertising below:

Display Ads

Display ads, a business favorite. Display ads include banners, pop-ups and other types of visual content that attract consumer attention to inform and influence them to a make a purchase. The basic premise is that your business gets paid by advertisers and/or businesses to get in front of all of the eyeballs you’ve been able to attract. This model is threatened by the advent of ad-blocking technologies as well as consumer desensitization. Nonetheless, the biggest names on the internet use them, so why not you?

Examples of a few businesses that monetize partially or fully from display ads:

• Billboards (the ones you see along highways, for example)

•  Trend Trunk

business models trend truck

Search ads are similar to display ads, except that advertisements are displayed according the search queries entered by users. This theoretically allows for more targeted and effective advertisements, although for some keywords (as for “Foundr” below because we haven’t paid for search ads over at DuckDuckGo), they may fail.

Search advertisements are effective because they present ads that are directly relevant to what a consumer is searching for. They are less intrusive and can sometimes be more relevant than unpaid search results. Often, search ads will be built on a pay per click (PPC) model, where the advertiser pays a fee for every clickthrough on the ad that occurs.

One downfall is that this revenue model has to compete against always clever Search Engine Optimization (SEO). Another downfall is that you can’t really make this revenue model work for you unless you are a well-known search engine or comparable conduit of searchable information.

•  Google , the undisputed master of search advertising

•  DuckDuckGo

• Twitter Ads

business models ads

Video ads are ideal if you are running a video media company. They integrate perfectly within the content.

•  Twitch.tv

•  Youtube.com

Audio ads can be an informative voiced announcement, or that cereal jingle you haven’t been able to get out of your head since childhood. You can typically monetize through audio ads if you are delivering some kind of auditory product, such as music or recorded interviews.

• Podcasts ( Entrepreneur on Fire uses audio ads and brings in over 5 figures a month!)

•  Google Play

Promoted Content

Promoted content isn’t as advertise-y as ads, and that’s just what makes them effective. If you are looking to make money from promoted content, you’ll need to run some kind of platform where your users are sharing and reading lots of internet content. This will incentivize companies to pay you to promote their native content (it looks a lot like the rest of the stuff you publish) to give them a leg up in the game.

Downside: you can’t really do this unless you’re a major social networking site

•  Facebook

Recruitment Ads

Recruitment ads are paid for by employers looking to draw attention to their job postings. There are few things more expensive for employers than making a bad hire. That’s why it’s very much in their best interests to place ads on places where the right people search for jobs to attract a higher volume of applicants.

This ad option is best if you run a site geared toward work or specific careers, toward a specialized skill, or if you own a site dedicated to recruitment and job searching.

•  Problogger Job Boards

•  Linkedin

business models jobs problogger

Lead Generation

If you are serving a two-sided market, that is producers and consumers simultaneously, then lead generation may be advertising model made for you. Boiled down, you will be connecting a high-value lead to someone looking for business. In order for this to work, you need to attract a specific set of people who have a high probability of making a purchase.

Some good fits might be matching mortgage rate searchers with realtors, patients with doctors, plane ticket bookers with travel agents.

•  MoneySuperMarket

Affiliate Fees

The ever-popular affiliate advertising is an arrangement where the advertiser (or you, the business) receives a cut of any purchases their audiences make. Many blogs and niche sites, and even service-based sites, make their income via affiliate income. This income can be significant. For example, Pat Flynn’s Smart Passive Income blog makes a significant portion of its monthly 5-figure income from affiliate commissions.

Many online entrepreneurs started out by trying to build a niche site around a popular, yet underserved keyword, and monetizing that site via affiliate fees (see “Knife Den” below, built around the keyword “Best Survival Knife”). As with the other advertising-based revenue models, the main challenge is generating a large enough volume of qualified traffic make a good income from affiliate commissions.

•  Smart Passive Income

•  Pinch Of Yum

•  Knife Den

business models income breakdown

Screenshot of Pat Flynn’s latest MONTHLY Income report

If you are looking to go beyond advertising other people’s products, this section is for you. Commerce business models are for businesses looking to sell a product, whether that be a physical product or information product.

That means you need to do the marketing as well as the selling, which involves extra time and cost. However, the huge bonus is that you can collect up to 100% of the profits generated, unlike the advertising business models, where at most you’d achieve a 50% commission if you find a very generous affiliate partner.

Retailing is the process of satisfying a demand through creating a supply chain, which at the end point awaits a hungry buyer. The value that retailers provide is sourcing quality products and ensuring that they are available at a convenient location and time. This can involve business-to-business transactions (B2B) or, more commonly, business-to-consumer transactions.

A traditional retail environment would be a mall, but now, retail is increasingly moving online to virtual storefronts and websites. In fact, one of the world’s top 10 largest retailers is none other than Amazon.com.

Retailing can be complex, especially when brought online. You will also need to compete in a very competitive retail field, forcing you to invest more money into advertising and marketing.

However, it’s a tested and proven model with many success stories to choose from.

•  Overstock


Would you like to get involved in commerce, but not so interested in details of a complex supply chain? A marketplace may be the business model for your commerce concept. Marketplaces offer a platform through which sellers and buyers can meet and exchange goods. As a marketplace, you typically make money by taking a certain percentage of the sale as your commission for offering and maintaining the platform. Marketplaces can be physical or virtual locations. Marketplaces differ from retailing in that you have multiple sellers offering up their goods, versus a single company selling a variety of products.

•  Redbubble

business models souks

A Middle-Eastern Souk

Excess-capacity marketplace

Excess-capacity marketplaces are a new type of marketplace quickly gaining prominence thanks to the interconnective power of technology. These marketplaces aggregate excess resources and allow owners to leverage their unused or underused stuff —such as space, time, vehicles, materials, even pets—and rent/sell them out for a profit.

•  BorrowMyDoggy

Vertically Integrated Commerce

Vertically integrated commerce is retail done directly. Clever commerce players have revolutionized their industries by vertically integrating the supply chain, bringing manufacturing, branding, and distribution under one roof. This eliminates middlemen and waste, and allows products to be presented directly, and directly tailored, to consumers.

This is a great option if you are looking to compete in retail, which, as mentioned, has become extremely competitive thanks to giants like Amazon. Vertically-integrated companies distinguish themselves through unique products, high quality, customization, and sharp branding. Customization is especially significant—vertically integrated commerce will aggressively zone into a particular niche and make sure their products are specifically made for this market. For example, Nasty Gal listed below targets retro chic younger women. They may also be able to compete on price since their costs are lower thanks to the simplification of the supply chain.

•  DollarShaveClub

•  Nasty Gal

•  Warby Parker

business models warby parker

Flash Sales

Yet another way to compete against giant retailers like Amazon is to build your commerce startup on flash sales. This involves having a continuous stream of temporary sales to entice consumers to buy from you NOW to enjoy steep discounts. The main effect of these flash sales is creating an ongoing sense of scarcity, which is a psychological selling trigger.

This is an extremely effective strategy, and some players, like Gilt , have built their businesses to $1 billion thanks to this tactic. You’ll often find this commerce business model applied to high-ticket items, like luxury goods and designer items.

•  Vente-Privee

business models gilt

Group Buying

Group buying involves offering products and services at significantly reduced prices and on the condition that a minimum number of buyers make a purchase. This model has grown especially popular for selling products and services at a local business level. These websites usually function as marketplaces, bypassing the retail supply chain:

•  Groopdealz

•  LivingSocial

business models groupdealz

Pay What You Want

This is a new and rising movement of businesses offering up their products and services on a flexible pricing basis. This is particularly great if you are a business serving a community of people who are passionate about what you sell, or if you are a personal brand with a devoted following. You can request a minimum amount to cover basic costs and allow people to give you more depending on their preferences. Some companies also defer payment to after the “purchase” has been made—that is, they follow-up with the buyer later asking for voluntary payment. This reduces a buyer’s perceived risk , allows them to assess the value of the product, and may result in greater overall revenue by decreasing the number of refunds.

Of course, you run the risk of having people pay you zero dollars, but this method is great for making you stand out among the competition, by demonstrating an impressive confidence in what you have to offer. It can also be helpful to new brands that have not yet built up enough authority to successfully demand market rates for their products or services.

This method also increases trust among buyers. “Pay what you want” eliminates the fear that they’re wasting money or getting swindled. It changes the dynamic of buyer/seller from a competitive to a more co-creative relationship .

This is a perfect model for independent artists, avoiding the hassle of having to “compete” against others in their field, which may make little sense if their work is unique and labor-intensive. This model has also gained popularity among those who have ideological issues with pricing their products according to market rates.

•  Charles Eisenstein (Author who gives his books away on a “pay what you want” basis)

•  Headsets (you have the option of paying what you want for headsets)

•  Openbooks

•  Radiohead did this as well!

• Musicians on Bandcamp

business models charles eisentstein

Subscription businesses are a fan favorite among entrepreneurs, as they have recurring revenue baked right in. Subscription-based services started out mostly in the publishing industry, with magazines and newspapers, but now have invaded nearly every industry, from diapers to opera tickets.

This model builds brand loyalty and a dependable consumer base, which are two key ingredients to a viable business. The overall value of each customer also tends to be higher. Therefore, the model reduces overall risk and makes for easier forecasting .

Software as a Service (SaaS)

A SaaS business is a company that creates and maintains software in exchange for a typically monthly payment from customers. The software usually lives on the cloud, which saves clients money on server costs and in-house developers. SaaS businesses are typically easy to deploy and have huge potential for scalable growth. They can be created for a variety of sectors, with technologies often applied to streamlining communication or administration in other companies.

SaaS is a hot model right now, as Marc Andreessen puts it: “ Software is eating the world .”

Nonetheless, entrepreneurs beware—SaaS is difficult, especially the customer acquisition and retention aspect.

•  Salesforce

business models samcart

Freemium Subscription

Same premise, except that the service is free of charge up to a certain limit of use. This limit could be the amount of storage space, number of downloads, or number of users. This is used primarily as a marketing tactic, as it works to lower the barriers to entry for potential buyers. You’ll see that many subscription businesses, even those that do not follow a freemium model, will typically offer some sort of discount or offer for their entry into the service (see Samcart above).

•  Calendly

business models calendly

Customer as a Service (CaaS)

This subscription model involves delivering content to an audience in exchange for a regular fee. This model started out in movie rental stores, and has since migrated to the online sphere. The distinguishing factor is that, rather than purchasing individual pieces of content, you pay a flat rate for all that’s available.

•  Foundr Magazine

Infrastructure as a service (IaaS)

This subscription business model involves providing clients with access to computing infrastructure resources, such as server space, network connections, bandwidth, IP addresses, and load balancers. The provider maintains the physical elements and the client get access to these resources in order to build their own IT platforms.

•  Amazon S3

•  Google Cloud Services

Recurring Donations

You don’t have to be a charity in order to run a business based on donations. Many modern-day businesses rely fully or partially on donations in order to operate. These are usually “social good” type enterprises, and may incorporate other sources of income into their business model. It’s also an increasingly common practice among artists and other creatives who ask fans to chip in a regular amount to support their overall work.

•  Wikipedia

Subscription Boxes

An increasingly popular business model that straddles retail, vertically-integrated commerce, and subscription business models. Subscription box companies deliver a good to clients on a regular basis. Clients pay a higher price for these goods in return for the convenience and predictability of the regular delivery. This model works best for items that need to be regularly replenished, such as cosmetics, diapers, and some food items.

P2p (Peer to peer)

Not all companies have to be built on a provider-consumer relationship. Many businesses draw revenue by connecting peers to exchange goods and services. This is a budding field, where revenue for the business is typically made by drawing a processing fee or membership fee from participating peers.

P2P Lending

P2P lending businesses assist people in circumventing the bank and payday loan institutions to get money. This business model enables people to provide loans, typically at a lower interest rate or on easier terms than with a bank. As this business model removes the middleman (the bank) from the transaction, lenders will typically earn a higher net return or interest rate. The challenge to lenders is that these loans are typically unsecured, making the risk higher. There is also the trust element on both sides that needs to be managed, which has been done so in a variety of creative ways by different players in the P2P lending industry.

•  LendingClub

•  FundingCircle

P2P Insurance

P2P Insurance removes or reduces insurance companies as the intermediary, and allows people to come together and crowdsource their own insurance. These businesses can be structured in a variety of ways. For example, a small group of friends and family may come together and place an equal sum into a pot. This pot can be used to pay down the deductible when insurance is needed, thereby making insurance cheaper for everyone. There are also models that crowdfund business insurance, car insurance, and nearly any kind of insurance imaginable.

•  MetroMile (Pay-Per-Mile Auto Insurance)

•  PeerCover

•  Friendsurance

business models friendsurance

P2P Computing

Typically for volunteer based projects, P2P computing involves having a set of people share their server space/bandwidth or other computing resources. This may or may not involve illegal downloading of media and other content. 😛

•  BitTorrent (P2P file sharing)

•  SETI@home (volunteering your computing resources for space research)

P2P Funding

Crowdfunding is huge for entrepreneurs right now, and a whole slew of sites have helped build well-known businesses. P2P Funding cuts out the venture capitalist, bank, or government loan so that people can gather the required capital to start a business faster.

•  Kickstarter

•  Indiegogo

•  GoFundMe

Entrepreneurs can create profit either by licensing a product that they own, or purchasing a license from an established company. Typically, you’d need to have an established company in order to sell licenses. Conversely, as a new entrepreneur, you may be interested in tapping into an already-established company’s brand, infrastructure, and marketing systems and make a percentage from the sales. Your job will involve properly marketing and selling the product to fully leverage this established value.

Examples of companies that make most or much of their revenue from licensing their brand:

•  Calvin Klein

•  Sesame Street

•  Qliktech

business models calvin klein

Open Source is no longer just for free software anymore. Large businesses have been leveraging open source products in a variety of ways. The advantage of this business model is reduced development costs, access to a wider market and the currently popularity of open source (since it’s mostly free).

Many service-based businesses have been created around providing consulting for companies that are built on open source software.


Open source hosting companies are all the rage, with the most popular hosting website for blogs currently being the open source WordPress. WordPress has monetized by offering a premium features to those who pay, charging for domains and a variety of other web-based services. The core of its functionality is free, however.

•  WordPress


Leverage your open source software by placing ads and reaping ad revenue.

•  Mozilla Firefox

The majority of businesses that we recognize are top-down, hierarchical enterprises out to beat other players in their fields. The reason these businesses are most common is because they are favored by capitalism, which requires quick growth and competitiveness for success.

However, some businesses have carved out pieces of the market in nearly every industry, using a radically different model of business: the cooperative model .

The main two differences between typical top-down enterprises and cooperatives is that the business is not owned by a few private hands, and that ownership of the business cannot occur outside those working or consuming directly from the business. This means that you cannot purchase stock or become a shareholder in a cooperative business unless you work there or you are one of the consumer-members.

One main advantage is that these businesses are extremely democratic in nature. Since all members own a share in the business, they have a real voice into the operations and decisions of that business. For examples, members of a workers’ cooperative would collectively make hiring/firing decisions for the company, instead of a small group of managers, or only the business owners.

Another bonus is that the goal of the company is to maximize net and real worth of all owners, instead of only increasing profit for the business owner or shareholders.

In cooperative models, every owner of the cooperative gets an equal vote, regardless of the amount of shares they own of the company. Therefore, say in the company is not contingent on how much money you have.

If you are starting a business with a few people and are struggling to figure out how to divide equity, a cooperative model may be just what you’re looking for.

Worker Cooperatives

Worker cooperatives are companies where all owners are also workers in the company. This means that the workers must also self-organize to manage the company, or at least elect those among them who will do this task. As worker-owners, each member of the cooperative also gets an equitable share of the yearly surplus profit, as well as having voting rights as to how the profit is otherwise allocated.

As the cooperative grows, it may invite more worker-owners in a variety of ways. For example, after working as an employee with the cooperative for a duration of time, a person may be invited to buy into the company and become a worker-owner. As a rule, cooperatives need to be open to inviting new worker-owners if an employee is qualified.

As outside shareholders cannot own stake in the company, all profit remains within the cooperative, which can lead to higher wages for the worker-owners. A downside is that investment from outside loans cannot be received.

Participating in a worker cooperative means that you are both an employee and a business owner. This comes with more responsibility and requires development of a new set of skills, while at the same time granting you more autonomy and agency.

This model has been extremely successful in a variety of industries, as the example below illustrate:

•  New Era Windows

•  Mondragon Corporation (+70 000 worker-owners)

•  Colab (web design cooperative)

Consumer Cooperatives

These cooperatives are owned by consumers instead of workers (although the two models may often be combined). Consumer cooperatives typically occur when a need in a community is identified that a privately owned enterprise cannot provide because of lack of profitability. Alternatively, they may be formed in order to provide an essential need at a lowered cost. For example, food cooperatives may be formed to provide groceries at a lower cost.

To take the food cooperative example, a city may come together and pool money in order to open one. They will often pay a yearly or monthly membership. This membership means that each member of the community owns a share and an equal vote in the cooperative. The money is used to fulfill startup costs and maintenance costs. The cooperative company will seek to fulfill the needs and wants of its owners, which in this case are the consumer-owners. In this example, the community was seeking lowered food cost. As such, all operations and profit of the company will be targeted towards that end.

Consumer cooperatives also appear in consumer good industries.

This likely isn’t the best model to follow if you are looking to create a company to make you rich. However, if you’re interested in creating a company to fulfill a local need or want, this is an excellent model to explore.

•  Mountain Equipment Coop (MEC)

•  The Wine Society (Australian Wine Consumers’ Co-operative Society Limited)

• Credit Unions

Knowledge is power, and profit, for companies that sell and buy data as their business model. Businesses that sell data will typically do all of the hard work of collecting, digitizing, analyzing, and presenting data to enable others to make better, and more data-driven decisions.

This model involves collecting data from consumers and sell it to businesses so that they can better their strategy, marketing, and sales.

•  Oracle ATG Web Commerce

Business Data

Same thing as user data, except you are collecting information on business to enable clients to perform between B2B transactions.

•  Open Corporates

•  Business Profiles

Transaction processing

Lots of huge businesses are built not on selling a “thing.” Instead, they facilitate a transaction. As murky as that sounds, these businesses play a central role in today’s marketplaces, and many of them are household names.

Merchant Acquiring

Do you take Mastercard? Visa? American Express?  And where’s my receipt?!

With so many payment options out there today, consumers and sellers need companies that make it easy and fast to interact and transfer payment.

This is where merchant acquiring companies come in. They create a platform that takes care of all of those technical and pesky details involved in dealing with the modern world of digital money. In exchange, these merchant acquirers are awarded either a flat rate or a commission.

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Online Business Models

The business model you pursue is almost as important as your idea. Actually, scratch that, it’s much more important than your idea. Remember that saying, it’s 10% idea and 90% execution? A big part of that execution is your business model.

It will help determine the direction you take in terms of your marketing , hiring, strategy and much more. But what do you think? Did we miss a business model? Are you pursuing an interesting combination above? Let us know in the comments.

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About Assya Barrette

Assya is a content strategist and consultant based in Toronto, Ontario, Canada. Her and her client's work have been featured in outlets including Yahoo!, Salon.com, Qz.com, and others. You can see her work and learn more here: Kangen Demo

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The Top 10 Startup Business Models

Founders often begin their journey with an idea that solves a problem. While innovation can drive business in the early stages, even the best ideas can quickly become obsolete if not executed correctly. 

That’s why at the heart of every successful startup lies a robust business model. A framework enabling your startup to grow and scale is key. When startups think about which type of business model they want to adopt, there are a few important factors to consider. 

The first step involves determining how your revenue is structured. Although revenue is an important aspect of your business, it’s integral to consider aspects of the business such as cost structure, marketing, target audience, service offering, etc. 

Due to the ever changing needs of your business, choosing a specific model may not always involve a regimented approach. In other words, it’s not a one-size-fits-all solution. Rather, it can involve a combination of factors that contribute to the overall success of your business. 

Let’s dive into some of the most popular business models. 

Marketplace Model

A marketplace model involves acting as the intermediary between the buyer and the seller. 

The biggest advantage of using a marketplace model includes the fact that it eliminates the traditional brick and mortar store, meaning you don’t need to provide inventory yourself, thus getting rid of overhead costs and the risks that come along with it. Marketplaces typically earn money by charging a small percentage of the transaction between the buyer and the seller. 

Reseller Model

While the reseller model is similar to the marketplace model, the former focuses on promoting and selling products that are produced or manufactured by a separate company or individual. A company like Amazon promotes and sells products sold on their website – once a purchase is made, delivery of the product falls on the company or individual that operates the storefront and has listed the item for sale. 

Subscription Model

The subscription model is arguably one of the most popular business models.  This model involves a company selling a product and/or service via a subscription as opposed to a one-time transaction. 

The benefits of a subscription model are two-fold. It provides a lower barrier to entry for products and services which allows more potential customers to purchase your product. Additionally, it makes your monthly recurring revenue (MRR) a lot easier to predict- a metric that is very important to investors. 

On-Demand Model 

The on-demand model provides customers with nearly immediate access to the product or service. Good examples of this include food and grocery delivery apps and ridesharing services. 

Although this business model is similar to a marketplace, it often requires more regulatory work in the early stages, in addition to sourcing freelance workers to deliver the product or service. 

Direct Sales Model

There are a few different types of direct sales. The two most popular are inside sales, which takes place when a customer places an order directly with the company, or business development representatives whose role is to sell the product to potential prospects; and outside sales, which involves face to face selling. 

The main advantage of a direct sales model is that it builds client customer relationships and helps drive customers through the sales cycles. This is especially important when there are multiple potential buyers and influencers.

In terms of disadvantages, the direct sales model often requires hiring a sales team which can be difficult and costly if you have a small business and you’re trying to scale. 

Freemium Model

The freemium model describes a company whose basic services are free, but requires users to pay an additional fee for premium features, tools, or extensions. 

The biggest advantage of this model is that the free basic service is attractive to a lot of customers. In this model, it’s important to identify premium offerings that are enticing in order to convert free users to paid customers. 

The disadvantage of this model is that many users will not upgrade to premium and it can be costly to convert people from free to premium. Additionally, the costs associated with hosting this service for free users can become quite expensive.  

Affiliate Revenue Model

The affiliate revenue model is one of the most popular web-based revenue models. It works by advertising and promoting links to different products and services, while collecting a commission based on the sales of those products. This can often be a good strategy to monetize on blogs and web pages that get a lot of views but do not have their own product or service.

Transactional Revenue Model

Many companies rely exclusively on a transactional revenue model as it is one of the most straightforward ways of generating revenue – customers pay directly for a good or service.

The main advantage to this model is how simple it is for transactions. It also has the added benefit of easily calculating margin by taking the sales price and subtracting the production cost.

The main disadvantage of this model is that a company needs to do something for every transaction: produce a good, ship a product, etc. This is more costly, and intensive than a model like recurring revenue.

Retail Sales

A retail business model involves delivering a traditional brick and mortar experience through a department or retail store. In this model, physical goods are sold to your customers. 

Retail can provide customers with discounts and exclusive products. It’s also a great way to build brand loyalty. 

While this route can build popularity, the retail sales route is suboptimal for early stage companies to accelerate their revenue growth and reduce profit margins. 


Crowdsourcing involves generating product interest through social media and/or viral videos, as well as partnerships, and other promotional channels. 

The biggest advantage to crowdsourcing as a business model is that your upfront costs tend to be lower due to the fact that early adopters will typically cover your startup costs.

Some disadvantages to keep in mind include the possibility of a failed launch resulting in a bad customer experience – for example, if the product is delayed or canceled.  

While each of these business models contain different advantages, it’s important to consider what works best for you and your objectives. An L-SPARK accelerator can help you navigate the complexities of growing your startup, while minimizing risks and getting the mentorship necessary to succeed and scale. 

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Modern Business Models Will Drive the Post-Pandemic World

To remain relevant and resilient, companies and leaders must strive to build business models using three key components for growth.

  • Data, AI, & Machine Learning
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The AI & Machine Learning Imperative

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In the face of a global health and economic crisis, many traditional companies have suffered tremendous losses, and some have shuttered their doors. Those that heavily rely on physical capital (for example, stores, goods) and human capital (for example, services) were already vulnerable in economic downturns. The pandemic has exacerbated the lack of resilience in these business models, which have struggled to compete against digitally centric companies that can leverage data and machine learning to create valuable insights, intelligence, and capabilities across the organization.

For instance, compare companies whose products are like air (customers rely on them all day long for business, personal, or financial use) with those that are like haircuts (customers use them sporadically; they are nice to have but are not critical to their needs). Those in the former category that are being used constantly with little effort have proved to be resilient even in times of crisis. We typically know these as software-as-a-service (SaaS) products, such as Salesforce for business or Amazon Prime for consumers. In addition, those companies that combine SaaS with multisided platforms (like marketplaces) to fulfill their customers’ needs through a network of partners (such as Apple’s developer network) have an added advantage. These new, three-pronged models go far beyond SaaS and include the following:

  • A community of active B2B and B2C users that creates a network effect due to their interactions.
  • A marketplace that delivers offers from sellers and suppliers to meet customers’ needs.
  • A secured data lake powered by AI that enables customized offers and insights.

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We call this new winning combination a modern business model (MBM). In fact, MBMs occupy four of the top 10 spots of the S&P 500’s most valuable companies: Apple, Amazon, Alphabet (Google), and Microsoft. And they are not alone — Shopify, Spotify, and others have adopted this new AI-powered, subscription-based model with marketplaces.

Based on our own machine learning analysis of the Russell 3000 Index (see “Comparing the Resilience of Modern vs. Legacy Business Models”), we found that SaaS, marketplace, and modern business models have proved to be more resilient than their legacy business model counterparts in times of disruption.

While adopting a full MBM is not possible for many legacy companies (which rely on physical and human capital), SaaS companies are well positioned to add AI-powered data lakes and marketplaces of sellers and partners. (Our team has also created an assessment model for SaaS companies to determine whether they have MBM potential.) And if your company is a marketplace, it may also be primed to achieve the modern status; the question you need to ask yourself is, can you create a subscription service that is critical (like air) to your buyers’ and sellers’ offers? By adding these key components to your growth strategy, you can begin to move from laggard to leader.

Product-Led Growth Is the Future of SaaS Growth

To put a fine point on the power of the “like air” SaaS solution, product-led growth is a growth model that focuses on the product itself to drive customer acquisition, retention, and expansion.

With a modern business model, companies must provide a valuable B2B or B2C software solution that becomes critical for users as they perform their daily functions. To do that, MBMs use AI to generate and present data, to both business and consumer customers, that’s used in combination with SaaS tools to create greater value. Machine learning enables valuable insights that drive action for a business’s ecosystem of product users. For example, one of our portfolio companies, Fiix , is a cloud-based maintenance management system and emerging marketplace. AI tracks and analyzes parts and inventories and alerts users if a critical part is projected to run low, allowing the customer — or even the machine — to solve the issue by ordering the required part.

Imagine a marketplace that matches salons and clients. Before this marketplace scales to critical mass, it’s very easy to disrupt. However, if we add a SaaS solution that allows owners to keep track of operational data like appointments, payments, inventory, and client profiles, and power it with AI, the value increases. In this example, AI can facilitate personalized offers from sellers to buyers. Based on their observed wants, needs, and purchase behaviors, clients are sent reminders to schedule their next appointment, and buyers receive alerts for low inventory or the need to place orders. A good example of this is Mindbody , an online marketplace and AI-driven software solution for boutique gyms, salons, spas, and their clients. The private software maker, which was acquired in 2019 for $1.9 billion, has a successful MBM that is integral to a user’s daily workflow.

AI, when used with care and compassion, enables companies that are data-, machine-, and network-centric to begin understanding the feelings of their customers and suppliers.

Network Growth Is Critical to AI and Data Generation

In today’s digitally centric world, increased access to people and their data have made offer personalization possible, and even expected by users. Business and consumer customers want to feel especially important, regardless of how fast your company is growing. However, many organizations focus on themselves — their internal processes, people, and products — and spend little time or effort on customer engagement and loyalty other than social media likes. Profitable growth begins with creating more promoters and fewer detractors. MBMs use AI and machine learning to increase customer loyalty by recognizing and serving the needs of customers with an almost human-level degree of understanding and personalization — or empathy at scale. Given that empathy is the ability to understand and share the feelings of another person, our belief is that AI, when used with care and compassion, enables companies that are data-, machine-, and network-centric to begin understanding the feelings of their customers and suppliers. It even enables the sharing of those feelings among their network participants so that their partners can meet their needs with offers of goods and services. An example of this is DigniFi , which uses machine learning and data to match consumers who need car repair financing with lenders that want to reach those consumers with myriad offers.

In the marketplace environment, this means better matching to users’ needs and creating a tailored experience, by surfacing the information and features that are most relevant to them. The value scales with each additional participant, which drives community development and growth. As more matches take place, the data and insights expand in exponential fashion, leading to improved user experience, more features, and more value. This growth attracts more users, which continues the flywheel cycle of more data to improve the community experience. As the network grows, it becomes harder for community members to leave for a competitor, especially if this is where everyone is. Eventually, the marketplace grows to an impassable data lake — competitors in the industry will struggle to cross it. In this way, AI is an essential component for MBM businesses to foster customer empathy and create supplier value on an unprecedented scale.

What gives MBMs absolute advantage over traditional and SaaS business models is that MBMs actually become stronger as they get bigger. AI and machine learning allow MBMs to see greater returns instead of the decreasing value of investment that many companies see as they expand.

Failing to Prepare Is Preparing to Fail

Related articles.

You’ve probably heard the classic advice to start with the end in mind. Another way of saying it: Failing to prepare your business for success in today’s modern environment is preparing to fail. There are three factors of success in a pre- and post-COVID-19 world:

  • A data- and AI-centric strategy that drives insights from every interaction and helps match customers’ wants and needs with suppliers’ products and services at scale.
  • A SaaS product that is as critical as air, providing a reason for both customers and suppliers to interact with your company all the time.
  • A marketplace that goes far beyond your own offers, in which your sellers and partners meet each and every need of your customers.

Companies that neglect these three critical ingredients will mistakenly think that somehow the products and services they market, make, and sell will suffice in a world in which customers can get whatever they want, wherever they want it, from whomever they want it. To remain relevant and resilient, companies and leaders must strive to build business models in a way that ensures that these three components are working together: AI that enables and powers a centralized data lake of enterprise data, a marketplace of sellers and partners that make individualized offers based on the intelligence of the data collected and powered by AI, and a SaaS platform that is essential for users.

About the Authors

Lanham Napier ( @lnapier ) was the CEO of Rackspace and is the CEO and cofounder of BuildGroup, a permanent capital fund that invests in growth companies and private investments in public equity. Jim Curry was a senior member of the Rackspace leadership team and cofounded BuildGroup, where he leads the company’s investment activities. Barry Libert ( @barrylibert ) is the CEO of AIMatters, a business model data science startup. He is a strategic adviser to BuildGroup and sits on a number of its portfolio company boards. K.D. de Vries is in charge of marketing and thought leadership at BuildGroup.

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Fortune 100 Best Companies to Work For

Finding a best company to work for seems an elusive task for disillusioned young and older employees alike. Any employer worth its salt has recognized and responded to the shifting demands of the workforce in order to hold on to top talent. Like any youthful type, Gen Z is reckoning with working for “the man,” but our 27th edition of the Best Companies to Work For list, published with our partners at Great Place to Work, shows an emerging corporate equivalent of “the man in therapy.” Helping employees find meaning in their jobs, many of these best companies offer wellness benefits and a commitment to their workforce looking as diverse as the nation’s population. In practice, creating a more empathetic workplace looks like staying loyal to workers, emphasizing the needs of individuals with diversity and inclusion initiatives, and, naturally, paying employees well. 

  • 2 Cisco Systems
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  • 5 Synchrony Financial
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  • 7 Accenture
  • 8 Marriott International
  • 9 Cadence Design Systems
  • 10 Comcast NBCUniversal

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This is a singular moment for CIOs: here is how they can take advantage to unlock true business value across their enterprise.

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How do you simplify a complex enterprise transformation; Accenture’s Jason Sain recommends starting with a clear vision and value creation story.

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By focusing on new opportunities provided by cloud, data and AI, CSPs can accelerate their legacy technology transformation to resolve tech debt and position themselves for new product and service growth. 

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CIOs can bring the greatest value to transformation. Accenture’s Greg Douglass explains how CIOs address new challenges in today’s business.

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News & features, winter center, total solar eclipse cloud forecast: what will the weather be like.

Clouds aren't the only concern for eclipse viewers. Severe weather could present problems for thousands traveling to or from viewing destinations.

Published Apr 1, 2024 9:23 AM PDT | Updated Apr 5, 2024 10:07 AM PDT

What will make this year’s eclipse different from the one in 2017? When will the next one be in the U.S.? We’re answering those questions and much more.

The final countdown is underway until the moon's shadow casts part of the United States into darkness for a few fleeting moments, and the deciding factor of whether or not people in the path of totality see the event may boil down to one thing: clouds.

The eclipse takes place on Monday, April 8, and for areas in the path of totality, it will be an afternoon affair, with the exact timing varying depending on your location. People outside of the path of totality will still be able to see a partial solar eclipse as long as clouds don't spoil the show.

AccuWeather's latest total solar eclipse cloud forecast is looking promising for some but concerning for others, AccuWeather lead long-range forecaster Paul Pastelok said. Most places in the vicinity of the path of totality will have to deal with some level of clouds, whether high or low.

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Where will the best weather be for viewing the eclipse?

Clouds can break for some sunshine, just in time for the afternoon viewing from Chicago to Cleveland, Pastelok said. A narrow region of good viewing is now opening up for cities like Kansas City, Indianapolis, and St. Louis.

"The best locations for viewing should be across the Southwest, out of the mountains. California, again, out of the mountains, New England, and parts of the mid-Atlantic and Southeast, Pastelok explained. "Cities like Los Angeles, El Paso, New York City, Boston and Raleigh should all have nice views of the eclipse from start to finish," he added.

What areas face a cloudy forecast for Monday?

AccuWeather long-range expert Joe Lundberg said places along or near the path of totality that will have more adverse viewing conditions appear to be from Missouri and Kansas southward into central and east Texas, where it is likely to be rather cloudy with showers and perhaps some thunderstorms.

"Other areas with poor viewing conditions will be from Wisconsin westward through South Dakota and Nebraska to Washington and Oregon," AccuWeather long-range expert Joe Lundberg added.

There is also a concern that a band of clouds will move across western/central Pennsylvania and New York around the time of the eclipse, Pastelok said. "There is even a possibility of a passing shower. This could lower viewing opportunity for a couple of hours."

Severe weather threat to eclipse viewers

In addition to the cloud forecast, Pastelok said there are a few factors involved in the weather pattern leading up to the eclipse that could affect those traveling to and from viewing locations. "High southerly winds are likely across the central and western Plains Friday through Sunday with wind gusts between 40-60 mph."

Travel can be impacted due to visibility and strong crosswinds, especially along the major west-to-east highways, including I-80 and I-40. "Make sure any loose material, including tents and items on top of cars and campers are securely fastened," Pastelok warned.

A severe weather threat looks likely from late Saturday through Sunday from the western Plains to the Midwest, but less potential of making it to the Ohio and Tennessee Valleys. Areas around Kansas City, Missouri and Omaha, Nebraska, can be in the pathway of these storms. "The biggest threat will be large hail and strong, damaging wind gusts," Pastelok said, adding, "Isolated tornadoes are possible."

AccuWeather Senior Director of Forecasting Operations, Dan DePodwin is urging eclipse travelers to be aware of their surroundings. “With so many people traveling to unfamiliar areas and camping, or staying in an RV, it’s important to take a few minutes to locate your nearest storm shelter. It may be a sturdy restroom building, campground office, a nearby public storm shelter, or even a 24-hour retail store,” he said.

Those camping along the path of totality are urged to be prepared. Large hail can bring damage to vehicles, bring down tents, and cause injuries. “Be careful where you park your vehicle and where you set up your tent or camper. You do not want to be near large trees if a severe storm with gusty winds approaches," DePodwin warned.

Showers and drenching thunderstorms can occur across east Texas and the lower Mississippi Valley on Monday and slowly move northward into southern Oklahoma later in the day and night. Some of the heavier storms can produce flooding, hail, and brief strong wind gusts. These storms can spread and extend toward western Texas late on Monday into Tuesday and even expand into West-central Texas.

It only takes 55-mile-an-hour wind gusts to uproot trees, even less if the ground is saturated from recent rainfall. Trees can be incredibly dangerous in severe weather. It’s important for campers to know where they can shelter before a storm moves in.

Continue to check back with AccuWeather.com daily through April 8 for the latest eclipse cloud forecast.

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  1. Business Model Examples : 50+ Awesome Models To Inspire You

    top 10 business model

  2. What is a Business Model & Top Examples

    top 10 business model

  3. A complete Guide on Business Model vs Business Plan (2022)

    top 10 business model

  4. 6 most popular business models and examples

    top 10 business model

  5. What Is a Business Model? 30 Successful Types of Business Models You

    top 10 business model

  6. 50 Different types of Business Models

    top 10 business model


  1. Business Model Part Discussion // Business Model meaning about discussion // Business model

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  3. The Top 10 Business Ideas In 2024

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  5. Top 10 Business Analyst Skills for 2024: The Future of Business Analysis

  6. Top 10 Business Ideas for IT Students


  1. 8 Types of Business Models & the Value They Deliver

    8. Agency/Promotion. Agents create value by marketing an asset, which they don't own, to an interested buyer. They then earn a fee or a commission for bringing the buyer and seller together. Thus, instead of using their own assets to create value, they team up with others to help promote them to the world.

  2. Business Models: Types, Examples and How to Design One

    Example: A business that rents machinery like backhoes, augers and dozers to individuals for their home construction projects is using a leasing business model. 8. Franchise model. A franchise is ...

  3. 50 Types of Business Models (2022)

    Example: Companies like Wikipedia, YouTube, Kickstarter, LEGO ideas, Unilever, Coca Cola (new flavor of beverage) are involved in crowdsourcing. 37. High Touch Business Model. In the high-touch business model, customers' interaction and involvement are on the highest level to make the experience personalized.

  4. The 9 Most Successful Business Models Of Today

    The 9 Most Successful Business Models Of Today. Watch on. The platform-based business. This model is closely linked to the sharing economy and subscription models (see above- in fact, platforms are particularly powerful when combined with a subscription model). Well-known examples of platform businesses include Facebook, GitHub, Uber and Airbnb.

  5. 21 Different Types of Business Models With Examples

    Franchise model examples. Subway. McDonald's. UPS Store. Dunkin'. Merry Maids Residential Cleaning. 5. Direct Sales Business Model. In the direct sales model, a company's employees will be the ones who demonstrate and sell the products or services being offered directly to the intended consumers.

  6. 10 Business Models That Will Inspire You

    5. Tesla. Tesla Motors, Inc. is an American automotive and energy storage company that designs, manufactures, and sells electric cars, electric vehicle powertrain components, and battery products. It aims to accelerate the advent of sustainable transport by bringing compelling mass-market electric cars to the market.

  7. 10 Proven Business Models for Startups To Try In 2023

    Let's now find out the top 10 most popular yet efficient business models that have already been implemented by such businesses as Amazon, Walmart, Uber, Airbnb, and many others! Short description, how it works, why it works, pros & cons, real-life examples of each model.

  8. The 7 Most Successful Business Models Of The Digital Era

    Advertising-Supported. The ad-supported business model is among the most successful of the digital era. It is behind the rise of companies like Google and Facebook, which match users to products ...

  9. How to Create an Expert Business Model: A Detailed Guide

    Edit and Download. The bundling business model can be a great idea if offering multiple products or services for a lower price point will still be profitable for your business. Here's a template you can use to explain this model to stakeholders. Customize this template and make it your own! Edit and Download. 3.

  10. Take a Look at These 10 Business Models Which Have Been Successfully

    Top 10 business models that every major company uses. In today's business landscape, selecting the right business model is pivotal for a company's success, surpassing even groundbreaking products.

  11. What is a Business Model with Types and Examples

    Business Model: A business model is a company's plan for how it will generate revenues and make a profit . It explains what products or services the business plans to manufacture and market, and ...

  12. 10 Influential Business Models

    Top 10 Influential Business Models. In the NASDAQ system there are three players: investors, broker-dealers, and market makers. Learn more about the NASDAQ in this HowStuffWorks video. Henry Ford, famous for using the assembly line in his car factories, neither founded the world's first car company nor invented the assembly line.

  13. Foundr's Comprehensive Guide to Business Models

    This is an extremely effective strategy, and some players, like Gilt, have built their businesses to $1 billion thanks to this tactic. You'll often find this commerce business model applied to high-ticket items, like luxury goods and designer items. Examples: • Gilt.

  14. 10 Types of Business Models to Explore

    Different types of business models to consider. Operating a brick-and-mortar store is one of the most common business models. To illustrate each model below, we've created a hypothetical business called The Greenery, an independent neighborhood plant store that sells local and exotic plants. Here's what it could look like if The Greenery ...

  15. The Top 10 Startup Business Models

    Direct Sales Model. There are a few different types of direct sales. The two most popular are inside sales, which takes place when a customer places an order directly with the company, or business development representatives whose role is to sell the product to potential prospects; and outside sales, which involves face to face selling.

  16. The Biggest Business Trends In 2022-2025. And The Ones That ...

    There are favorite trends, for sure. Bernard Marr , Sophie Bowman and Anis Uzzaman suggest at least the following: Sustainability/Is a Must/Renewable Energy. Humans Vs Robots. Changing Talent ...

  17. Modern Business Models Will Drive the Post-Pandemic World

    Get monthly insights on how artificial intelligence impacts your organization and what it means for your company and customers. We call this new winning combination a modern business model (MBM). In fact, MBMs occupy four of the top 10 spots of the S&P 500's most valuable companies: Apple, Amazon, Alphabet (Google), and Microsoft.

  18. 8 Profitable Online Business Models for 2024

    1) The Service-Based Online Business Model. EXPERIENCE NEEDED: High. STARTUP COSTS: Low (<$500) MAINTAINING COSTS: Low. TIME INVESTMENT: High. PROFITABILITY: High (although not passive) Having a service-based online business model is one of the most popular approaches today.

  19. The 10 Biggest Business Trends For 2024 Everyone Must Be Ready ...

    Discover the top business trends for 2024, from the rise of generative AI and the emphasis on soft skills to the importance of sustainable practices and data monetization

  20. 10 Most Common Business Models to Make a Profit

    1. Product is free, revenue is from advertisers. This is the most common model used by online businesses and apps today, the so-called Facebook model, where your service is free, and the revenue ...

  21. 10 Business Models for Every Entrepreneur

    Check out the new home for all things Valuetainment! - https://valuetainment.comEver wanted to get personally mentored by Patrick Bet-David, but can't make t...

  22. Top 10 Business Models that Every Major Company Uses

    Register Now. Have a look at the top 10 business models that new and established organisations popularly use to their advantage. Subscription Service. Freemium. Affiliate Marketing. Franchise. Direct Sales. Peer-to-Peer. Razor and Blade.

  23. 100 Best Companies to Work For

    Creating a more empathetic workplace looks like staying loyal to workers, emphasizing D&I initiatives, and paying well.

  24. Technology Strategy and Consulting

    of CIOs are focusing on an overall business transformation, versus a single function, in 2024. 70%. of enterprise transformation projects fail to meet expectations. ... Design and implement an intelligent operating model built for business agility, resiliency and growth. Have a clear vision for your tech transformation. Prioritize what you want ...

  25. Total solar eclipse cloud forecast: What will the weather be like?

    The countdown is on and in a few days, millions of people from Mexico to Canada will see a celestial spectacle unlike any other, but forecasters warn clouds could dash the hopes of onlookers in ...

  26. Most Profitable Businesses In 2024

    3. Bridal Gowns and Accessories. The bridal industry is growing by 4.4% and is expected to reach a $79.8 billion valuation by 2027. While people buy many retail products online, nearly 85% of ...

  27. Watch Waning EV Demand in the US

    David Sandalow from Columbia University's Center on Global Energy Policy, takes us through some of the reasons behind the dwindling demand for EVs in the US. He joins David Westin on "Wall Street ...

  28. Indian carmakers post higher March sales; end fiscal 2024 at record

    Maruti Suzuki , Tata Motors and Mahindra & Mahindra reported higher car sales in March, wrapping up fiscal 2024 at record levels, monthly data from the automakers showed on Monday.