So you have a great idea of how to make money or you have identified a need not currently being met in the market, but you aren’t so sure how to make that into a business, let alone be profitable. Here are some of the most profitable business models that are in the market right now and why they are so effective. Hopefully, you can find one that will match your brilliant idea!  

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Freemium

This business model is focused on the idea of providing something of value to consumers for free. They then can opt-in to purchase the premium offering that might include more services or additional products. The biggest benefit of this model is that you can provide a sampling without making consumers take any financial risk. 

The downside is that your marketing game and message better be strong so that they convert from the free version to a paying customer. A great example of the freemium model is Spotify. They also added in a free trial time period to truly alleviate the risk I took when I signed up for the premium version. Not an ad, but if you stream music often then I would consider checking out Spotify because you can play any song any time without advertisements, and to check out their business model.

Subscription

One word, simplicity. From both the customer and the business owner’s perspective, it is a simple business model. The customer knows when they will receive your product or service each month and you can easily estimate revenues each month. This method has one of the highest customer retention rates of the different models. Netflix is an exceptional example of this, you pay once a month and then you have access all month to all of their movies and TV shows. 

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Market Place or Broker

When you think of this model I bet you think of Amazon, or at least you should. Their business is to bring buyers and sellers together in one place. This means little to no inventory or overhead. How do they make their money then if they are not selling anything? This model makes its money through fees on transactions on its secure e-commerce website. If you are looking to sell your product on a market place and are not sure which ones to use read, The Best Online Marketplaces: Best Platforms for Selling Your Products.

On-demand

I’m so guilty of this, wanting instant gratification from my purchases. On-demand business models are focused on this way of life in today’s society. It thrives on our need to have what we want and need instantly. That is why businesses like Uber, where we can order a ride at the push of a button, have been so successful. Having your business on-demand creates efficiency and accessibility for your consumers. Keep in mind, this also might mean some additional supply chain management challenges.

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Direct Sales (in the modern world)

Direct selling has changed in regards to what medium sellers are using. Today they use social media to share their product or service to a wide variety of audiences across the globe. The large benefit to you as the owner of a business that does this is that you hire sellers to sell for you and offer them a commission based on their sales. If you are wondering about other advantages to this business model read Direct Sales Model Advantages.

Virtual Good

Last but not least is the virtual good model. Now you might be thinking, what is that?  Think about when you are playing a game either on your phone or computer and you die. The screen might prompt you to buy an extra life or buy a special weapon to let you continue to play. This is the virtual good model at work. This model has a high-profit margin since expenses are minimal and mostly for bandwidth requirements. Bandwidth is essentially the fast internet service a business using this model would need, since gamers do not want to have to wait for their screen to load. If you want to learn more read, Business and Bandwidth How Much do You Actually Need?

If you are still unsure of how to choose from this list which one would be best for your business idea read, How to Choose the Most Profitable Business Model for Your Startup. I hope you found this helpful for the next step in developing your business! 

If your next step is to find funding for your startup then head over to our website to see how you can apply for a Business Loan.

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