17 business models to find sources of income, Cash management

Reviewing some of the most common types of business models will help identify which one best fits the business situation.

The business model is an important decision that you need to spend time on. The decisions you make in this regard will have a significant impact on your profitability as measured by two key entrepreneurial variables: lifetime value of an acquired customer (LTV, for lifetime value of an acquired customer) and customer acquisition costs (CAC). Don’t worry about your prices at this stage, the choice of your business model affects your profitability much more than your pricing decisions.

Once you have established a business model, it is possible, but usually difficult, to change it. So choose one that sets you apart from your competition and gives you an edge. on them because they cannot easily give up theirs to adopt yours. (…) The list below contains many possible options, but nothing forces you to limit yourself to them when designing your own business model.

#1: One time payment plus maintenance fees

This is the most common business model where the customer pays a large sum for the product, with the option to benefit from subsequent updates or maintenance of the product for a recurring sum. The initial amount sometimes comes from the client’s investment budget, especially if it is a large amount, which implies a potentially lengthy approval process. On the other hand, maintenance costs are covered by its operating budget (…)

#2. Cost plus x%

In this scenario, the customer pays a fixed percentage on top of the production costs. (…) The problem is that we must agree on the figures, which must be precise and continue to be so. This model can also be interesting when your product, which is not yet final, will definitely be encouraged to develop further – but when its development is finished, you can migrate to a different business model. (…)

#3. Hourly rates

Common to service companies, this model is similar to the second scenario, except that the tariffs are based on market demand and not on costs.

#4. The subscription or leasing model

In this case, the customer pays a pre-agreed amount every month or with other frequency. It’s a great way to have a steady stream of income. There are many variations, e.g annual or multi-year commitment Where month to month commitment.

#5. Licenses

If you license your intellectual property and earn royalties, you can earn a very high gross profit. Also, if you license your product, you don’t have to no big investments must be made for production and distribution. You can only grant licenses if the intellectual property is of extreme interest. (…) You will not spend time on the end user, whose needs you will therefore know less well than yours the ability to continuously innovate will be limited. Add to this that the royalty rate generally corresponds to one-twentieth or less of the revenue per sales; your MAT will inevitably be affected too as the best you can hope for is a rate of 5%.

#6. The expendables

For your business, this may well be a way to reduce the difficultyacquire new customers thereby reducing the cost of sales and increasing significantly revenue that the customer will bring you over time.

#7. Complementary high margin products

As in the consumer goods business model, the core product is sold at a very low margin, but the sale of complementary products at a very high margin makes it possible to increase the overall margin. This business model is often used in consumer electronics stores or on websites also, often, for the sale of new cars. (…)

#8. The ad

As with newspapers and magazines in their heyday and now with websites, the ability to attract and retain a desirable demographic can make money through third parties who want access to the customers you have attracted. When done right, at sufficient scale, the model can be very lucrative, as Google and others have shown, but many startups have been guilty of trying to rely solely on advertising. (…)

#9. Resale of collected data or opening of temporary access

Like the model above, reselling your users’ data involves first enticing them with a free product and then getting paid by third parties who want access to demographic and other information about your users. finally.(…)

#10. Transaction Fees

Online stores often pay or receive commissions for referrals that lead to sales. (…)

#11. Bill consumption

(…) This gives customers more control over their spending because they only pay for the amount of bandwidth they use, not excess capacity they don’t use.

#12. The “mobile phone” plan.

It is a predictable, recurring fixed rate that the consumer pays in return for a certain consumption, with surcharges, often at a much higher marginal rate, if it exceeds the ceiling set in the contract. The basic price is generally much lower than the invoice price in the event of an overrun. (…)

#13. Parking meters and late fines.

What a business model! No wonder cities maintain such armies of parking meters! A few years ago, Blockbuster charged extra for customers who returned their movies late. The problem is that you can lose loyal customers by punishing them like this: When Netflix entered the market by emphasizing that it would not charge for delays, Blockbuster lost a lot of market share that it never regained. (…)

#14. Microtransactions

A new model has emerged with online video games – that of microtransactions, which newspapers are currently testing in the hope that this formula can save them. In this model, customers are asked for their credit card number and make very small transactions (defined as less than $12, often $1 or less) to obtain digital goods (which have virtually zero marginal cost since they are electrons). Since there are many, they can add up.

#15. Savings or shared income

Despite its conceptual elegance, this business model, which is often considered, is rarely used due to the complexity of its implementation. In this scenario, the customer only pays if he has realized savings or income thanks to the product. (…)

#16. Franchise

If an entrepreneur has a good idea and can implement it, but does not have the desire, skills or funds to launch it, they can use the franchise model. He will then hit one percent of turnover and a large sum at the start in return for the knowledge and the developed brand. You can also earn money by sells its branded products to franchisees who distribute them.

#17. operation and maintenance

A new business may not actually want to sell a product, but rather be paid to operate a factory or other facility. If this formula resembles a consulting contract in some respects, the client has a greater interest in controlling or reducing costs as they directly affect his income. (…)



THE AUTHOR:

Bill Aulet directs the Martin Trust Center, the largest incubator at the Massachusetts Institute of Technology (MIT). This text is taken from his book “The entrepreneurial discipline: 24 steps to develop a success business”, published by Eyrolles, 2018, 310 pages, 29 euros.


Leave a Comment