The Process

Introduction

1 Find a problem to solve

2 Craft your value proposition

3 Define a business model

4 Specify Go-to-market strategy

5 Identify and test hypotheses

6 Build an MVP

7 Launch, grow and improve

Introduction

Intro

Business models

What is a business model

• Fancy name for how you make money
• Do not reinvet the wheel, copy one that works

A business model is a strategic framework that outlines how a company creates, delivers, and captures value.

It encompasses the key components of a business, such as the target customers, value proposition, revenue streams, cost structure, and core activities. A well-defined business model aligns resources, processes, and customer needs to drive profitability and sustainable growth.

ChatGPT Inputs

Certainly! Here's a complement to the previous lists, including the advantages and disadvantages, as well as primary Key Performance Indicators (KPIs) for each business model:

Traditional Business Models:

1. Manufacturer: Advantages: Control over product quality, potential for economies of scale in production. Disadvantages: High initial investment, inventory management challenges. Primary KPIs: Sales revenue, production costs, inventory turnover.
2. Retailer: Advantages: Direct interaction with customers, flexibility in product selection. Disadvantages: Intense competition, high overhead costs. Primary KPIs: Sales revenue, foot traffic, average transaction value.
3. Franchise: Advantages: Established brand recognition, support from franchisor. Disadvantages: Franchise fees and royalties, limited operational flexibility. Primary KPIs: Franchise sales, royalty revenue, customer satisfaction.
4. Service Provider: Advantages: High-profit margins, expertise-based competitive advantage. Disadvantages: Reliance on client demand, resource-intensive. Primary KPIs: Revenue per client, client retention rate, service delivery efficiency.
5. Licensing: Advantages: Low production costs, revenue from licensing fees. Disadvantages: Dependence on licensees, potential loss of control over IP. Primary KPIs: Licensing revenue, number of licenses, IP infringement cases.

Business Models Suitable for Startups:

1. Freemium: Advantages: Wide user adoption, potential for upselling premium features. Disadvantages: Monetization challenges, conversion from free to paid users. Primary KPIs: User acquisition, conversion rate, revenue from premium subscriptions.
2. Marketplace: Advantages: Scalable business model, network effects, revenue from transactions. Disadvantages: Balancing supply and demand, managing quality control. Primary KPIs: Gross merchandise volume, number of transactions, customer satisfaction.
3. Subscription: Advantages: Predictable recurring revenue, customer loyalty. Disadvantages: High churn rate, delivering consistent value. Primary KPIs: Monthly recurring revenue, churn rate, customer lifetime value.
4. Platform: Advantages: Ecosystem growth, revenue from transactions, ads, or subscriptions. Disadvantages: Building critical mass, maintaining platform integrity. Primary KPIs: User growth, engagement metrics, revenue per user.
5. On-demand: Advantages: Convenience for users, revenue from service fees. Disadvantages: Balancing supply and demand, operational efficiency. Primary KPIs: Service utilization, customer ratings, average response time.

Business Models Suited for Small Online Businesses:

1. Dropshipping: Advantages: Minimal upfront investment, reduced inventory risk. Disadvantages: Limited control over shipping and fulfillment, lower profit margins. Primary KPIs: Revenue per order, fulfillment accuracy, supplier performance.
2. Affiliate Marketing: Advantages: Passive income potential, no need to create own products. Disadvantages: Reliance on affiliate program policies, changing market dynamics. Primary KPIs: Click-through rate, conversion rate, affiliate commission.
3. Digital Products: Advantages: Low production and distribution costs, scalable sales. Disadvantages: Intellectual property protection, competition. Primary KPIs: Sales revenue, conversion rate, customer reviews.
4. Ad-based: Advantages: Revenue from ads, potential for passive income. Disadvantages: Ad-blockers, dependency on traffic volume. Primary KPIs: Ad impressions, click-through rate, ad revenue.
5. E-commerce: Advantages: Global reach, direct customer relationships, potential for growth. Disadvantages: Intense competition, logistics and fulfillment challenges. Primary KPIs: Conversion rate, average order value, customer retention.

Remember that these advantages, disadvantages, and KPIs may vary based on the specific

In the dynamic landscape of business models, there are several innovative and unconventional approaches that have emerged in recent years. Here are a few examples of innovative "mis-business" models:

1. Razor-and-Blade Model: This model involves selling a primary product at a low or even subsidized price, while generating revenue from the sales of complementary or consumable products. For example, companies like Gillette sell razors at a low cost but make profits from selling replacement blades.
2. Sharing Economy Model: This model enables individuals to share or rent their underutilized assets or resources, creating a marketplace for peer-to-peer transactions. Companies like Airbnb, which allows people to rent out their homes or rooms, and Uber, which connects drivers with riders, are prominent examples.
3. Freemium Model: This model offers a basic version of a product or service for free, while charging for premium features or advanced functionality. Companies like Spotify and Dropbox have successfully adopted this model, attracting a large user base with free access and monetizing through paid subscriptions.
4. Platform Model: Platforms create digital marketplaces or ecosystems that connect users, producers, and consumers, often facilitating transactions and interactions. Examples include Amazon, which provides a platform for sellers to reach customers, and App stores like Apple's, which offer a platform for developers to distribute their apps.
5. Subscription Box Model: This model delivers curated products or experiences to customers on a recurring basis. Companies like Birchbox (beauty products) and Blue Apron (meal kits) send monthly subscription boxes tailored to customers' preferences, offering convenience and personalized discovery.
6. Direct-to-Consumer (D2C) Model: This model allows companies to bypass traditional retail channels and sell products or services directly to consumers. By eliminating intermediaries, companies can maintain more control over the customer experience and gather valuable data. Brands like Warby Parker (eyewear) and Casper (mattresses) have embraced this model.

These are just a few examples of innovative business models that have disrupted traditional approaches and garnered success in their respective industries. The key to their innovation lies in creatively addressing consumer needs, leveraging technology, and finding new ways to create and capture value.

Traditional business models

• Retailer: - Advantages
• Direct interaction with customers

Disadvantages:

• Intense competition
• high overhead costs.
• Consulting businesses
• Scaling with people rather than software
• Low margins
• Can be good to learn
• Hardware
• Need lots of capital
• Have low margins
• Difficult to scale

Unicorn business models

The hand-full business models that power most of the Billion Dollar companies.

Two third of the top 100 YC startups are run by either a Saas, Marketplace or Transactional model.

Focus on product innovation, but use a proven business model.

Business Model Guide : YC Startup Library | Y Combinator

The nine most common business models we see in startups with primary metrics to focus on and key takeaways for each.

www.ycombinator.com

• SaaS (Subscription)
• Recurring and predictable revenue
• Lock-in with customer data that goes away when cancelled
• Marketplaces
• Winner takes it all business models (network effects)
• Chicken and egg problem

• Usage Based
• Advertising
• Need organic virality, huge traffic
• Too hard to monetise if not a top 10 website in the Internet
• Bio
• Transactional
• A platform where money flows through
• As close to the transaction as possible, easy to take a cut (vs. affiliate program)
• Become critical infrastructure, hard to replace
• Hardtech
• Tesla, Space X
• Takes soo much to get started, hence, its very hard to break in, huge barrier
• Enterprise
• Difficult to get i
• But very low churn
• E-commerce

Online business models

• Affiliate
• Very far away from a transaction

• Businesses built on other platform
• Work in the early days
• Very dependent on the platform
• If highly profitable, platform replace service by themselves
• Arbitrage contractors

Pricing

Business Model Guide : YC Startup Library | Y Combinator

The nine most common business models we see in startups with primary metrics to focus on and key takeaways for each.

www.ycombinator.com

• You should charge! (do not give for free)
• Teaches you whether user is willing to pay at all
• Teaches who wants the product most
• Teaches how much users are willing to pay / how much value users see

• Do not overthink pricing, just get started, need to be more less ok
• Pricing is not permanent, takes years, plenty of time to capture all value
• Price on value not on costs
• Do not price on costs + margin
• Value could be much higher
• How to find value; ask customers about their problems and how your product can solve their product.
• Make more money
• Reduce costs
• Move faster
• Reduce risk
• Keep incrementally increasing pricing
• Lower pricing is not a winning strategy
• Competitors can easily drop prices if wanted
• Higher price could be associated with higher value
• If price is not accepted could mean two things:
• Value of product needs to be increased
• Problem that is being solved is not big enough
• Could give a lower price for exchange:
• Initial users
• Valuable customer with recognisable logo (social proof)
• If product builds lock-in
• Able to renew at a higher price at a later stage
• How to raise prices
• Only raise prices for new customers
• Give advanced notice that prices will increase (make sure to provide sufficient value)
• Keep pricing simple

Research

Business Models for Startups: Choose the Best One

How to choose the best business model for your startup? Find the answer in our article on startup business models.

www.uptech.team

• Freemium Model
• One-Time Payment (Pay-Per-Use)

The 10 Most Popular Startup Revenue Models

How do you get your product, service, or app into the hands of your target customers? Our guide on the most used revenue models will help you decide. There are

fi.co

• Affiliate Revenue Model
• Licensing
• Retail

10 Proven Business Models for Startups To Try In 2023

Looking for the most effective business models for startups that will work perfectly in 2023? Find this out in a detailed overview by Ideamotive!

www.ideamotive.co

• Hook & Bait Model
• Action

The 11 Most Popular Online Business Models to Know in 2023

Each of these popular online business models gives an opportunity for a six-seven figure career. The online business world has something to offer everyone.

empireflippers.com

• Adsense
• Affiliate Marketing (Amazon)
• Dropshipping
• Amazon FBA (Fulfillment by Amazon)
• Ecommerce
• Infoproducts
• Apps
• Lead Gen

• Consulting

2.2 Chapter

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3 Draw conclusions

As with the end of the previous chapter, it is time to zoom out and draw conclusions regarding the work you have done.

Do you have at least medium confidence in your identification of a product or service that can solve major pains and create significant gains for your target customer?

If yes, complement the 10 Building Blocks of a Business with your results. If no, you may need to continue developing your value proposition and conducting user interviews.

As you see, the picture of your business starts becoming sharper with every step. Next, we will define how you will generate revenues and whether the financials of your business make sense.

Contact

hello@venturebloom.com