By looking at some of the most common types of business models, you can determine which ones best fit the business situation.
The business model is an important decision that you have to spend time on. The decisions you make in this regard will have a significant impact on your profitability as measured by two key variables of entrepreneurship: lifetime value of an acquired customer (LTV, for LifeTime Value of an Acquired Customer) and the customer acquisition costs (CAK). Don’t worry about your pricing at this stage, the choice of your business model affects your profitability much more than your pricing decisions.
Once you’ve established a business model, it’s possible, but usually difficult, to change it. So pick one that sets you apart from your competition and gives you an edge. on them, because they can’t 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 costs
This is the most common business model, where the customer pays a large amount for the product, with the option to take advantage of subsequent updates or maintenance of the product for a recurring fee. The initial amount sometimes comes from the client’s investment budget, especially if it is a large amount, which is a potentially lengthy approval process. On the other hand, the maintenance costs are covered by the operating budget (…)
#2. Cost plus x%
In this scenario, the customer pays a fixed percentage on top of the production cost. (…) The problem is that we have to agree on the numbers, they have to be and remain exact. This model can also be interesting when your product, which is not yet final, will certainly be called upon to evolve further – but when its development is complete, you can migrate to a different business model. (…)
#3. Hourly rates
This model is common for service companies and is similar to the second scenario, except that rates are based on market demand and not cost.
#4. The subscription or lease model
In that case, the customer pays a pre-agreed amount monthly or with another periodicity. It’s a great way to have a steady stream of income. There are many variations, including: annual or multi-year commitment Where monthly commitment.
If you license your intellectual property and earn royalties, you can make a very high gross profit. If you’re licensing your product, you don’t have to no big investments made for production and distribution. You can only grant licenses if the intellectual property is of extreme importance. (…) You don’t spend time on the end user, whose needs you know less well, so your the ability to continuously innovate will be limited. Add to this that the royalty rate is generally equal to one-twentieth or less of the revenue per sale; your MAT will inevitably be affected as well as the best you can hope for is a 5% percentage.
#6. The expendables
For your business, this might be a way to reduce the difficulty of:acquire new customers thereby reducing selling costs and revenue that the customer will bring you over time.
#7. High Margin Complementary Products
As in the consumables 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 also on websites, often for the sale of new cars. (…)
#8. Commercial break
As with newspapers and magazines in their heyday and now with websites, the ability to attract and retain a desirable audience can generate revenue through third parties seeking access to the customers you have attracted. Done right, on a sufficient scale, the model can be very lucrative, as Google and others have shown, but many start-ups have failed to rely solely on advertising. (…)
#9. Reselling collected data or opening temporary access
Similar to the model above, reselling your users’ data involves first enticing them with a free product and then being paid by third parties who want access to demographic and other information about your users. final.(…)
#10. Transaction costs
Online stores often pay or receive commissions for referrals that lead to sales. (…)
#11. Consumption bill
(…) This gives customers more control over their spending because they only pay for the amount of bandwidth they use, not for overcapacity they don’t.
#12. The “mobile phone” plan
It is a predictable, recurring flat rate that the consumer pays in return for a certain consumption, with surcharges, often at a much higher marginal rate if it exceeds the contractual ceiling. The base price is generally much lower than the invoice price when exceeded. (…)
#13. Parking meters and late fines.
What a business model! No wonder cities have such armies of parking meter controllers! A few years ago, Blockbuster charged extra for customers who returned their film late. The problem is, you can lose loyal customers by punishing them this way: when Netflix entered the market by insisting that it wouldn’t charge for delays, Blockbuster lost a lot of market share that it never recovered. (…)
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 purchase digital goods (which have virtually no marginal cost because they are electrons). Because 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. (…)
If an entrepreneur has a great idea and can execute it, but lacks the desire, skills or resources to launch it, he can use the franchise model. He will then hit one percentage of turnover and a large amount at the start in exchange for the knowledge and the developed brand. You can also earn money by selling its branded products to franchisees who distribute them.
#17. operation and maintenance
A new company may not really want to sell a product, but would rather get paid to operate a factory or other facility. If this formula is similar in some respects to an advisory contract, the client has a greater interest in controlling or reducing costs, as they directly affect their income. (…)
Bill Aulet heads 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 Successful Business”, published by Eyrolles, 2018, 310 pages, 29 euros.