12 Successful Business Models to Help Make a Profit
Updated July 14, 2023
An organization needs an established business model to prove to investors that a company has a clear strategy for making money and sustaining its profits. After building and using a comprehensive business model, it continues updating it as the company develops and the industry evolves. Learning about the different types of business models can help you decide which one might help the organization you work for earn more profits.
In this article, we discuss business models and explore some models you can consider.
A business model is a plan for how the company plans to generate value and profit.
Four business model elements include the key resources and profits, customer value proposition and profit formula.
Organizations can use many standard and hybrid business models, including freemium, subscription and resale.
What is a business model?
A business model is a company's strategy for building revenue and making a strong profit. It includes key information that investors need to ensure they're investing in a financially stable and profitable organization. Business models typically detail a company's products or services, its target market and how it plans to increase revenue.
A business model has several components:
Related: Guide to Best Business Models
Elements of a business model
These are some business model elements:
Customer value proposition: This describes what the customer receives as a result of engaging with the organization.
Profit formula: The profit formula describes how the company intends to make money.
Key resources: Financial, human, intellectual and physical resources comprise this element.
Key processes: This element describes the process through which the company generates value and what makes them unique.
Types of successful business models
Here are several successful business models you might explore:
1. Subscription-based model
A subscription-based model is one where companies offer ongoing services or products to encourage customer loyalty and recurring payments. Their customers typically sign up for ongoing use of the product, so they make weekly, monthly or yearly payments, rather than a one-time purchase. If customers like this service or product enough, they continue to purchase it each period, which saves employees time, effort and resources in convincing customers to buy the product again.
Example: An office software suite offers a subscription model for those who don't want to purchase a physical copy of the software.
2. Freemium model
A freemium business model is where companies offer free products or services to see if customers might purchase them. This gives customers an idea of how a product works and if they want to continue using it. The free version of a product typically contains limited features. Customers gain access to more features if they upgrade to a paid plan.
This model lets customers try out a product to see if it benefits their personal or professional lives without undergoing any financial risks. If the free version of the product is user-friendly and valuable to customers, it can convince them that upgrading to a paid version is worth it.
Example: A music streaming company offers a free, limited version with ads and provides an ad-free full version of the software when customers pay a monthly or annual fee.
3. On-demand model
An on-demand model is one where customers can access products as needed. As technology evolves, more consumers can receive information or content as quickly as possible.
When customers use an on-demand model, they can sign up for a product or service quickly using simple forms and inputting their information. From there, they can download their software or receive a product and start using it immediately. This improves the convenience and reliability of a brand.
Example: A food delivery company partners with local businesses, such as restaurants and convenience stores, and gig economy workers to meet the demand for food delivery.
4. Product or service model
A product or service model is a broad model where companies design their offerings and marketing efforts to appeal to customers, often offering customizations. It involves creating the product or service of the company's choice and promoting it using the desired marketing channel. The company can sell and market each of its products in different ways.
For example, it can sell some of its products as one-off purchases and others can use ongoing subscriptions. This model has a fairly loose structure compared to others and doesn't require strict guidelines or plans that employees must closely follow.
Example: A skincare company sells razors, shaving cream and after-shave serums through subscriptions and individual purchases.
5. Reseller model
A reseller model is when a company doesn't physically own the products or services it sells and instead represents the brand through promotional offers catered toward its target audience. Business owners may partner with other companies to sell and market their products to different audiences through their websites.
This company may showcase the product or service on its outlets and feature the selling price for products. This company then receives profits from selling the products and may have to split its earnings with the business that creates or owns the products, depending on the initial agreement between the two parties.
Example: A grocery store purchases produce from farmers and other goods from manufacturers, then sells them in the store to customers.
6. Broker model
Companies with a broker model typically provide a platform that connects product owners and sellers to customers. It offers one streamlined location for customers to browse products or services from different businesses and make safe purchases through the platform. A company using this model typically monitors the interactions between buyers and sellers and ensures the security of each transaction. Organizations using this model typically earn their income by applying small fees to these transactions.
To ensure customers continue using this platform, the company must make sure it's user-friendly, easy to navigate and functions properly at all times.
Example: An apartment brokerage helps clients find apartments and townhomes within their budgets in a major city. It charges a percentage of the deposit for the services.
7. Ad-based model
An ad-based model is one where a company creates a free product or service for customers to use regularly. If a company reaches a wide audience and offers a reliable product or service, this business model can provide strong revenue. The profits the organization generates rely solely on revenue received from advertising other companies' products and services.
This can be a successful business model when businesses prove that they bring in a strong following by showing the views, clicks and engagements gained from customers visiting the website. If a website has high viewership, companies have a strong chance of customers seeing their advertisements if they feature them on this site, which can attract more potential customers to their business.
Example: A mobile video game company creates free games to play with intermittent ads to generate profits.
8. Agency-based model
Agencies and other companies that offer valuable services to customers use an agency-based model to attract potential customers with quality content and free resources. This allows a brand to establish itself as a thought leader in the industry and builds meaningful relationships with customers. Potential customers see this company as a reliable source of information, which can help them trust the products or services it sells.
Marketing to customers using this model takes time and effort, as the company must continuously provide resources and content that adds value to their lives. It can often be worthwhile as it leads to strong customer loyalty and ongoing use of the product or service, resulting in higher and continuous revenue and profits.
Example: A marketing firm offers marketing strategy services to clients. This marketing firm publishes its own content and guides on how to take advantage of industry trends to establish the brand as a thought leader.
9. Social business model
A social business model is when companies focus on personalizing their services to each customer. Customers often feel confident knowing the organization they purchase from has dedicated employees who are passionate about the work they contribute. To distinguish themselves from the competition, organizations may use a social business model to personalize their services and interact with customers through social media channels, email and other marketing efforts.
Example: A clothing company specializes in creating shirts with custom artwork of the customer's pet. They interact with customers to gather photos and create a stylized sweater, t-shirt or jacket.
10. Customer-centric model
A customer-centric model is when companies dedicate a majority of their time, effort and resources to providing valuable and memorable services to customers. Customer-centric businesses work to stand out from competitors by offering immediate support to customers when needed and by providing resources customers can access easily when the support team isn't available. Team members also receive constant encouragement from managers to put the customer first and to provide a one-of-a-kind customer experience that other companies don't typically offer.
Example: A global coffee chain creates customer resources like secret menus, curated coffee shop playlists and individualized drinks. When training new team members, customer happiness is presented as the top priority.
11. Data-driven model
Usually adopted by technology companies, a data-driven business model acknowledges that data is an important key to better understanding customer behaviors and ways to enhance the company's performance. With this business model, employees constantly collect, monitor and interpret key data sets to make important business decisions. It also drives employees to test new strategies or products to determine how successful they are and improvements to make after evaluating the data and results.
Example: A soft drink company collects data about its customers to decide which new flavors to introduce and how to structure supply and marketing.
12. Partner-centric model
Partner-centric businesses operate like networks. They outsource work and bring clients from their partners to generate value and profits.
Example: Content Creation Co. is a partner-centered business, and one of its partners is Editing Inc. Editing Inc. sends customers with content requests to Content Creation Co., and Content Creation Co. uses Editing Inc. for all its editing and proofreading needs.
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