how-to-create-a-business-model

Business model

Today scaling up a startup isn’t just about the product but primarily about the Business Model. In short, a business model is a way a company monetizes over time.

How many Business Model exist? Think of two simple examples. A startup has created a software. That software can be sold for a monthly fee. This kind of business model is called “subscription-based” because to make it work you have to have customers willing to renew the subscription each month. Therefore, you have to find ways for your customers to keep their interest in the product high.

Another example is the “Freemium” business model. In other words, some companies have two versions of a product: free and paid. They use the free product as a hook to get new potential customers. Once those customers get used to the product, they make money by convincing users to become paying customers.

Why is the business model relevant at all? First, based on the business model a company will “behave in a certain way.” From the previous example, a subscription-based company with no Freemium will find right away strategies to get paying customers. Instead, a Freemium based company will focus more on funnel optimization to convert users into customers.

Second, it tells you what metrics to look at. For instance, if you have a software service with a monthly subscription, metrics as CAC, LTV, ARR are crucial.

How many business models can you find in the entrepreneurial world?

The answer should be: your creativity is the limit.

However, the most used are:

Short Definition: figure out how to make money, now!

Published by

Gennaro Cuofano

Creator of FourWeekMBA.com | Head of Business Development at WordLift.io | International MBA

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