Effective Online Business Models for Solopreneurs

An online business model following the logic of traditional business models can be classified in several ways. One simple classification is about who’s the key customer. According to that online business models can be categorized as business-to-consumer (B2C), business-to-business (B2B), and many internet companies also work as peer-to-peer marketplaces.

Who is a Solopreneur?

Being a solopreneur means making a choice for freedom. In short, the business you create won’t be an end in itself, but a means to give you more freedom while creating value for others. In this guide, we’re going to see three online business models you can use to start your solo business.

solopreneur
A solopreneur is usually (not always) a digital entrepreneur who leverages automation, work flexibility, and creativity to develop ultra-lean business models. Those can scale over the one-million-dollar revenue mark with a minimum business overhead, no venture capital funds, and mostly bootstrapped. Those solopreneurs start by mastering profitable microniches.

What is and what is not a solo-business?

Macmillan dictionary defines a solopreneur as a business owner who works and runs their business alone. Although this definition is correct, it also carries some flaws.

In fact, in the business world the solopreneur is seen as the small business owner that does, from A to Z, all the functions and tasks the business requires to survive.

Instead – I argue – the solopreneur doesn’t necessarily do everything on its own but instead focuses on devoting his whole focus on the most critical part of the business while contracting (if necessary) the remaining portion of the company.

In other words, the solopreneur doesn’t have to be the workaholic or self-employed freelancer that works 24/7 just for the sake of running a business.

Quite the opposite. The solopreneur is that person that is making of his side hustle or of what it seemed a part-time business in a full-time commitment.

However, while the classic start-up entrepreneur (the Silicon Valley archetype) is about building a company with the grandiose vision of an exit. Either through venture capital funds or an IPO.

The solopreneur chooses passion and freedom. Its business will be built on the premise that you need to do what you like, by focusing on what you do best that also creates value for others.

In many cases, the solopreneur will soon transition into an entrepreneur (like DuckDuckGo solo-business that turned out in a profitable and successful business).

In other cases, the solopreneur might limit the growth of the company as a choice of freedom. In short, for the solopreneur business isn’t just about money but also about passion, value creation, and most importantly freedom.

Thus, the solopreneur approach might well be the opposite approach compared to the Silicon Valley-type serial entrepreneur, which only aim is to build businesses that scale but that also requires a lot of maintenance and employees.

The solopreneur makes the opposite choice. Thus, let me recap in the following list what a solopreneur is and what it isn’t:

  • bootstrapping vs. funding
  • passion vs. business planning
  • automation vs. employment
  • passive income vs. unbounded growth
  • work less vs. work more
  • more time vs. more capital
  • less capital vs. more employees

In this article, I want to show you a few business models if you’re thinking to start, starting or running a solo business. Those are mainly based on online businesses.

In the following article, I’ve already covered 26 ideas on how to monetize a WordPress blog.

Affiliate marketing

Affiliate marketing is one way to monetize your online business if you have an audience that follows you and it finds you authoritative.

In short, you’ll make money by suggesting tools, services, and things they can buy or use to add value to their business.

To be done correctly, you will need to suggest things you’re passionate about and that you are paying your self.

With affiliate marketing, you can get paid either when someone is buying a product you’re suggesting. Or if they’re taking action (like subscribing to the mail list) on the product, you’re suggesting.

Not all affiliate marketing programs work in the same way. And also based on what you’re good at, what you like and what your audience needs you’ll find the best options for you.

For instance, e-commerce websites, like Amazon Associates, offer a commission that goes anywhere from 3% to 10%, according to the product you’re selling.

amazon-associates-program

Others like eBay Partner Network would pay you as much as 70% of the auction revenues as reported on the website:

Partners earn between 50% – 70% of eBay revenue. The percentage you earn depends on the category of item purchased – such as electronics or fashion. You can earn additional cash for shoppers who haven’t made a purchase on eBay in the past 12 months.

Those are among the most established ones but making money with affiliates depend upon your online business and what fits best you and what creates the most value for your audience.

For instance, if you take Patt Flynn, he mostly makes money with affiliate links:

smart-passive-income-business-vs-traditional-business

If you look at his past income reports you’ll notice how he makes most of its affiliate revenues from Bluehost:

smart passive income Pat Flynn-ConvertKit

That makes sense because his audience is comprised of people that want to start an online business and usually the first step is having a website and a hosting service. As Pat Flynn has a large audience he also has a dedicated page on Bluehost website:

pat-flynn-bluehost-affiliate-marketing

As hosting services is a very competitive industry, hosting companies are willing to pay a substantial amount of money for leads or customers. In fact, with a single sign-up you can make $65:

bluehost-affiliate-program

Other hosting companies, like WP Engine, would even go further and offer $200 for a new customer or 100% of the customer’s first-month payment, whichever is greater. To give you an idea:

wp-engine-affiliate-program

The examples mentioned above are just some of the possibility you have with affiliate marketing. What I like the most about this monetization strategy is that it allows you to be flexible and creative.

If you find the products and services that most fits you and your business and that provide value to your audience; you’re on the right path to be a solo business owner that gets high-profit margins.

Dropshipping/E-commerce

 

e-commerce-business-models
We can classify e-commerce businesses in several ways. General classifications look at three primary categories:
– B2B or business-to-business, where therefore a business sells to another company.
– B2C or business-to-consumer, where a business sells to a final consumer.
– C2C or consumer-to-consume, or more peer-to-peer where consumers sell to each other.

As Shopify explains:

Dropshipping is a retail fulfillment method where a store doesn’t keep the products it sells in stock. Instead, when a store sells a product, it purchases the item from a third party and has it shipped directly to the customer. As a result, the merchant never sees or handles the product.

This isn’t a business for anyone. In fact, as Shopify notices there are advantages like less capital is required, easy to get started, low overhead, flexible location, a wide selection of products, easy to scale.

While disadvantages are low margins, inventory issues, shipping complexities, supplier errors. 

All you need to start a drop shipping business is to find the right product and set up a store. The most challenging part of putting together a dropshipping business – I believe – is to find the right products and the suppliers that can make your dropshipping business successful.

Setting up the story isn’t complicated, and a solution like Shopify might help. Another solution might be the Amazon Seller Center where you keep the inventory in the Amazon fulfillment center. Thus, Amazon will take care of everything, and you will get a cut on the sale.

SaaS (Software as a Service)

what-is-saas
Software as a service (SaaS) is a model where a third-party provider hosts the infrastructure and applications and make them available through the Internet. This model leverages on web-based software and on-demand applications that run centrally on the server of the provider, while the company purchasing the service will use those applications based on need and without the upfront cost.

The software as a service industry has become over $46 billion in annual revenues.  SaaS companies like Salesforce, Workday, and Shopify reached a market cap of $69, $22, and $11 billion respectively. 

As reported by thesaasreport.com “as of August 31, 2017, the median enterprise value / 2017 revenue multiple is 5.7x.  Median revenue growth rate is 17%, the gross margin is 73%, and the median retention rate is 97%.

It’s no surprise then that many entrepreneurs are jumping into the SaaS world with the hope of an exciting exit.

However, as reported by the thesaasreport.com “There are an estimated 10,000 private SaaS companies, the vast majority of which are early-stage generating less than $3 million in annual revenue.

The number of companies joining the SaaS industry might be growing at a faster and faster pace in the coming years. With the aim of automating many tasks, SaaS businesses can be created more quickly.

Although, as the industry will become even more competitive it will be harder and harder for SaaS businesses to differentiate themselves. Thus, this will bring up costs related to sales and marketing. In short, acquiring new customers will be more expensive.

In other words, for a solo-business, it’s tough to choose the option of a SaaS. First, because you will need a full-time developer; second, the activities of support will take more and more time, as the business will grow. At the same time, the business development part will also make a great effort.

However, what makes this business compelling for many solopreneurs is the subscription-based monetization strategy. In short, your customer will pay each month a flat fee to access your service.

Therefore, the economics of this model might seem very appealing. Imagine you could have 100 people pay you $100 per month, this would mean $10,000 of recurring revenues each month. Not bad! Yet this isn’t as easy as it seems.

As more stories about how launched SaaS in a week more people want to join in:

successful-saas-launch

AI Company

make-money-with-machine-learning/
The AI Ecosystem has generated a multi-billion dollar industry, and it all starts from data. Going upward in the value chain there are the Chips (GPUs) that allow the physical storing of Big Data (a dominant player is NVIDIA). Big Data will need to be stored on platforms and infrastructures that SMEs can’t afford. That is where players like Google Cloud, Amazon AWS, IBM Cloud, and Microsoft Azure come into rescue. On a large scale, a few corporations control the Enterprise AI market; while nations like China, the USA, Japan, Germany, UK, and France have widely bet on it!

Blockchain Company

blockchain-economics
According to Joel Monegro, a former analyst at USV (a venture capital firm) the blockchain implies value creation in its protocols. Where the web has allowed the value to be captured at the applications layer (take Facebook, Twitter, Google, and many others). In a Blockchain Economy, this value might be captured by the protocols at the base of the blockchain (for instance Bitcoin and Ethereum). However, according to blockchain investor Paivinen due to ease of forking, incentives to compete, and improved interoperability and interchangeability also in a blockchain-based economy, protocols might get thinner. Although the marginal value of scale might be lower compared to a web-based economy, where massive scale created an economic advantage. The success of the Blockchain will depend on its commercial viability!

Key takeaway

As a small business owner, the online world is a great opportunity to build a business that can give you freedom, while making money and create value for others.

I believe those three things together can genuinely help you achieve meaning. Many aspiring entrepreneurs get sold to the Silicon Valley stereotype where you need to scale up your business as fast as possible, work 24/7 and hopefully one day make an exist to enjoy the rest of your life.

What if you could start already enjoying your life, with a business model that empowers you rather than a company that makes you work no stop.

This article was meant to give you some inspiration and ideas on which business models might be better suited for a solopreneur.

How to get started with your business? 

Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which target is to reach over two million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get in touch with Gennaro here

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