15 Business Models to Explore for Your Impact-Driven Venture
A ‘business model’ is your company’s strategy for making its profit. If you are in the early stages of your venture, chances are you need to explain 4 key pillars to investors, partners and potential team members. These are your - 1) customers 2) value proposition 3) operating model 4) revenue model.
This conceptual structure is your business model.
Joan Magretta of the Harvard Business Review describes them as “stories that explain how enterprises work”. We prefer this definition because it encourages you to look beyond quantitative factors such as pricing, costs and gross profit and instead consider how value is created and who it impacts. By asking yourself questions such as “What does the customer truly value?” and “who else can get involved as a contributor or beneficiary?” your venture is primed to create impact from the get-go.
Traditional business models like direct sales, advertising-based and brick-and-mortar stores have stood the test of time. However, the Internet opened the door to an explosion of other possible models.
Below are some business models that have gained traction in recent times. While this is in no way an exhaustive list, we hope this serves as a starting point for envisioning how your business idea might take shape!
Customers pay a monthly or yearly fee to access your product or service. This model is a great way to pull in new customers due to the attractive pricing it allows (as opposed to a one time large payment) and gives them time to fall in love with your brand (We’re looking at you, Netflix!). Meanwhile, your business has more stable and predictable revenue to keep you going -- a win-win for all! Keep in mind that any business using the subscription model needs to proactively find new ways to create value - whether it's dropping new features at regular intervals or offering new types of content that keeps them staying for more.
Popular with: Media Organisations, Educational Platforms, Charities
Examples: Netflix, Venture Into Good, Children International
Your role here is to help individuals interact to buy and sell directly. You could monetise this through seller listing fees, commission, paid features or advertising. The upside of this model is that you get scalable revenue while building self-employment opportunities, community and trust! Logistics, inventory, return policies and other heavy administrative costs are also out of your hair. The downside is that if anything goes wrong, it’s almost always your fault. :( Since platform owners are held accountable for all transactions that happen on their site, building trust with users is key. Focus on marketing your platform to quality buyers and sellers, and religiously work on improving your user experience and customer service.
Popular with: Online Marketplaces, Asset-sharing businesses
Examples: Airbnb, Etsy, Uber
This model is perfect for socially conscious brands and customers. A donation is made for every item purchased; be it in monetary form or by meeting specific needs of a selected community (eg. provision of shoes for less privileged children). This model communicates your brand’s commitment to the cause, and builds a culture of deeper purpose within the team. While designed to be community-minded and impactful, be realistic with what your brand can provide under this model. Instead of offering specific items that increase your own costs, you can also look at working with non-profit organisations who have the resources to create similar impact.
Popular with: Social Enterprises
Examples: Warby Parker, Freedom Cup
While this is not a new model (think utility and car rental companies), the internet has made it applicable to a wider range of industries. Customers are metered or charged for a specific usage of a product or service. In other words, they choose to rent the item as opposed to purchasing it. The prerequisite here is that your product/service needs to be easily delivered, billed and effectively metered. The downside of this model is its unpredictability and it is really only a viable option if you already have a large customer base. However, smaller companies have the option to tie it in with a subscription model so that customers pay a base fee while paying additional charges based on any extra usage.
Popular with: Clothing rental businesses, Car-sharing services, Cloud Storage
Examples: Style Theory, Tribe Car, Amazon Web Services
Nobody can say no to a good freebie. This model involves offering basic services for free while charging premiums for add-ons. Since this provides a low barrier to entry for new customers and is a cost-effective way to scale up, it has gained popularity with internet-based businesses. A key factor here is in figuring out how you can give first time users a taste of your software or service, while also showing the real perks that come with being a paying user. Upgraded packages have to create real value for customers, whether through an improved experience (eg. ad-free version) or by enabling them to achieve larger goals (eg. advanced features).
Popular with: Internet-based businesses
Examples: Spotify, Canva, Mailchimp
If you noticed similarities between these models or that some of the examples given could fall under multiple categories - you’re exactly right! Remember that these models are simply concepts that help you understand and explain how your venture could operate. Organisations can therefore opt to combine and adapt their own business model in a way that a) best brings out their value proposition and b) works for their consumer.
For those just starting off, focus on developing a good understanding of your customers, the market, your costs and the optimal delivery of your value proposition before choosing a model you believe would work for you. Remember that your business model can evolve and change with time so don’t be afraid to make mistakes!
For a step by step guide on turning your idea into a successful business, subscribe to our Venture Into Good platform for comprehensive learning resources.
Here are some other business models that are popular with first-time entrepreneurs and small businesses.
1. No Frills - When non-essential features are removed, allowing for lower costs and prices.
2. B2B - Business conducted between companies - typically within a supply chain or a product/service that improves business operations.
3. O2O (Online to Offline & vice versa) - Customers are found online, and enticed to visit a physical space or store.
4. Razor Blades Model - Attracting customers with a lower priced item while other items (eg. accessories) are sold at a premium.
5. Bundling Model - Combining products or services and offering them as a package deal for a comparatively lower price.
6. Franchising - Franchisors license a parent company’s resources and brand name in exchange for a royalty fee for every product sold.
7. Affiliate Marketing Business Model - Featuring or reviewing other companies’ products, and earning a fee for every sales opportunity brought to vendor companies.
8. Consulting Business Model - Offering consulting services on an hourly basis or by taking a percentage share of the completed project.
9. Agency-Based Business Model - A project-based model which involves the completion of a specific (often niche) task for a fee.
10. Online Education Business Model - Giving users access to educational resources online through a subscription, course fee or freemium.