January 27, 2022
Niclas

The Complete Guide to Startup Business Models

Business models are crucial to the success of your startup. It is the plan that will allow you to grow and become profitable. Without a business model, you are just throwing money down the drain.

4 minutes reading time

Article Contents

Taking the plunge into starting your own business is an exciting but often terrifying endeavor. You might have a great idea, but you don't know how to turn it into something worth money. That's where the idea of a business model comes in.

Introduction: Getting Started with a Startup Idea & Why You Need a Business Model

A business model can help you form your ideas for who will buy your product, how they will pay for it, and what features they want. It can also help you figure out how much money you need to start up and if the company is worth the investment.

This section will give you everything you need to know about what a business model is and how to make one for your startup idea.

A business model is a set of systematic ways to create, deliver and capture value. It is a blueprint for how your company will make money.

In the digital age, the number of businesses that have a clear and well-tested business model is on the decline. This may be because it seems like you don’t need one as long as you have an idea that has gone viral or because people think they can create anything without having to worry about making money.

Business Model Types

When you look at startups in the market, you will notice that they are categorized into different types. These categories exist because startups in the market can choose to go after different business models. However, not all of these models are necessarily profitable for startup companies.

Some of the most common business models that startups use today are low-risk startup models. A low-risk model is one where there is minimal risk involved when starting up the company. The best example of this is when a company sells their product with no upfront costs to them or their customers. This type of model works great for people who want to sell products which they think will sell well in the market with very little investment on their part.

The most common business model is the high risk/high reward model where the entrepreneur invests a lot of time and energy to build something that they hope will be successful. This is what you typically see with startups like Facebook or Instagram.

Best Startup models:

There are two different types of best startup models -

  • Bootstrapping is when an entrepreneur starts the business with his/her own time, skills, and resources.
  • Scaling up is when an entrepreneur starts with a small business and then invests in making it bigger.

Sizes of Companies and Their Typical Business Models

Different kinds of companies operate at different scales in different industries. Some start-ups are operating in the early stage in the beginning of their life cycle. For example, they may be operating small brick-and-mortar shops but not yet an online store.

Others will start with an online store and grow to include physical stores at a later point, while some might do the opposite. There are also companies that don't have either brick-and-mortar or online store and focus on other channels like social media only.

A start-up can be a variety of different types, but the most common categories are:

  • technology-based,
  • business-to-business or B2B,
  • and consumer.

Technology startups are focused on developing a new product or service with the aim of disrupting an existing market. Business to business startups offer a product or service for sale to other businesses. Consumer startups sell products and services to consumers.

Some early stage start-ups will have an initial product or service that they offer for free in order to acquire customers and improve the product before taking it live. They may also offer their customers other products and services in addition to their core offerings in order generate revenue while they build up their main offering .

How to Choose the Perfect Business Model for Your Startup

It is not easy to make a decision on what business model to use. That is why there are tools that are available to help you with this choice.

  1. St. Gallen Business Model Navigator: This tool can help you pick the best model for your business needs and it will also provide templates for all models that you might need when starting your own company.
  2. Business Model Canvas: The canvas is a diagram that is used to create a visual representation of a startup’s business model. A blank canvas can be found online and needs to be filled in with five important components: value proposition, customer segments, key activities, channels, and revenue streams.
Business Model Canvas Template

Do you have an idea?
Let’s talk about it.