Disruption, the Startup Mantra : Today, startups are the “talk of the town”, with everyone showing a keen interest, whether it is an entrepreneur, investor or the general public. With the so called success stories of recent startups, many people are jumping onto the band wagon and looking at ways of replicating these successes with their own startups. While reviewing some of these stories, I wondered what business models these startups began with and whether it can be replicated effectively by others.
Twenty years back, who would have imagined that something like advertising would be a major source of income for a business whose primary product was logistics services or information exchange? This is where a business model comes in handy as it helps determine the sources of income. If you are an entrepreneur or planning to become one, do you have a business model in place? If not, I would recommend that you put together one, as the axiom goes, “better late than never”.
Investopedia defines a business model as the plan implemented by a company to generate revenue and make a profit from operations. The model includes the components and functions of the business, as well as the revenues it generates and the expenses it incurs. In other words, how you plan to make money or in startup jargon “monetize”.
How do you go about planning a business model? Looking at how the established startups are behaving, this maybe is the “million dollar question”. There are numerous models that can be used for your business. All you require to do is work out which one(s) will be the best for your business. To start you off, here are some established models that you can evaluate.
Marketplace or Demand Aggregation model:
Create a virtual marketplace where sellers can display their products and buyers can select what they want to purchase. Your role is limited to providing a platform where suppliers and buyers can come together. You can run the business with zero inventories and very low overheads as the sellers service the orders directly from their own warehouses. You get paid for each transaction that takes place on the virtual marketplace. This model is practiced by online giants like Amazon and eBay.