7 Business Models For Startups You Can Apply (Practical Examples)

Business models are concepts by which startups can achieve sustainable growth while generating income.

Do you know how onetime successful companies suddenly became a failure?

These companies had great products and wonderful services. What could be the problem?

The answer to these questions is simple.

They rejected innovations and strategies that would have helped their long-term sustainability.

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If you were alive in the 70s, you will argue it is impossible for billions of the human population to converge in one place.

Facebook, Twitter, and other social networks made it happen.

Perhaps it was impossible to watch and talk with people on a different continent from yours.

Skype, Zoom, and other video calls software made it happen.

In today’s digital world, change in methods and medium has become of necessity.

Your chance of building successful startups depends on your ability to maximize these business models.

Best Business Models For Innovation Startups In Nigeria

1. Add-on Business Models

Addon is one of the best business models for SaaS Startups.

In this model, you give the basic product or service at a lower price. And then offer extra add-ons for higher prices.

You end up making more money than you could have to sell the package as a complete whole.

Also, your customers will prefer it this way since they can choose the package they want without buying it all.

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Have you been to the airport?

You will buy the ticket for a cheap price, but end up paying more for extra services like food, beverages, travel insurance, and luggage charges.

This business model is perfect for businesses where the core cannot do without the parts.

As a digital marketing agency, we offer our web design service at a cheap price and sell more on extra packages like SEO, content marketing, maintenance, and more.

If you want to go with this business model, I advise you to focus your marketing on your basic offering.

2. Affiliate Business Models

One of the best startups business models to sell more with less marketing.

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To operate in this model, you give affiliates a unique link to track their sales.

You may choose to pay either by click or views (also known as impressions).

Supposing you sell many products, you can pay your affiliates by a percentage of the total products sold or by a fixed price irrespective of the number of products sold.

Google AdSense operates this business model.

Companies pay Google to list their ads (banners, text, or videos) across its platforms.

Google then pays affiliates a certain percentage of the commission to place the ads on their blogs.

Here are ways your business benefits from affiliate marketing.

3. Auction Business Models

One of the best business models for startups, wanting to connect both sellers and buyers.

Auctions have been around for ages. In the old, they auction women off to their husbands.

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The evolution of the internet made this eCommerce business model more promising and acceptable.

eBay today is the largest website operating this business model types, with over a billion transactions.

There is another reverse type of auction where the sellers bid rather than the buyers.

An example is when a traveler mentions the amount he has to pay for travel. Airline companies have to bid for this price to have the customers.

Also, you can use this online business model if you run a service marketplace.

A user comes to your website and states the services he wants.

Service providers then bid for this service till the user picks one.

A perfect example is Upwork.

4 Freemium Business Model Examples For Your Business

4. Rent Business Model

The best among the list of startups business models for high-end physical products.

This is an old business model where a customer rents a product or service for a certain period.

We are in a generation where people prefer access to assets. A time when people prefer usage to ownership.

Buyers love this model because they don’t have to pay for the entire price of the products.

You can set up a website where customers rent cars, or tools and return at a particular time.

Airbnb is one company that has applied rent the rent business model in the real estate industry.

And Uber used the same business model in the car industry.

What products or services can you put on an eCommerce website where people can come to rent instead of buying the whole?

Mostly the rent business model is best for products with high costs like building a house, owning a car, or a sophisticated machine.

This business model is common with proptech startups in Nigeria.

5. Marketplace Business Model

This a two-sided online business model where buyers meet with sellers.

This means the increasing number of one group (buyers) attracts the other group of sellers.

To excel in the marketplace business model, you must balance the two groups of people using the website.

You make money from the marketplace by making it free for one and paid to the other.

Searchers use Google for free while advertisers pay to have their ads on the search engine.

The initial launch of a marketplace is always the hardest. Most sellers wouldn’t upload their products except there is a large buyer’s base.

Also, if you choose this business model, allow for the interaction between buyer and seller.

Examples of companies operating the marketplace online business model are Jumia, Amazon, eBay, and more.

6. Subscription Business Models

One of the untapped startups business models

Most of the internet business models of today monetize their platform with adverts.

They allow users to use the platform for free and then filled the site with ads. News websites are bad about this.

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Subscription online business models work on the idea of selling a product or service to receive recurring revenue.

It allows a single customer to pay every month or year for a product or service until he or she cancels.

Founders of WhatsApp, Jan Koum and Brian Acton, built WhatsApp with a subscription online business model in mind with a charge of $1 per year.

$1 per year may mean nothing to you, as it seems like small money. But if you consider collecting $1 from over 500 million users, you will marvel.

7. Freemium Business Models

One of the best business models for SaaS startups.

The Freemium business model is most common among businesses delivering services online.

The abundance of information on the internet has taught us there are alternatives to what we already have.

So, people search the internet for hours to find products for a cheaper price or even for free.

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soon, they realize later that the difference in price is not worth the time spent in searching.

A freemium business model works by asking users to sign up on your website. In return, you offered them the basic version of your service.

The basics must not be too limited, else they walk away. And it must not be too complete that they see no need to upgrade. Balance is the key here.

Your duty is to persuade enough users of the free version to convert to the premium package.

Factors Affecting These Models

  • Social Media

Research shows that people on average now spend one-third (8 hours) of their day on social networks.

Facebook on its own covers over 10% of the world’s population (over a billion users).

  • Free Contents

With a lot of websites, giving out free content, users want the entire internet to be free.

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  • Wikipedia with free information
  • YouTube with free videos
  • Facebook with free chats
  • Data Analytics

When you have access to millions of existing data, it’s easy to notice similarities in users’ usage.

Also, business model Inc offers a great tool to help you understand a business model in a straightforward, structured way.


Conclusion On Best Business Models For Startups

Companies that refuse changes to their revenue models yesterday are no longer existing today.

So, you need to keep innovating without changing the core principle of your business.

All that is good can be great. All that is best can be better. Making today better than yesterday is the new pursuit.

You can contact me when you need help to execute these online business models for your startups

Thank you.

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