Gennaro Cuofano's Blog, page 251

Website Flipping: Where to Shop & How to Choose

All things considered, it’s a pretty great time to be an entrepreneur. The concept of the self-made millionaire used to be something of a joke, with those singled out as success stories generally coming from wealthy backgrounds or having benefited from great fortune in some other sense — today, though there’s still some fortune required, it’s relatively minimal.

In fact, let’s run through the basic things you need to pursue your entrepreneurial ambitions (aside from food and water, naturally): a computer, a smartphone, and internet access. You could work solely through a smartphone in a pinch, and use Starbucks Wi-Fi if necessary. So there’s no reason why one person with a decent smartphone couldn’t hit it big.

Throughout the rich digital world, there are numerous options for the aspiring entrepreneur (you can read about a decent selection of them here), but in this piece, we’re going to look at one in particular: website flipping.

Much akin to a cross between stock trading and real-estate investment, website flipping provides the convenience of the former with the reassuring reliability of the latter. Instead of buying and selling conventional assets, you buy and sell entire websites, sprucing them up and moving them along at a profit.

So if you’re interested in giving it a try, how should you go about it? Where should you shop, and how should you choose the websites to buy? Let’s go through it all.

Where can you buy or sell a website?

While of course, you can independently arrange the purchase or sale of a website (or anything you feel like buying or selling), it’s generally easiest to use a dedicated marketplace. That way, you can be sure that the sites you find will have passed some basic vetting, and those prospective buyers of your sites will better understand what they’re really worth.

It also means you can cut down on the promotion you’d need to make the necessary connections. Unless you plan on trading only within a tight-knit network of people you personally know, you’re going to benefit significantly from being able to simply post a site (or a buying request) and know that relevant people are going to be able to find it.

There are numerous sites out there that support website flipping, but there’s a handful of front-runners that you should definitely look at before you think about trying any others. Let’s go through their strengths:

Empire Flippers

Despite the name, Empire Flippers isn’t about flipping empires — just websites. All sellers are vetted to ensure that their stores have stable and verified histories, and their sites are initially listed by average monthly profit to give you an idea of possible performance. You don’t need to speak to buyers or sellers directly, because the site staff will handle it for you, and each buyer must first make a deposit to demonstrate commitment. There’s even a valuation tool if you want to get an idea of what your site may be worth.

Flippa

As the marketplace with the most awareness in the field of website flipping, Flippa is an extremely popular choice, and for a good reason. The selection is strong, website sales hit around $5m each month, and you can even dip your toe into the app world since that’s also an option. And with a success fee of between 12 and 15 percent, it’s often cheaper than Empire Flippers (with a set fee of 15 percent).

Exchange Marketplace

A relatively-new contender, Exchange Marketplace has some notable characteristics that set it apart from the other marketplaces. Two in particular: it only accepts or offers stores running on Shopify, and it doesn’t charge any fees. Because it’s a Shopify project, the profit comes from keeping people on the Shopify platform. No further charge required. Something useful about Exchange is that it allows the narrowing of the selection by type or even location (e.g., profitable Nevada businesses for sale) — it might not seem significant where a store is supposedly based, but it is, particularly given the impending changes to state-determined sales tax regulations.

eBay

Yes, it’s true — you can buy or sell a website through eBay. Should you, though? Well, if you’ve ruled out the three previous options for whatever reason, it might be worth a look before you start checking out more niche marketplaces. That’s because eBay might be full of spam but that’s really because it’s full of everything. Given its broad inventory, it certainly warrants a glance before you rule it out entirely.

If none of these marketplaces seems a good fit for your needs, it’s best to consult entrepreneurs who operate in your preferred niche. Where do they buy/sell sites? Look for relevant subreddits, Facebook groups, and Twitter conversations — make some online connections and start asking questions. You’ll find that people will be happy to help.

What makes a website worth buying?

Whichever marketplace you ultimately decide to use, the hardest part is choosing a website to buy. You want something that already works well enough can be updated somewhat to drive up the sales and is likely to hold its value (at least for a little while). Let’s look at some examples of how you can get this wrong:

If you buy a website that hasn’t been set up correctly, then you’ll need to fix it before you even think about making other alterations. Once you reach that point, you might as well have built a new site from scratch and saved the purchase money.
If you buy a website that is already optimized, you won’t have much room to improve it — and if you can’t make improvements, you can’t sell it on for a healthy profit.
If you buy a website that’s focussed on a fad or something seasonal, its value is likely to diminish over time (or by the month) regardless of what you do. Think about how much money there was in fidget spinners when they first hit the market, and how profitable they are today — still performing, but not even close to that massive level.

If you’ve selected one of the top marketplaces we looked at (the first three, really), then you can trust in the accuracy of the financial information provided for a listing — but interpreting it is up to you. You may be familiar with the warning of “past performance is not a guarantee of future success,” as some version of it will crop up for any trading advice service, and it certainly applies here.

It isn’t enough simply to know that a website has been successful before. If you don’t know how that success was achieved, you might struggle to replicate it. Sometimes people sell websites because they just want to move on to pastures new, but sometimes they’re fortunate enough to luck into some early success and try to exploit that success to pass their sites off as being more stable as they really are.

Ideally, each site you buy should offer each of the following:

An up-to-date platform. There’s the aforementioned Shopify, or WooCommerce (on WordPress), or BigCommerce, or Magento, or… well, there are numerous viable options. It just isn’t a good idea to buy a site that runs on old software, because you might have issues updating.
Historic transparency. Can you see what the revenue has been for at least the last year (or the entire lifetime of the site, whichever is shorter)? And has the seller commented on why they’re selling? Do you believe their explanation?
Evergreen relevance. Cosmetics will sell at any time of year, but Halloween masks won’t. Unless you plan on waiting for 12 months, it isn’t too sensible to buy a Halloween store at the beginning of November.
A thriving industry. You don’t want to grab a website that operates in a niche that’s losing ground, because the value is inevitably going to decline. Pick something solid.
No operational demands. Turnkey sites that use dropshipping for any product sales might have low-profit margins, but they’re easy to keep running. Getting something with an actual inventory would likely end up being more trouble than it was worth.

If you can pick up a suitable site, you’ll have a great foundation upon which to build. What comes after that is up to you. You can focus on driving some sales to improve the record and raise the value, or you can adjust the style and product range to make it a more well-rounded site for whichever person ends up buying it from you.

Do you need other ideas to make money? Below a list of ideas with low cost and high profit we found for you:

Become a blogger
Become an online instructor
Become a professional photographer
Become a ghostwriter
Become a Chatbots maker
Become an affiliate marketer
Become a career coach, resume writer or LinkedIn profile writer 
Become a business development contractor
Become an infopreneur 
Become an SEO consultant
Become a contractor headhunter

Do you already have a blog or online business but are you looking for ways to monetize it? Look at these 26 ideas below:

1. Affiliate Marketing

2. Infoproducts

3. Email marketing 

4. Google AdSense

5. Consulting

6. Branded stories

7. Paid reviews

8. Banner Ads

9. Sponsored Blog Posts

10. Members Only Content

11. Paid Business Directory

12. Become a Coach

13. Accept Donations

14. Charge For ‘Premium’ Content

15. Sell Your Blog

16. Build your SaaS

17. Speaking Gigs

18. Create & Sell Your Product

19. Write Tutorials & Guides

20. Live Workshops

21. Find Sponsors For An Event

22. Generate ‘leads’ for other companies

23. Create a job board

24. Advertise pages

25. Host paid webinars

26. Writing Gigs

 

The post Website Flipping: Where to Shop & How to Choose appeared first on FourWeekMBA.

How Does Snapchat Make Money?

Snapchat business model is based on advertising revenues. Even though the company got listed, it didn't manage yet to turn a profit as of June 2018.

Snapchat monetization strategy

Snapchat monetizes primarily through advertising. The advertising products include:

Snap Ads
and Sponsored Creative Tools (Sponsored Lenses and Sponsored Geofilters)

In the year ended December 31, 2017, Snapchat recorded revenues of $824.9 million compared to $404.5 million for the year ended December 31, 2016, a 104% year-over-year increase.

Revenues are classified in two ways:

Advertising gets sold directly to advertisers, referred to as Snap-sold revenue
Certain partners that provide content on Snapchat, or content partners, also sell directly to advertisers, referred to as partner-sold revenue

For the year ended December 31, 2017, and 2016, approximately 94% and 91% of advertising revenues were Snap-sold, respectively, and about 6% and 9% was partner-sold, respectively.

Snap Ads, whether Snap-sold or partner-sold, may be subject to revenue sharing arrangements between Snapchat and the content partner.

What metrics does Snapchat use to assess its success?

Snapchat measures the progress of its advertising business using two key metrics

ARPU (average revenue per user) because it helps Snapchat understand the rate at which it is monetizing the daily user base. Snapchat defines ARPU as quarterly revenue divided by the average Daily Active Users. Average revenue per user, or ARPU, was $1.53 in the fourth quarter of 2017, compared to $1.05 in the fourth quarter of 2016, an increase of 46% year-over-year.
Snapchat defines a Daily Active User as a registered Snapchat user who opens the Snapchat application at least once during a defined 24-hour period. DAU or Daily Active Users, or DAUs, were 187 million in the fourth quarter of 2017, compared to 158 million in the fourth quarter of 2016, an increase of 28.8 million or 18% year-over-year.

Snapchat key financial metrics

Revenue was $824.9 million, an increase of 104% year-over-year.
Total costs and expenses were $4.3 billion, an increase of 84% year-over-year, excluding stock-based compensation expense and related payroll tax expense.
Loss from operations was $3.5 billion.
Net loss was $3.4 billion with diluted loss per share of $(2.95).
Adjusted EBITDA was $(720.1) million.
Cash used in operations was $734.7 million, and Free Cash Flow was $(819.2) million.
Capital expenditures were $84.5 million.
Cash, cash equivalents, and marketable securities were $2.0 billion as of December 31, 2017.
Research and development expenses for the year ended December 31, 2017, increased $1.4 billion compared to the same period in 2016. The increase was due to a $1.1 billion increase in stock-based compensation expense primarily due to the recognition of expense related to RSUs with a performance condition satisfied on the effectiveness of the registration statement for Snapchat IPO in March 2017.

Read Snapchat business model and its startup story. 

snapchat-business-model

References

Snapchat 10K annual report 2017 
Snapchat 10Q for 2018

Other handpicked related business models: 

How Does PayPal Make Money? The PayPal Mafia Business Model Explained
How Does WhatsApp Make Money? WhatsApp Business Model Explained
How Does Google Make Money? It’s Not Just Advertising! 
How Does Facebook Make Money? Facebook Hidden Revenue Business Model Explained
Marketing vs. Sales: How to Use Sales Processes to Grow Your Business
The Google of China: Baidu Business Model In A Nutshell
Accenture Business Model In A Nutshell 
Salesforce: The Multi-Billion Dollar Subscription-Based CRM
How Does Twitter Make Money? Twitter Business Model In A Nutshell
How Does DuckDuckGo Make Money? DuckDuckGo Business Model Explained
How Amazon Makes Money: Amazon Business Model in a Nutshell
How Does Netflix Make Money? Netflix Business Model Explained

 

 

The post How Does Snapchat Make Money? appeared first on FourWeekMBA.

6 Mistakes To Avoid To Build A Successful Online Business

You are not in business unless your business is online. This seems to be the trend in today’s context—entrepreneurs around the globe are bringing new businesses to the market which are purely online, with minimal offline activities.

But, of the thousands of people who launch such ventures across different verticals, how many succeed and how many fall by the wayside? And what were the mistakes the ones who fail made or continue to make?

The aim of this article is to allow the entrepreneurs that want to start an online business in the future to avoid making them!

The common and avoidable mistakes are explained below.

Lacking a Solid Business Plan

As the cliché goes, “you don’t plan to fail, but you just fail to plan,” many ventures are founded without a firm business model in place to start with.

Experts point out that one does not have to have a set-in-stone plan running into several pages. But since the business itself is expected to be online and adaptable by nature, one has to put down some framework of the primary objectives.

It could start by saying what the product or service the business plans to make or offer, and the current scenario in the market it is preparing to enter. The top cited reason, why startups fail, is because their idea falls short of filling a market need. Business owners should outline the need for the product or the service and in what manner the business to be started will cater to that need/demand.

Finally, there can be a brief mention of how much money will be needed, when would the company start making profits and how many people may have to be recruited to accomplish the tasks. If you ask around, very few new businesses will be able to spell these out clearly.

Lack of Emotional Attachment to the Project

Any new business is a project, and many try and compare it to a new-born baby. As much as attention and focus need to be directed towards the business, the entrepreneur has to be quite possessive about the project, a kind of emotional attachment and the inner urge to see it beyond the standard ways of looking at a business.

This is being mentioned because a new business goes through many trials and challenges in the early days; arranging to fund could be a monumental task, getting the right people for critical functions and getting the marketing strategy right are all challenges that can affect any individual.

The owner of the online business has to have the determination and perseverance to survive through such turbulent times. The passion will only get them through. Those who do not possess these qualities often fail.

Lack of funds: “It’s About Money Honey”

Again, an oft-repeated cliché. The fact is that when a new business is started, it sucks the maximum amount of funds.

Depending on the kind of business you have planned online, the revenue inflow may start after several months. Have you worked out your full financial needs and the sources they will be raised from and how the funds will be structured?

You can bet many businesses get it wrong. If this is allowed to go out of hand, it can rapidly slide down and take the venture to failure before you know it. Your financial management ought to be perfect. The ones who make the mistake of not taking this seriously will find it hard to succeed.

Lack of customer focus: Mind Your Customer

While the traditional businesses learned the hard way how important it is to keep the customers’ interests the top-most priority, the challenge is even more critical for the online businesses since the customer is unseen and, on many occasions, unheard.

It is essential that you build within your site a platform for your customers to let you know what they feel about your business, your products, and your service. If you are the business owner, you may not know that your product was delivered late to a customer or that they received the wrong product unless you encourage your customers to get back to you and inform you.

Online businesses make this mistake frequently and may realize very late that their customers have switched to other sites to do their transactions.

Failure to Get the Pricing and Discounts Right

This is a very frequently observed blunder by new businesses; either they are misguided by someone, or the business owner himself/herself has these pre-conceived notions of doling out too much to attract the customers and grow the revenue.

While as a strategy per se, this may not be wrong, it ought to be calibrated and executed based on in-depth research and knowing the consequences fully. The mistake businesses often commit is to give away too much too soon and then they are left with nothing to give. As a result, the customer could drop you like a hot brick.

Lack of an HR Strategy

People constitute a vital part of a startup.

But many online businesses make the mistake of either over-hiring, then finding difficult to pay employees their salaries when things get tough, or under-hiring, leaving out critical functions which can have a negative impact on specific processes. It can even end up being the reason for the downfall of the organization.

That’s why it’s crucial for business owners to establish an effective strategy for managing their teams. It’s also necessary for entrepreneurs to follow recommended guidelines for how to pay employees during the startup stage.

There may be many other mistakes that online businesses commit that lead to their failure.

In any eventuality, lessons are learned and some of the mistakes may not be made again. The need is definitely for the businesses to learn from the mistakes of others and not their own. There are enough recorded case studies of why an online business failed, and it takes some effort to learn how to avoid them to embrace success.

Key takeaway

As we’ve seen throughout this article when starting an online business, there are several things you can do and several ways to make it work.

Lack of a Solid Business Plan
Lack of Emotional Attachment to the Project
Lack of funds
Lack of customer focus
Failure to Get the Pricing and Discounts Right
Lack of an HR Strategy

If you take the time to focus on avoiding these six critical pitfalls that can break your online business from the start you’re already half the way to build a successful venture!

Guest contribution by Sophie Ross

Sophie is a marketing specialist at Security Gladiators. A writer by day and a reader by night, she is specialized in tech and cybersecurity. When she is not behind the screen, Sophie can be found playing with her dog.

Now that you know what mistakes to avoid, do you need some ideas to get started? Below a list of 12 ideas that require little investment and carry a high profit-margin:

Become a blogger
Become an online instructor
Become a professional photographer
Become a ghostwriter
Become a Chatbots maker
Become an affiliate marketer
Become a career coach, resume writer or LinkedIn profile writer 
Become a business development contractor
Become an infopreneur 
Become a websites flipper 
Become an SEO consultant
Become a contractor headhunter

Do you already have a blog or online business but are you looking for ways to monetize it? Look at these 26 ideas below:

1. Affiliate Marketing

2. Infoproducts

3. Email marketing 

4. Google AdSense

5. Consulting

6. Branded stories

7. Paid reviews

8. Banner Ads

9. Sponsored Blog Posts

10. Members Only Content

11. Paid Business Directory

12. Become a Coach

13. Accept Donations

14. Charge For ‘Premium’ Content

15. Sell Your Blog

16. Build your SaaS

17. Speaking Gigs

18. Create & Sell Your Product

19. Write Tutorials & Guides

20. Live Workshops

21. Find Sponsors For An Event

22. Generate ‘leads’ for other companies

23. Create a job board

24. Advertise pages

25. Host paid webinars

26. Writing Gigs

 

The post 6 Mistakes To Avoid To Build A Successful Online Business appeared first on FourWeekMBA.

How Facebook Made Money In 2017 [Animated]

Facebook is one of the most profitable digital advertising businesses ever existed. In fact, even though there are several sources of income, most of the revenues come from advertising:

data in $ billion201520162017




Advertising17.07926.88539.942


Payments and other fees849753711


Total revenues17.92827.63840.653

1. Advertising (over 98% of revenues): it consists of displaying ad products on Facebook, Instagram, Messenger, and third-party 

2. Payments and other fees (almost 2% of total revenues):  it consists of the net fee received from developers using Payments infrastructure or revenue from the delivery of virtual reality platform devices and others

As highlighted on Facebook annual report for 2017:

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Source: How Does Facebook Make Money? Facebook Hidden Revenue Generation Model

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The Google of China: Baidu Business Model In A Nutshell
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Salesforce: The Multi-Billion Dollar Subscription-Based CRM
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How Amazon Makes Money: Amazon Business Model in a Nutshell
How Does Netflix Make Money? Netflix Business Model Explained

 

The post How Facebook Made Money In 2017 [Animated] appeared first on FourWeekMBA.

How Apple Made Money In 2017 [Animated]

As reported on Apple annual report for 2017:

Net sales increased 6% or $13.6 billion during 2017 compared to 2016, primarily driven by growth in Services, iPhone and Mac.
2017 year-over-year increase in net sales reflected growth in each of the geographic operating segments, with the exception of Greater China.
The weakness in foreign currencies relative to the U.S. dollar had an unfavorable impact on net sales during 2017 compared to 2016. In May 2017, the Company announced an increase to its capital return program by raising the expected total size of the program from $250 billion to $300 billion through March 2019.
This included increasing its share repurchase authorization from $175 billion to $210 billion and raising its quarterly dividend from $0.57 to $0.63 per share beginning in May 2017.During 2017, the Company spent $33.0 billion to repurchase shares of its common stock and paid dividends and dividend equivalents of $12.8 billion.
Additionally, the Company issued $24.0 billion of U.S. dollar-denominated term debt, €2.5 billion of euro-denominated term debt and C$2.5 billion of Canadian dollar-denominated term debt during 2017.
Fiscal 2016 Highlights Net sales declined 8% or $18.1 billion during 2016 compared to 2015, primarily driven by a year-over-year decrease in iPhone net sales and the effect of weakness in most foreign currencies relative to the U.S. dollar, partially offset by an increase in Services.
In April 2016, the Company announced an increase to its capital return program by raising the expected total size of the program from $200 billion to $250 billion through March 2018.This included increasing its share repurchase authorization from $140 billion to $175 billion and raising its quarterly dividend from $0.52 to $0.57 per share beginning in May 2016.
During 2016, the Company spent $29.0 billion to repurchase shares of its common stock and paid dividends and dividend equivalents of $12.2 billion. Additionally, the Company issued $23.9 billion of U.S. dollar-denominated term debt and A$1.4 billion of Australian dollar-denominated term debt during 2016

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How Does PayPal Make Money? The PayPal Mafia Business Model Explained
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Marketing vs. Sales: How to Use Sales Processes to Grow Your Business
The Google of China: Baidu Business Model In A Nutshell
Accenture Business Model In A Nutshell 
Salesforce: The Multi-Billion Dollar Subscription-Based CRM
How Does Twitter Make Money? Twitter Business Model In A Nutshell
How Does DuckDuckGo Make Money? DuckDuckGo Business Model Explained
How Amazon Makes Money: Amazon Business Model in a Nutshell
How Does Netflix Make Money? Netflix Business Model Explained

 

The post How Apple Made Money In 2017 [Animated] appeared first on FourWeekMBA.

How Amazon Made Money In 2017 [Animated]

As reported on Amazon Annual Report for 2017:

Amazon organized its operations into three segments:

North America,
International,
and AWS.

When it comes to financial highlights:

Sales increased 27% and 31% in 2016 and 2017, compared to the comparable prior year periods.
Changes in foreign currency exchange rates impacted net sales by $(5.2) billion, $(550) million, and $210 million for 2015, 2016, and 2017.
North America sales increased 25% and 33% in 2016 and 2017, compared to the comparable prior year periods.
The sales growth in each year primarily reflects increased unit sales, including sales by third-party sellers, and, in 2017, the impact of the acquisition of Whole Foods Market.
Increased unit sales were driven largely by Amazon continued efforts to reduce prices for its customers, including from Amazon shipping offers, increased in-stock inventory availability, and increased selection.
International sales increased 24% and 23% in 2016, and 2017, compared to the comparable prior year periods. The sales growth in each year primarily reflects increased unit sales, including sales by third-party sellers.
Increased unit sales were driven largely by Amazon continued efforts to reduce prices for its customers, including from its shipping offers, increased instock inventory availability, and increased selection.
Changes in foreign currency exchange rates impacted International net sales by $(5.0) billion, $(489) million, and $138 million in 2015, 2016, and 2017.
AWS sales increased 55% and 43% in 2016 and 2017, compared to the comparable prior year periods. The sales growth primarily reflects increased customer usage, partially offset by pricing changes. Pricing changes were driven largely by Amazon continued efforts to reduce prices for Amazon customers.

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The post How Amazon Made Money In 2017 [Animated] appeared first on FourWeekMBA.

How Google Made Money In 2017 [Animated]

As reported on Google 10K annual report for 2017:

The key financial results for the fiscal year ended December 31, 2017:

Revenues of $110.9 billion and revenue growth of 23% year over year, constant currency revenue growth of 24% year over year.

Google segment revenues of $109.7 billion with revenue growth of 23% year over year and Other Bets revenues of $1.2 billion with revenue growth of 49% year over year.

Revenues from the United States, EMEA, APAC, and Other Americas were $52.4 billion, $36.0 billion, $16.2 billion, and $6.1 billion, respectively.

Cost of revenues was $45.6 billion, consisting of TAC of $21.7 billion and other costs of revenues of $23.9 billion. Our TAC as a percentage of advertising revenues was 23%.

Operating expenses (excluding the cost of revenues) were $39.1 billion.

Income from operations was $26.1 billion. Effective tax rate was 53%. • Net income was $12.7 billion with diluted net income per share of $18.00.

Operating cash flow was $37.1 billion.
Capital expenditures were $13.2 billion.
Number of employees was 80,110 as of December 31, 2017.

Google operates in multiple operating segments. Google is the only reportable segment. None of the other segments meet the quantitative thresholds to qualify as reportable segments; therefore, the other operating segments are combined and disclosed as Other Bets.

The reported segments are:

Google – Google includes our main products such as Ads, Android, Chrome, Commerce, Google Cloud, Google Maps, Google Play, Hardware, Search, and YouTube. The technical infrastructure and some newer efforts like virtual reality are also included in Google.
Google generates revenues primarily from advertising; sales of apps, in-app purchases, digital content products, and hardware; and licensing and service fees, including fees received for Google Cloud offerings.
Other Bets – Other Bets is a combination of multiple operating segments that are not individually material. Other Bets includes businesses such as Access, Calico, CapitalG, GV, Nest, Verily, Waymo, and X. Revenues from the Other Bets are derived primarily through the sales of internet and TV services through Fiber, sales of Nest products and services, and licensing and R&D services through Verily.

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The post How Google Made Money In 2017 [Animated] appeared first on FourWeekMBA.

What Is a Business Model? 23 Successful Types of Business Models You Need to Know

In this guide, I'll show you how business models work and why they have proved to be quite effective. At the end of it all, business modeling is about finding a systematic way to unlock long-term value for an organization. In this guide, we'll see 23 successful types of business models examples.

What is a business model?

A business model is a critical element for any startup success as it is what unlocks value in the long-term. In a way, developing a business model isn't only about monetization strategies.

Indeed, that is way more holistic. To develop a business model companies need to create value for several stakeholders. Thus, a business model it is about what makes users go back to your app, service or product. It is about how businesses can get value from your solution. It is about how suppliers grow their business through it.

A business model is all those things together. In short, when those pieces come together, that is when you can really say to have a business model.

What are the primary components of a business model?

Although there is not a single way to define a business model, there is a standard called "business model canvas" which is a good way to start to understand what are the pieces and moving parts of a company value creation chain. As highlighted in the business model canvas there are seven key ingredients for any business model to succeed:

Key partners
Key activities
Value proposition
Customer relationship
Customer segment
Key resource
Distribution channel
Cost structure
Revenue stream

However, in a world where information technology has become predominant, being agile becomes critical. In that context, an evolution of the business model canvas, the lean startup canvas has become more accurate to design a business model for a startup. The key difference is how a startup "behaves" compared to a corporation:

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The lean startup canvas started from the lean startup movement launched by Steve Blank in 2013. In short, while large companies relied and still relies primarily on elaborate planning, with business plans hundreds of pages long, full of assumptions. Startups primarily rely on experimentations. Where large corporations invest large resources upfront to design or build up a product or service; Startups use the process of iterative design and agile development, where users help the startup get from MVP to product/market fit.

Whether you decide to use the business model canvas, the lean startup canvas or develop your own methodology, it is critical to gain a holistic understanding of your business. Thinking in terms of business modeling is the key to reach that kind of understanding!

How many types of business models exist?

We can classify business models in several ways. For instance, based on how companies and startups monetize their business, how they deal with their suppliers, customers and the value proposition those companies can offer to several stakeholders.

Some business models have always existed, some others are new, others yet innovate by bringing old business models to new industry (take the Netflix business model case study as an example).

In this guide, we'll see several business models based on successful companies, tech startups and also more traditional organizations. The aim is to give you an overview of all the different moving parts that comprise a business model. In some cases - take Microsoft or Amazon - there isn't a single way to describe a business model, as some companies have been able to diversify so much their operations to be able to generate value propositions across several stakeholders across many industries.

For instance, Microsoft isn't just the company selling the Microsoft Office products. True, that is still an essential part of the business, as of 2017. Yet, Microsoft has many other segments, that are independent of others, and some others that are complementary:

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From a quick look at Microsoft revenues breakdown from 2015-2017, you can appreciate the changes the company has gone through and the complexity of its business model. Indeed, while Microsoft Office is still the core of the business, other products, such as Xbox, might seem at first sight completely separate segments. However, when you understand that the Microsoft involvement in the gaming industry has proved as a perfect ground for AI systems; you can appreciate how the Xbox becomes the perfect "playground" for innovation in the other company's segments! 

Take also LinkedIn, a social media network for professionals. If you look at it merely as a social network, you don't realize the importance of LinkedIn on Microsoft overall business model. In fact, LinkedIn, which is powered by a knowledge graph might be playing a critical role for Microsoft's search engine, Bing.

Or take how Amazon back in 2000 was trying to figure out a way to allow other stores to build their e-commerce on top of Amazon, yet it was impossible to do that with its infrastructure at the time. That is why Amazon started to develop that infrastructure, which has now become Amazon AWS:

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In 2017, Amazon AWS represented the fastest growing segment of the company, and it generated over $17 billion in revenues!

Why am I telling you that? As highlighted so far, a business model can be designed. Yet, most of it is about tinkering and experimentation. Thus, the business model design is a tool to accelerate the process of building up a sustainable machine that captures value on the long-run. The key though is to leave that machine unleashed.

How do you understand the way the business model moving parts come together? What is the glue that keeps them together?

Vision vs. Mission: why understanding the difference between them is important

There is one key ingredient of any company's business model that seldom changes, that is the company's vision.

While the company's mission statement might change over time, the vision sticks. The main difference between mission and vision is about the present and future. The mission is the way the company wants to achieve its objectives now and its purpose in the present.

Take Google mission statement:

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In other words, the vision is the map, that influences the company directions and decisions for the future. The mission is about how the company wants to achieve its objectives, thus getting closer to its future vision, in the moving present. That is a tool aligning the key players of an organization (employees, suppliers, customers and more), while it allows the forming of a culture within the organization.

The mission statement instead might have two functions, one is internal, and one is external. Internally, the vision aligns people around the same map. Externally, the vision allows outside observers to understand why an organization might be looking toward a certain direction.

Therefore, the vision is the "organizational DNA." Once the vision is clear, you might not even need a mission statement to succeed. Even though the mission statement if an critical propeller that helps companies focus on short-term success.

Going back to Google's mission statement "to organize the world's information and make it universally accessible and useful," that allows Google to focus its efforts to achieve its future vision. For instance, when Google announced its transition from mobile to AI first that hasn't changed its mission.

That only represented the mean to achieve its mission.

23 business models in a nutshell

In this guide, we'll look at 23 business models, spanning across several industries, monetization strategies and way to unlock value in the long run!

Hidden revenue business model

Some examples of hidden revenue generation are Google and Facebook. The two most popular websites on planet earth have a similar monetization strategy. They offer free apps and platforms for a broad audience (billion of people worldwide) while monetizing the data of the same users.

In fact, when you do a search on Google or when you put a like on a Facebook post, this is data those companies are gathering to get you profiled. This data that gets collected anonymously gets sold to businesses in the form of advertising.

Each time you click through a link on Google that has the "ad" notation next to it. De facto you're allowing Google to monetize on a keyword, while you're making a business monetize on that keyword if you buy the service they provide.

A similar logic applies to Facebook. The news feed is the place where Facebook monetizes most of its ads. Both models both use a hidden revenue generation model as those services work so well that most users barely realize their data is getting sold for advertising.

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One-for-one business model

Have you ever heard of TOMS Shoes? As you can understand from the name, this is a company making shoes. What's new about it? The founder of TOMS Shoes founder has come up with a model, in which, for a pair of shoes sold, another pair is given to kids around the world that cannot afford them.

This kind of model might be seen as a sort of hybrid that combines profit with non-for-profit models. In reality, TOMS Shoes has proved to be profitable and sustainable over time.

Indeed, the non-profit side of the business model works as an excellent propeller for the business. Anyone wants to take part in the growth of a company that not only sells shoes but takes care of kids around the world.

Thus, it isn't anymore just a pair of shoes; it is a story you want to be part of.

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Razor and blade revenue model

Have you ever wondered why a blade costs more than a razor? This is the razor and blade revenue model in action. When a company makes its customers loyal to a product. Then that same companies might leverage on that product to sell related "accessories" for a premium price.

Companies like Apple, for instance, use an inverse razor and blade business model. Apple has created platforms like the App Store and iTunes, which sell app and songs, movies or tv series at a convenient price. While Apple charges premium prices on its devices (iPhone, iPad, and Mac).

The logic is the same, but inverted. As consumers are locked in the Apple ecosystem, they feel compelled to buy Apple products at a premium price and with very low price elasticity.

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Cash conversion cycle or cash machine business model

Have ever wondered how some businesses survive, nonetheless the thin margin they have? One great example is Amazon.

A company that makes low-profit margin yet it has been very disruptive. In reality, Amazon can get its partners to finance the business by playing on the short-term liquidity of the business.

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Peer-to-peer business model

[image error] As a peer to peer network, Airbnb allows individuals to rent from private owners for a fee. In fact, Airbnb charges guests a service fee between 5% and 15% of the reservation subtotal; While the commission from hosts is generally 3%. Airbnb also charges hosts who offer experiences a 20% service fee on the total price.

A peer-to-peer business model is built on the premise of creating value for both demand and offer side, while the company that acts as a middleman monetizes through commissions.

Companies like Airbnb have implemented the modern version of the peer-to-peer business model. As technology has quickly advanced, in Airbnb's case, it won just because it allowed the transactions between hosts and hostee smooth.

The platform works seamlessly, and Airbnb only intervenes to create trust and mitigate risk for the party involved.

Multi-sided platform business model

If I saw, professional social network, at least at the time of this writing, for sure you'll think about LinkedIn. In fact, with over five hundred million users worldwide LinkedIn is a platform that offers value for several stakeholders.

LinkedIn is a source of value for a B2B that is trying to grow; it is a powerhouse for any business developer and a source of value for HR managers and candidates looking to grow their skills.

In short, where on a peer to peer marketplace, a company acts as an "invisible" middleman that makes transactions and interactions among sellers and buyers as smooth as possible.

On a multi-sided platform, the company operating that offers services to both sides. For instance, LinkedIn sells subscription services to HR managers to find candidates to fill vacancies. At the same time, LinkedIn provides another subscription service to people looking for job opportunities.

As the value of the platform depends upon the ability of LinkedIn to offer skilled candidates to HR manager, that is why LinkedIn also has an online teaching platform that offers together with a subscription, professional courses to people looking for a job.

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Direct sales business model

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Nowadays, with the advent of AI, machine learning and a new form of advanced technologies, it might seem demode to talk about direct sales. In fact, for many, this is a thing of the past.

However, the opposite is true. In an era where everything is getting automated the personal touch is becoming critical. Of course, once technology produces machines to the point of seeming human (see the Google Duplex experiment) that might be a different story.

Yet as of now, companies like ConvertKit use direct sales as a powerful weapon to grow their business, fast! Below you can see a simple Trello board put up by Nathan Berry, founder of ConvertKit when he decided to create a mail marketing tool from scratch just to see it grow to over a million dollar in monthly recurring revenue in only six years:

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Thus, direct sales can be a powerful way to develop a business if done correctly. One of the secret to a successful direct sales strategy is about the qualification of your target audience.

If you try to sell your service or product to anyone, this is more spamming. The more you qualify your audience, the more you create value.

Freemium business model

Free can be a powerful weapon for growth. Many in the tech industry and more specifically in the SaaS business model use the Freemium to grow their business. The freemium is a mix of free and paid service.

The company offers a basic version of the product that works just like the premium product but it either has limited usage, or it has limited features. Thus, the free version is used for lead generation (capture contacts of people) and invite them to upgrade to the paid version or have the users with a free account to advertise their product.

Take SumoMe, a tool that allows you t grow the audience of a blog through newsletter forms, pop-ups, A/B tests, and heat maps:

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If you get the freemium version of the tool, you still have a lot of features for free. SumoMe will invite you to upgrade over time, and it will show a small link "powered by SumoMe."

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Source: jackpdean.com

In short, the free product can be leveraged in several ways. First, for lead generation. Second, as a way to trigger upsells for non-paying customers.

Third, as a virality tool, with CTAs and links placed in strategic places to have free publicity from non-paying users.

If appropriately implemented the freemium model can be a great way to grow a brand and a business fast.

Affiliate marketing business model

Let's say you have a website with a large amount of traffic each month. Yet you don't sell any product or service, which is yours. How do you make money? Well, thanks to affiliate marketing you don't need either a product or a service, you have many from other companies.

Thus, you'll make money by merely featuring other product or services and getting a commission for that. Affiliate marketing done right can be a powerful source of income. Take, Pat Flynn from Smart Passive Income, which has been generating millions of dollars with affiliate marketing:

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Subscription business model

[image error] Salesforce main revenue generation strategy is based on a subscription-based cloud service. Over 92% of Salesforce revenues come from four categories of cloud CRM (Customer Relationship Management) services, that span from the sales cloud to a marketing cloud. The remaining revenues are primarily driven by professional services. In 2017 the company generated $8.39 billion in revenues.

Think those two scenarios. You have a series of online courses that you sell as a one-off. You've sold 100 courses in one month at $100; you'd made $10,000. Next month to have the same level of revenue generation you'll have to sell other 100 courses.

This means you either find more students or you produce new courses. Imagine the second scenario. You have a few courses, and you make them available for a monthly subscription at $75. If you have 100 subscribers, this means that each month you'll have $7,500 without having to find new students.

Given this example, you can understand why the subscription business model is so powerful. Today companies like Netflix, Amazon (with Prime), LinkedIn and many others use subscription-based models to monetize part of their business. However, a subscription-based business model also needs a lot of resources.

Take Netflix. I'll keep paying my subscription only if they will give me fresh content on a regular basis. That is why Netflix also produces series that are quite successful. Yet those series have massive production costs.

In other words, to sustain a subscription-based business model you also need a lot of the resources necessary to create new content, have awesome support or service that motives subscribers to keep paying. The curse of the subscription business model is churn!

The (management) consulting business model

[image error] Accenture is one of the world’s leading professional services companies with approximately 425,000 people serving clients in a broad range of industries across the globe. 

As one of the most successful consulting company in the world, Accenture makes money by selling consulting services in several industries (from financial services to communication and technology).

A consulting business model is often based on hiring talented people with hiring people and have them work on multiple client's projects. The client pays a fee that can be assessed per hour or per day, according to the requirements of the service.
Accenture was able to build a multi-billion dollar based on consulting services across the globe.
The agency-based business model

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neilpatel.com is one of the most successful sites about digital marketing. Neil Patel has also used his name as a brand, which has become recognized in the digital marketing space.

However, rather than selling tools or info-products, Neil Patel is monetizing its traffic by generating leads for his digital agency. As he pointed out:

My model isn’t as scalable and it requires more headcount, but it can generate much more money. Just look at ad agencies like WPP and Dentsu. They generate billions in revenue!

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In short, Neil Patel Digital is the SEO and digital marketing agency which allows Neil Patel to monetize its traffic primarily by offering free content and free marketing tools. This is a mixture of a freemium business model, combined with an agency-based business model.

Yet, the idea behind the agency-based business model is simple: you generate enough qualified leads, set up a lean team to manage those projects and grow the agency based on on-coming projects! According to Neil Patel - at least in the digital marketing space - there is still space to grow a multi-billion turnover agency.

Vertically integrated supply chain business model

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From its humble beginnings in 1961, when Leonardo Del Vecchio started as a small shop that produced components and semi-finished products for the optical industry; that shop has reached over $9 billion in net sales in 2017. With all the major brands from the eyewear industry licensed by Luxottica (Armani, Bulgari, Chan, l, Prada and many others) it is the largest and most vertically integrated business in the world. 

Leonardo Del Vecchio, one of the wealthiest people in Italy and among the wealthiest businessmen in the world, has built Luxottica piece by piece. Started as a small shop producing semi-finished products for the optical industry it eventually acquired the whole supply chain, up to own retail stores across the globe. It took Leonardo Del Vecchio a few decades to build its vertically integrated business. Yet now that is the most successful company in the optical industry. Instead of being acquired by a large American company, the Italian based Luxottica was the one acquiring brands like Oakey (the California-based eyewear company). 

The e-commerce marketplace business model

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With almost $23 billion in revenues and nearly $7 billion in profits. While in North America and the western world in general, Amazon is the synonym of "e-commerce." When it comes to the Chinese industry, Alibaba is the market leader! In 2016 the company recorded over 423 million active buyers. Alibaba, just like Amazon has a diversified business model, with many moving parts. However, as of 2017 most of its revenues still came from core commerce.

As building up a website and e-commerce has become inexpensive, and it buries no particular cost for the traditional brick-and-mortar business, more and more small businesses join in and make of the marketplace their primary source of revenues following Amazon leadership at the global scale. In fact, in many cases brick-and-mortar stores opt to become Amazon sellers:

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In fact, by becoming a seller on Amazon, you allow your products to be directly picked, packed and shipped. Amazon takes a cut of the revenue, and the seller retains the rest. As Amazon puts it:

We offer programs that enable sellers to grow their businesses, sell their products on our websites and their own branded websites, and fulfill orders through us. We are not the seller of record in these transactions. We earn fixed fees, a percentage of sales, per-unit activity fees, interest, or some combination thereof, for our seller programs.

As of 2016 Amazon still made almost 70% of its revenues from retail products.

The discount business model that focuses on high quality

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Leveraging on price to gain a competitive advantage isn't new. However, price wars are not the best way to create a sustainable business model. Instead, the supermarket chain - ALDI - has done just the opposite. One of the critical ingredients of ALDI business model is to keep its prices low while maintaining its quality as high as possible. How? WIth several strategies. For instance, ALDI limits its stores to 1,300 items, which generates minimum wastes. Also, ALDI also features its brands, which makes it inexpensive to sell them, as there will be lower sales and marketing costs associated. 90% of ALDI brands have an exclusive agreement with the market chain! 

The attention merchant business model

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An attention merchant might be defined as a company that primarily makes money by harvesting human attention. While this definition is tough in practice (most companies make money by grabbing their target attention) the attention merchant primarily asset is human attention. That is also why companies operating with an advertising business model are defined attention merchants. While in the tech industry companies like Facebook and Google have become hugely profitable by using an advertising model.

For the sake of this article, I'm mentioning Snapchat Business Model as it probably represents the wildest evolution of where attention merchants can get. Just like Google allows businesses to bet on keywords. Businesses on Snapchat can create their Geofilters based on location and track the results of those Ggeofilters.

While Google and Facebook proved to have a solid business model, attention merchants usually also face many challenges. In fact, as those companies scale up, they also end up grabbing the attention of billions of people worldwide. When that happens, those tools become a threat to the political system which tries to kick back by regulating or fining them.

Another aspect of attention merchants is about keeping the users hooked. When those apps start losing users attention - if they don't have a solid business model - a single Tweet from a Kardashian can make the company burn over a billion dollar in market cap!

sooo does anyone else not open Snapchat anymore? Or is it just me... ugh this is so sad.

— Kylie Jenner (@KylieJenner) February 21, 2018

Privacy as an innovative business model

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While humans have always looked for private moments in their lives, Privacy has gained a new and renewed meaning in modern times:

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With the rise of the web and the rise of companies that make money by harvesting users' data, privacy has become a concern. As many businesses start from people's concerns, privacy has become itself an industry.

Part of it has been fueled by Google practice to gather users' data. As more people become aware of the Google business model, they look for alternatives that respect privacy. If you type "privacy" on Google search box, among the most frequent related searches, you'll find "privacy Google:"

[image error]If you click on "privacy google" you will get on the right-hand side a knowledge panel which highlights "privacy concerns regarding Google:"

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In short, Google itself is revealing the existence of an industry that revolves around privacy online. In this scenario, a search engine like DuckDuckGo, which has built its success on throwing the users' data on the fly to allow private navigation, that is growing quite fast. That's because DuckDuckGo makes money primarily via affiliations and by selling local keywords. Thus, privacy becomes a propeller for DuckDuckGo business growth.







The most successful franchising business model in the world

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McDonald's follows what could be defined as a "heavy franchised business model." 92% of its restaurants are franchised. With a long-term objective to reach the 95% of franchised restaurants.

The franchising business model is quite effective for the expansion of the organization. A franchisor licenses its know-how (which might comprise procedures, training materials, brand and more) for a franchisee, which has the right to sell the franchisor products and services in exchange of a royalty. In some cases, the franchisor also gets a percentage of the revenues. 

The on-demand subscription-based business model

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We now give for granted that we must watch our favorite shows and series on-demand. Yet, for decades the traditional media business model has relied on fixed schedules. You either watched the Late Show at the time it was going on air, or you were supposed to wait for the next replica of that episode.

At times a business model only becomes possible when technology evolves. In some cases, it also requires some creativity when technology doesn't help. For instance, in 1997 Reed Hastings, CEO, and founder of Netflix started a business based on rental of DVDs. This business today contributes to a small pie of Netflix revenues, yet at the time it was the core of the business, and it has been so for years. "On-demand" at the time was possible with the pay per rental business model. Until Netflix transitioned to the on-demand subscription-based business model; an old business model used by magazines for decades was successful and "innovative" in the TV industry, where the content was mainly distributed at fixed schedules.

The user-generated content business model

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Among the 50 most popular sites in the US, Quora might be defined as a "social Q&A" site. Just like Reddit taps into users to generate content. Quora also draws into its writers to produce quality content that answers its users' questions.

There are a few interesting aspects about Quora. First, it uses a mixture of AI combined with human intelligence. Quora allows users to write content while using advanced algorithms to make the platform scale up. Second, people writing on Quora do not get paid. In fact, by introducing a social mechanism of ranking, Quora writers feel recognized for their work. Besides, earning the prize as Quora top writer might also mean the mention of popular publications. Thus, if I had to describe the Quora business model in a couple of sentences, that would be "the social that taps into users - that aspire to become writers - to produce content, and it scales up thanks to a smart platform built on AI systems."

In terms of monetization, Quora has received several rounds of investment and started to test text-based advertising.

The educational business model

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Built by one of the smartest persons on earth (Stephen Wolfram), Wolfram Alpha is a computational engine, able to provide complex mathematical questions and way more advanced (at least until a few years ago) compared to any other search engine. Wolfram Alpha has built its business based on education. The primary targets remain students or teachers, which with a subscription can get the unlimited access to Wolfram Alpha features.

Wolfram Alpha makes its computational engine free and open to anyone. Yet to get advanced features (such as full mathematical procedures) you will need to subscribe to the paid version. In short, that is a mixture of a freemium and subscription-based model that targets the educational industry.

The mix of chain and franchise business model

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When 1983, Howard Schultz was walking through the streets of Milan and Verona he became "enamored" by the coffee experience people had in the Italian bars. He decided to bring that experience back home. That's how Starbucks was born. While McDonald's makes money by primarily and heavily franchising its restaurants, Starbucks is a mix of operated vs. licensed stores. If we look at the revenue generation, company-operated stores make up 79% of the company's revenues in 2017. 

Instant news business model

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Twitter has based its fortune to short messages (until 2017 140 characters, then extended to 280) which allows anyone to share news but also updates that become news. One of the most powerful aspects of Twitter is its immediateness, which although might have also caused troubles in the media industry, it also allowed news to be disintermediated. Twitter is an attention merchant, which primarily makes money via advertising, like Facebook and Google.

Key takeaway

In this guide, we analyzed 23 successful business models and how they unlocked value in the long run. If we were to cover all the existing business models a book alone wouldn't fit them all.

Does it mean that you can choose any of those business models alternatively? In reality, you can't. Some business models are better suited for some context, not for others.

For instance, if I pay for a service, I don't want to see advertising. Thus, in a way a paid service and advertising are in most cases not compatible.

Another critical aspect is that often business modeling is about trial and error. In fact, not only the business model is usually a choice of the founders of a company but also a choice of the users/customers.

Take Wikipedia; if Wikipedia was going to show ads would you still trust it? Probably not. Wikipedia might only make sense as a free, non-profit organization. Was Wikimedia Foundation trying to cash on Wikipedia; chances are it would also lose the support of all its editors that have been working for free on its content, just because it was something meaningful to them. 

A third aspect that is critical for business modeling is about experimentation. Take Google. When Bring and Page started it, they didn't think at all about the advertising business model.

One of the reasons Google was so successful, even though it was one of the last movers in the search engine industry; was the fact that it offered more relevant results, with less spam and no advertising.

In fact, back then in a way advertising was associated with spam. Yet when Google came out with Google AdWords and AdSense, those mechanisms allowed several stakeholders to make money online.

In short, sometime a business model will be the result of a more sophisticated method of creating value for several players in an industry. Other times it might be as simple as just a one-off sale of a product.

Did you find your business model yet?

If you think we should cover other business models feel free to leave a comment below!

 

The post What Is a Business Model? 23 Successful Types of Business Models You Need to Know appeared first on FourWeekMBA.

What Is The Best Business Model For A Small Business?

There were 28 million small businesses in the United States in 2017. Out of them, 22 million were individually operated, which means that they don’t have any employees. It is clear that entrepreneurship is considered a solution for financial independence and the opportunity to finally do something you really like. What is more, when you develop a small business, the future is always unpredictable. You can be successful and develop your business even more, or you can fail and close it after one year.

So, you will need a business model to make sure that things will go in the right direction. It doesn’t matter how cool or unique your idea is, you will still need to make money to support your business. There are many business models which you can use as an inspiration and find the “recipe of success.” But, which is the best business model? Which business model is the best for your domain? Keep reading this article, and you will find the answer to your questions.

Who Has the Best Business Model?

Of course, a business model depends on many factors, such as size, context, stakeholders involved. However, in this article, we identified five business model that might work out quite well for a small business:

Become a marketplace

A business model that continues to have success in today’s working environment is becoming a marketplace. All you have to do is just bring supply and demand together, and you are fine. Airbnb does exactly this. It helps people list, find, and rent single rooms, apartments, or houses for their trips. Everything can be done by paying a processing fee. Airbnb is a strong believer in the potential of the new “sharing economy.” The supply and demand are there. All you need to do is just find the means to meet them.

Why can this business model work for you? First, you don’t have any inventory. You don’t need to have an office to operate this business. You can even run your company virtually. In this case, you are the marketplace, which means that you will have zero manufacturing costs. Your work will consist of merely bringing the sellers and the buyers together. You facilitate the transaction and take a slice of the total. All the rest is done by the seller and buyer alone.

On this blog, we covered the LinkedIn Multi-Sided Marketplace:

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Even though Linkedin is a large company now, acquired by Microsoft, a marketplace can be created in many niches and verticals.

Focus on customization

Consumers are shifting more and more to personalized goods. They want products that reflect their tastes and show their unique personality. Thus, this has become a successful business model many companies started to follow. For example, Coca-Cola added names on their soda cans producing a lot of excitement among its clients. What is more, Nike also has a special feature, giving you the opportunity to personalize your snickers. The examples can continue, but there is one valuable lesson you need to understand from them.

According to Mashable.com, people are open to spending more on personalized products. They want products specifically created for their needs, so this makes them more open to paying for them. On the other hand, technology has evolved a lot and is very helpful nowadays. If you think that you will spend more time working on personalized products, you now have technology on your side to prove to you the contrary.

On this blog, we also suggested how to follow strategies used by Amazon to get traction on your online store.

Direct Sales Model

Avon and Amway wouldn’t have chosen this business model unless they knew there is a big opportunity on this market. Direct selling is producing hundreds of billion dollars every year. For example, you can open a fashion jewelry business and use the direct sales business model. You can encourage talented students or people who need an extra income to join your website. They can sell their products on the website, using your infrastructure. They will pay you a commission for using it and create their own online store.

If you think for a second at today’s working environment, you will see immediately why this model can be successful. The number of people who are looking for an extra income or some financial mobility is increasing. Therefore, this model continues to have a raising opportunity. What is more, you now have social media which helps your collaborators to reach out to their target audience and become well-known as merchandisers. So, this business model has no other option but to be successful.

An interesting case study we covered is how ConvertKit was able to grow to over a million MRR with a direct sales business model. The key is consistency and to make sure not to lose opportunities.

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For that, you don't necessarily need a complex customer revenues management system, but a simple Trello board would work. Above, you can see the Trello Board, Nathan Berry, founder of ConvertKit used to keep track of its contacts.

Below the business model ConvertKit used to grow its business:

On-demand services

We are living in an on-demand economy. It has made people asking for more convenience, speed, and simplicity. Uber is a successful example which has changed entirely its industry. It also offers constant work opportunities for consumers who are looking for a business model to help them become solopreneurs. Handybook is another example which offers on-demand home services. It is present in 26 cities and has recently raised $30 million which are going to be used to help grow the mobile engineering department. The aim is to become a “remote control” for their clients, helping them with an easy-to-use app to order services like cleaning or repairs.

The on-demand market is at its highest potential of scalability, cost-effectiveness, and efficiency than ever before. Again, you can count on technology to leverage your start-up. What is more, you can cut costs by collaborating with freelancers who can keep your software updated and come with improvement proposals.

One of the most successful examples of a company that built its success based on on-demand content is Netflix with its business model:

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Did you try “freemium” model?

It is not hard to imagine where the name comes from. It is a combination of the words “free” and “premium.” This means that you will offer a basic service for free and ask for an extra fee when your clients want to receive a premium package. Linkedin is a perfect example of this model as it lets users share their professional profile for free, but it charges you if you want to obtain talent solutions or premium subscriptions. When you choose this type of model, it is essential how you create the free package. Your users should feel the need to ask for the premium model if they want more features. This doesn’t mean that the free version should be extremely basic.

In fact, the free option should grow their appetite to use your services even more and pay a monthly subscription for the premium features. It acts like your best marketing tool to convince your customers they should pay the premium fee. PickWriters, one of the largest translation companies, uses this business model to promote its translation services. You can try the 30-day free trial and so make your clients more comfortable first to test your solution and then pay for it. You will see that they will feel more comfortable to pay the subscription after the free trial period.

Another example of a freemium business model that works is SumoMe:

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You can see in the example above how SumoMe offers the service for free and then leverages on "powered by SumoMe" to make its product viral, thus using the free product as a marketing device.

Summary and conclusions

The models above have been tested and proved to generate revenue. When you choose the business model you want to follow, it is essential to connect it with your clients’ personality traits and interests. You should also make the best use of technology as it will help you move your business forward.

If you lack ideas on what do to next to start a business with low investment at high profits, below 12 ideas for you:

Become a blogger
Become an online instructor
Become a professional photographer
Become a ghostwriter
Become a Chatbots maker
Become an affiliate marketer
Become a career coach, resume writer or LinkedIn profile writer 
Become a business development contractor
Become an infopreneur 
Become a websites flipper 
Become an SEO consultant
Become a contractor headhunter

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The post What Is The Best Business Model For A Small Business? appeared first on FourWeekMBA.

The Walmart Business Model In A Nutshell

With over $495 in net sales as of January 2018, and over $4.5 billion coming from Membership and other income. The company operates three primary units that in 2018 comprise Walmart U.S. (approximately 64% of our net sales), Walmart International (about 24% of net sales), and Sam’s Club (approximately 12% of its net sales) a membership-only warehouse clubs and operates in 44 states in the U.S. and in Puerto Rico, as well as eCommerce.  

Walmart organizational snapshot

Walmart serves nearly 270 million customers who visit its more than 11,700 stores. Its strategy is based on “leading on price, invest in differentiating on access, be competitive on assortment and deliver a great experience by the motto of EDLP (every day low prices).”

Everyday low cost (“EDLC”) is Walmart’s commitment to control expenses. Those savings can be passed along to customers. Walmart has an omnichannel presence to provide customers access to a broad assortment of goods at any time and in many locations in the US and internationally. Besides its physical infrastructure, Walmart has also been investing in its digital platforms, based on eCommerce.

Walmart comprises three main segments:

Walmart U.S.,

Walmart U.S. is the largest segment operating in all the 50 states in the U.S., Washington D.C. and Puerto Rico. It follows three primary store formats, as well as eCommerce. Walmart U.S. generated approximately 64% of our net sales in 2018

Walmart International

Walmart International consists of operations in 27 countries outside of the U.S.

It comprises three major categories:

Retail,
Wholesale
And other

These categories consist of many formats, including:

Supercenters,
Supermarkets,
Hypermarkets,
Warehouse clubs (including Sam’s Clubs) and cash & carry,
As well as eCommerce.

Walmart International generated 7 approximately 24% of 2018 net sales.

Sam’s Club

Sam’s Club consists of membership-only warehouse clubs which operates in 44 states in the U.S. and Puerto Rico, as well as eCommerce. Sam’s Club accounted for approximately 12% of 2018 net sales.

As a membership-only warehouse club, membership income is a significant component of the segment’s operating income.

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Sam’s Club offers merchandise in the following five merchandise categories:

Grocery and consumables including dairy
Fuel and other categories consist of gasoline stations, tobacco, tools and power equipment, and tire and battery centers;
Home and apparel includes home improvement, outdoor living, grills, gardening, furniture, apparel, jewelry, housewares, toys, seasonal items, mattresses, and small appliances;
Technology, office, and entertainment includes electronics, wireless, software, video games, movies, books, music, office supplies, office furniture, photo processing and third-party gift cards; and
Health and wellness include pharmacy, optical and hearing services and over-the-counter drugs.

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Walmart store formats

Walmart sells mainly through three store formats:

Supercenters
Discount stores
Neighborhood markets

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Supercenters occupy a larger area, compared to discount stored and neighborhood markets.

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When it comes to merchandising Walmart sold three main categories:

Grocery, which accounted for 56% of Walmart net sales
Health and wellness, which accounted for 11% of its net sales
and General merchandise accounted for 33% of its revenues

How does Walmart manage to be competitive with such low prices? Inventory management is the key

As specified in its annual report Walmart can develop, open and operate units at the right locations and to deliver a customer-centric omnichannel experience. That largely determines its competitive position within the retail industry. Walmart employs many programs designed to meet competitive pressures within its industry.

These programs include the following:

EDLP (everyday low price): items priced at a low price every day so Walmart customers trust that its prices will not change under frequent promotional activity;
EDLC (everyday low cost): effort to control expenses so that savings can be passed along to customers;
Rollbacks: pass cost savings on to the customer by lowering prices on selected goods;
Savings Catcher, Save Even More and Ad Match: strategies to meet or be below a competitor’s advertised price;
Walmart Pickup: customer places order online and pick up for free from a store. The merchandise is fulfilled through Walmart distribution facilities;
Pickup Today: customer places order online and can pick it up at a store within four hours for free. The order is fulfilled through existing store inventory;
Online Grocery: customer places grocery order online and has it delivered to home or picks it up at one of Walmart participating stores or remote locations; and
Money Back Guarantee: ensure the quality and freshness of the fruits and vegetables in Walmart stores by offering customers a 100 percent money-back guarantee if they are not satisfied.

How does Walmart distribution work?

For 2018, approximately 78% of Walmart U.S.’s purchases of store merchandise were shipped through 157 distribution facilities, located throughout the U.S.

The remaining merchandise gets shipped directly from suppliers.

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At the international level, Walmart utilizes a total of 188 distribution facilities located in Argentina, Brazil, Canada, Central America, Chile, China, Japan, Mexico, South Africa, and the United Kingdom.

Through these facilities, Walmart processes and distributes both imported and domestic products to the operating units of the Walmart International segment. By January 2018, approximately 83% of Walmart International’s purchases passed through these distribution facilities.

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Also, Sam’s Club distribution facilities play a key role:

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The principal focus of Sam’s Club’s distribution operations is on cross-docking merchandise, while stored inventory is minimized.

What is cross-docking?

As explained by Walmart:

Cross-docking is a distribution process under which shipments are directly transferred from inbound to outbound trailers.

In short, shipments typically spend less than 24 hours in a cross-dock facility, and sometimes less than an hour.

Sam’s Club uses a combination of our private truck fleet, as well as common carriers, to transport non-perishable merchandise from distribution facilities to clubs.

The segment contracts with common carriers to transport perishable grocery merchandise from distribution facilities to clubs.

Sam’s Club ships merchandise purchased by members on samsclub.com and through its mobile commerce applications by a number of methods from its dedicated eCommerce fulfillment centers and other distribution centers.

Walmart revenues breakdown

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Reference for the financial data: Walmart 2018 Annual Report

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The post The Walmart Business Model In A Nutshell appeared first on FourWeekMBA.