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Business models Practical guide for startups and entrepreneurs

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Introduction

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SaaS

E-commerce

Media site

2-sided market

User Generated Content

Mobile Applications

B2B Service

Retail

B2C Service

B2C Products

B2B Products

Freelancing

In this section we will be talking about 12 different business models

We will discuss for every model Definition of the

business model Examples KPIs Most important

issues How to analyze it

in Excel

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Each model we will evaluate according to 3 criteria: difficulty of implementation, money needed to achieve the break even, the scale that has to be achieved for the business to be sustainable

Difficulty level Money needed Scale

How difficult it is on a scale from 1 to 5 (where 5 is very difficult) to build a startup in a given model In the assessment we

take into account not only the coding but also the operational and sales aspect It is a subjective

assessment based on our experience

How expensive it is on a scale from 1 to 5 (where 5 is very expensive) to build a startup in a specific model? In the assessment, we

take into account both cash expenditures as well as opex for people on human resources, that sometimes do not require cash (certain aspect covered by founder)

Here you can determine at what market you need to be a leader for the startup to be sustainable business To simplify the matter

we will use 3 levels: Country Level Regional Level

(more countries i.e. Europe)

Global

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What we will show in this presentation is a part of extensive on-line course where I show the business models along with how to calculate whether they make sense or not in Excel

Click to check my course

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I recommend reading the following books to get more insight into business models. Click on the chosen cover to see details on each and every book

Click for more Click for more Click for more

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SaaS

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SaaS should not be confused with subscription models

Software as a Service SaaS company offers software on an on-demand

basis, usually delivered through a website it operates

SaaS =

SaaS ≠ Subscription model

Many SaaS generates revenue from monthly subscription fee but there are plenty of SaaS that are free or charger per usage

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Difficulty level Required funds Scale

Country level

Regional level

The product must be global

SaaS is not that difficult and requires relatively small budget. If you are interested in this model you immediately have to think at least about the regional market. Your country (provided it is not USA or China) does not suffice

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Just to remind you some examples of well known SaaS businesses

Service provided Revenue model

Virtual drive for storage and sharing files

Main sales tactics

Subscription fee Freemium

Mail service Free to users Revenue from ads

Free

Designing graphics – drag and drop ready made elements

Pay per used elements

Freemium

Access to books (library)

Subscription fee Pay per page/book

Free trial

Creation of animation movies

Subscription fee Freemium

Creation of webpages esp. blogs

Subscription fee Freemium

more

more

more

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When you look just at the sales funnel you can see how SaaS takes the visitor to trial and then to paid user. Some of the paid users may become your ambassadors and help you get new customers

Visitor

Freemium / Trial User

Paid User

Engaged Heavy User

Ambassador

Conv

ersio

n

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Conversion rates Churn rate

Customer Acquisition Cost (CAC)

Customer payback time

Average revenue per user (ARPU)

Life Time Value of the Customer (LTV)

Monthly Recurring Revenues (MRR)

Engagement metric

There are some KPIs for revenue side of SaaS model that you have to follow…

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Quick achievement of theproduct-market fit

Minimizing Churn rate

Acquisition tactics – customer acquisition plan

Integration with other SaaS and IT systems

You should test and find optimal solution for the following key topics

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For more check also my on-line course

Click to check my course

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E-commerce

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In e-commerce you will have 3 types of players depending on their presence in off-line and their approach to both channels

E-commerce

Pure players

Off-line players with separate on-line presence

Multichannel /Omni players

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E-commerce due to the low margins (for physical products) is very difficult. It requires not that big budget but quite often country level is enough to have stable, profitable business

Difficulty level Required funds Scale

Country level

Regional level

The product must be global

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Customer behaviors has huge impact on the business model and on what the e-commerce should concentrate on

Less than 40% of the buyers will buy this year Focus is on customer acquisition Loyalty program are not good investment 70% of e-commerce businesses are in this

model

Acquisition mode

Description of the business model Examples

E-commerce selling only 1 type of Slow Moving Consumer Goods (SMCG) bought infrequently i.e. vacuum cleaner, scuba diving, furniture

E-commerce for 1-time in the life event: strollers,

40%-60% of the buyers will buy this year You have a nice mix of new and returning

customers Focus is on customer acquisition as well

increasing the value of the customer (increased frequency and increased purchase per visit)

Hybrid mode

E-commerce that sells SMCG with relatively big frequency of purchase(1.0-2.5 times a year ) i.e. shoes (Zappos)

More than 60% of the buyers will buy this year Focus is on increasing the value of the

customer (increased frequency and increased purchase per visit)

10% of businesses are in this model

Loyalty mode

Very strong brands with high frequency of purchase (i.e. Zara, Amazon)

Marketplaces i.e. Udemy, Uber

Source: Lean Analytics: Use Data to Build a Better Startup Faster; A. Croll, B. Yoskovitz

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Just to remind you some examples of well known e-commerce businesses

Products sold On-line / Off-line situation

Virtually everything esp. books, toys, fashion

Mode

Pure on-line player Loyalty mode

Fashion Multichannel player Loyalty mode

Tickets for events Pure on-line player Acquisition mode

Groceries Multichannel player Hybrid mode

Razors and cosmetics for men

Pure on-line player Loyalty mode

Fashion Pure on-line player Hybrid mode

more

more

more

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Conversion rates

Average shopping cart size / Average transaction value (ATV)

Abandonment rate

Life Time Value of the Customer (LTV)

% traffic generated by non-ad methods

Customer Acquisition Cost (CAC)

Number of purchases per visitors per year

Return rate

Average additional sales for click and collet

% click and collect orders

There are some KPIs for e-commerce model that you have to follow…

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Getting a lot of cheap traffic

Pricing – (multi-tier pricing, dynamic pricing)

Understanding your customer and marketing automation

Managing the long tail (both in terms of offer and logistics / availability)

Continuous optimization of your site - conversions, SEO, usability, etc.

You should test and find optimal solution for the following key topics in e-commerce

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For more check also my on-line course

Click to check my course

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Have also a look at my presentation how to conduct properly market research

Market research Practical guide for startups and entrepreneurs

presentation

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Media site

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Media site model is all about creating inventory of content and monetizing it

Create interesting content

Draw attention

Monetize the

attention

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As you guess on the most important aspects is content creation and monetization. There are many options available

You

Content creation

Outsourced

Aggregate other people’s content

Mix

Channels used

1 on-line channel

Multichannel yet only online

Multichannel – both on-line and off-line

Revenue sources

Ads (CPM, CPC, CPA,CPS)

Affiliation

Sponsorship

Licenses

E-commerce

Paywalls User Generated Content

Getting the traffic

Direct

Subscription (membership clubs)

Emails

Notification (from site where you subscribe to i.e. YouTube, mobile apps)

Product placement

Native advertising

SEO Interlinking

Social Media

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Media site is still cheap and relatively easy business – provided that you will find your niche and you will not be too greedy. Usually suffice to find a nice niche within the country to be profitable and stable

Country level

Regional level

The product must be global

Difficulty level Necessary money Scale

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Just to remind you some examples media site businesses

Content creation Channels used

In-house and subcontractors Some generated by users

Revenue sources

www and mobile apps YouTube Social media (esp. Facebook)

Native advertising Product placement

In-house and subcontractors Some generated by users

Printed newspapers www and mobile apps Social media (esp. Facebook)

Payment for newspapers – digital (paywalls ) and printed

Ads Native advertising Product placement Affiliate

In-house and subcontractors www / blog / podcast Social media (esp. YouTube,

Facebook, Twitter) Email list

Sponsorship Product placement Affiliate E-commerce (books,

trainings) Ads

In-house and subcontractors Mainly YouTube Social media to spread the

movies

Ads E-commerce (courses,

clothes) Sponsorship Product placement Affiliate

more

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Page inventory

Unique visitors (UV)

Average # of visits per UV

Average time per visit

Page per visit

Number of emails subscribing to your site

Click Through Rate (CTR) for ads

Conversion rate

Ad rates

Churn Number of subscribers

Views per movie

Total numbers of movies

Basic KPIs for media sites track the content creation side of the business

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Getting a lot of cheap traffic

Segmentation of the audience and achieving content-segment-fit

Creating community

Finding way to monetize the audience attention

Cross-selling (content and product)

You should test and find optimal solution for the following key topics in media site business

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For more check also my on-line course

Click to check my course

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2-sided markets

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2-sided market is trying to create a connection between the demand and supply enabling them to match and do the transaction

Patient Doctor Marketplace • On-line booking • Reviews • Statistics for doctors

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There are different types of 2-sided markets

On-line sale of physical products

Marketplace

On-line sale of on-line products

Purchase of services

Crowdfunding

Networks

Infrastructure

Energy market

Telecommunication market

Sharing platforms

Sharing physical resources

Sharing on-line resources

Matching models

Dating sites

Work Platform

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2-sided market is one of the most difficult and the most expensive type of business. Increasingly, you have to be a regional player for the business to make sense and to be stable in the long run

Country level

Regional level

The product must be global

Difficulty level Required funds Scale

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Just to remind you some examples of 2-sided markets

Type of 2-sided market Product offered

Marketplace

Revenue sources

On-line courses Commission from sold through Udemy courses (3%-50%)

Marketplace Driving / taxi services Commission from trips made (20%)

Marketplace Designs; mainly delivered through

Commission from contest (5-40%)

Revenue from sold ready-made designs

Sharing platform Shared trips Reservation fee around 10%

Sharing platform Sharing knowledge Donations

Marketplace Apartments rental Commission from provider – 3% and from guests 6-12%

more

more

more

more

more

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Just to remind you some examples of 2-sided markets

Type of 2-sided market Product offered

Matching model

Revenue sources

Peoples CVs and their strength appraisal

Advertising Added services (for

recruiters)

Matching model Tinder paid version Hot or not selection of interesting people with a chat service

Marketplace Subscription plan from 0-25 EUR per month for doctors

Booking visits at the doctor of your choosing

Marketplace Commission from sellers – above 10%

All sorts of mainly physical products

Marketplace Markup on store prices Commission from stores

Delivery of groceries fro chosen shop

more

more

more

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Engaged buyers

Active suppliers Total searches

Average transaction

Transaction to searches ratio

Average number of products per supplier

Average number of searches per engaged buyer

Life Time Value of the Customer (LTV)

Customer Acquisition Cost (CAC)

Supplier Acquisition Cost (SAC)

Basic KPIs for 2-sided market are connected with the supply and demand creation

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Chicken-and-egg problem

Level of centralization

Liquidity

Understanding the customer and loving the problem

Choosing the right side to concentrate on

Distribution and Activation

You should test and find optimal solution for the following key topics in 2-sided market

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For more check also my on-line course

Click to check my course

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