So you want to start a business, but you don't know where to start. You have a passion and a set of talents within your field but you don't know how to translate that into a profit. There are many ways to sell both products and services; with a little imagination and hard work you can figure out how to convert your talents into a multitude of income streams. In this post I'll be covering the most common ways that you can convert your talents into something profitable. These are the eight business models that I am most familiar with, though there are more. Research what others in your industry are doing to help you come up with a plan that works best for you and your business.
I'm sure you've been seeing this business model starting-up left and right. Though, drop-shipping is a great idea to make tons of money (even in your sleep), you must work hard and do you research in order to make yours successful. The drop-shipping model is great for entrepreneurs who don't have a lot of money to startup their business and don't have a ton of space for inventory, though would like to sell products. This model is simple, here's how it works:
You select a niche or target group
You select a list of items you can sell that the niche frequently buys or would like to buy
You create an online store to sell the products, to collect customer shipping information and payments
The cool part about this model is that it can work almost completely on autopilot with plug-ins such as Oberlo, you don't have to ship or store anything and your profit is made upfront! The bad part is that, everyone is doing it! Don't let the flooded market discourage you from drop-shipping though, just be sure to set your business up to win. There are two things that are important when starting a drop-shipping business. Make sure it is a strong target group. Too broad of a market will becoming overwhelming, it will be difficult to figure out what to list for sell. Too small of a market will not bring in enough sales. The second factor is marketing! Being that there are so many competitors, your marketing and advertising plan definitely matter, so be consistent and make it a line item in your budget.
This model is great for service based companies who either are interested in working remotely or just would like to expand their current services to generate more income. Customers sign-up to pay automatic monthly payments to have access to your platform. There are a variety of things that you can share with your customers on your platform, videos, checklists, insider information and more. With a subscription model you can also send a physical product to your members every month that is related to your industry. For example, if you are in the hair industry and you operate as a hairstylist you could make a subscription service for upcoming stylists or for your clients seeking to learn how to better care for their hair. You could upload videos teaching healthy hair tips, fun styles for the season and more. You could have a monthly physical gift element that include things such as brushes, sample size products, rollers, etc. With this model you can offer multiple membership tiers to appeal to different consumers and their needs.
This business model is one that offers endless earning potential and requires very little time and effort out of the entrepreneur. Creation of content and marketing the business will take the most time, but if organized correctly can be done in just a few hours every week. There are tons of options of how you can create your platform. You can store and distribute all your content from your website, many of the major platforms offer membership portals that can be easily setup. I use Wix for my site and for most of my clients and it is really easy to operate. You can also add third party options to work alongside the primary platform, such as a private Facebook or LinkedIn group. If you're interested in this model, start planning and creating your content now, the more you have upfront, the better.
This model works well for those with the entrepreneur spirit or business background, though haven't developed a new business idea they are in a position to invest. Franchises are companies that are owned and operated by individuals, though they sell the products and services of another brand. Many industries offer franchise opportunities, such as restaurants, hair services, gyms, tutoring, pet supplies, phone repair and more. All franchises require an initial investment from the owner that typically ranges from $10,000 to $600,000. Every company is different and some additional requirements may be required outside of the financial investment.
There are five things to research and consider before moving forward with any franchise idea.
Cost and fees: The initial investment is due upfront and royalty fees are due weekly or monthly
Size and growth: Check into the growth rate, how many branches are in operation, closure rate, etc.
Support: What's the training program like? How is the franchise infrastructure? What operation support is offered?
Brand strength: How popular is the brand? How many years in operation? How many years franchising?
Financial strength and stability: Check the franchisor's recent financial audits to see if it is a worthy investment
Entrepreneur.com has compiled a list of the top 500 Franchises for 2018 based on the factors listed above, you can check out the list here.
Manufacturers massively produce products to sale to retailers for resale, products are then sold in smaller bulks or individually. If you are a creative or an individual with a new product idea, instead of selling off the rights of your idea to another company for production, you can become a manufacturer. New products will require trademarks and patents before launching publicly to maintain profits and ownership. You can also become a manufacturer of a popular product that is already on the market. Make sure that you can produce the product with a comfortable profit margin, have access to clients who will purchase in bulk and that you can maintain a low overhead when inventory isn't moving quickly. Manufacturing requires a lot of work and research upfront to find a location, vendors, licenses and employees. Though this model requires more time than some of the other business models this one can bring in large profits quickly when implemented correctly with good products.
Gas stations, grocery stores, department stores, clothing stores and car part stores are all examples of distributors and retailers. This model works for those who want to be hands on in the world of business. Everything from business licenses, inventory, P &L's, staffing, payroll, taxes and monthly budgets would need to be handled. If you have a location in mind that is in need of a niche store or a department store you will be in a better position than you would be setting up shop near competitors. You can create your store or you can become the owner of a business that is already in existence. If you do not have the knowledge and background in the business and sales industry you can either hire someone on your team who has the talent or overtake a company that already has infrastructure and systems in place. This option is not for individuals who are seeking a side-hustle or a simple additional stream of income, this one requires work, hard work.
This model consists of the creation of an app, software or web based service that you will offer to your clients for free. The free version of the service or software will provide very basic services to the consumer. When clients attempt to use a premium option they will be prompted to purchase the premium services for a fee. This model is good for techy entrepreneurs who have the ability to code and create digital technology. This model works best when you have really great premium options at an affordable price. You already have the consumer interested and locked in, the next step is to convert them for a profit. The only way this will happen is if you offer an add-on that they can't live without.
I recently downloaded a freemium app on my phone. The purpose of this app is to help me better manage my time used on my phone throughout the day. The app tracked the time used and offered free courses to help train me from overly using my phone. What the free version did not offer was a clear breakdown of which apps I was spending my time on, so I coughed up the four dollars so that I could see the full set of stats. The magic of freemiums!
Bricks and Clicks
This is for the product based businesses of the world. Years ago brick and mortar stores were the way to go if you wanted to sell your products quickly and efficiently. Though times have changed and you now need an online platform for clients to purchase your products if you want to reach your sales goals. Shopify serves as an awesome online platform for product based businesses, the shop is easy to set up and you get easy to comprehend graphs for sales in your dashboard. Many other website builders can be used to sell products as well, so make sure you do your research and find the one that works best for you. I would say the most popular and user friendly options outside of Shopify would be Wix and Squarespace.
Developing and investing in a brick and mortar is hard work though it definitely pays off when executed effectively. I think one of the most important elements of a brick and mortar is location. Will you get a lot of foot traffic? Are you close to the neighborhoods that your niche market(s) live in? Do you have any competitors close by? Does the location house other businesses that would attract clients to your business? An example of this would be a lash tech setting up near a hair salon that doesn't offer lash services. Once you determine a great location for your business you need to create a budget. To avoid setting yourself up for failure project your sales low for at least the first 90 days. Ensure that you have enough capital to cover inventory, keep the lights on and employees paid. This is definitely not work for the weak hearted and requires a ton of time and capital, upfront and continuously.
This model is pretty self-explanatory, it's for service-based businesses. If you offer services you more than likely will follow one of these two pricing models, hourly rate or bundle deals. With an hourly rate route you of course are charging by the hour and you want to be sure you are getting the working done as quickly and efficiently as possible. One major mistake many new service-based entrepreneurs (including myself) make is that they underprice themselves. Don't do that! You are doing yourself a major disservice for a variety of reasons, I'll list a couple: You're going to burn yourself out, putting in too many hours of work, for too little pay. You're also going to turn off some really great clients who think you aren't good enough or that you're too fresh in your field due to your low rate. Research how others are charging in your field. Things to consider when comparing prices are: how long has the business been in existence? what relevant degrees/certificates does the entrepreneur have? where is their business located? what services do they offer? Do you research and set a rate that works for you. Don't forget to consider the hours you invest in your clients when they are not in your office. For example if you are a photographer don't just think about your time spent shooting, also consider the time spent setting up equipment and editing the completed pictures. With hourly based pricing you can either charge your client in full upfront, or you can charge a deposit at time of booking with the remainder due at time of service.
Your second pricing model is bundling of services. There is a large variety of how and which services you can bundle depending on your industry and services offered. If you do social media marketing you could bundle a number of posts and ads that you would create and set on auto-post for the month. I'm a business and efficiency consultant and many of my clients have start-ups. I could create a package that offers business incorporation services, a business plan, a website and a lead magnet. There are two things that I like about the bundled model. First, you are selling multiple products at once, with just one sales pitch, so it saves you time. Secondly, you get your funds upfront, saving your time and headache from chasing clients to collect the rest of your money. You can either package together products that are similar or products that frequently used/purchased together.
There are other business models in existence and of course you could always develop something brand new. I hope this list gets your wheels turning on some ways that you can make your skillset profitable. If you are already in business and seeking new income streams start brainstorming how you can use one of the models above to increase your income. At The Sonshine Enterprise we help individuals get their ideas out of their head and executed into something profitable! If you would like to set up a free consultation to discuss your business idea or brainstorm how to make your current business better, click here to book your appointment.
I hope everyone is having a great holiday season! Be sure to look out for the upcoming newsletter on how to get sales for Black Friday. If you are not subscribed, get on the list now: Business & Budgets Email List.
Happy Friday! Have a great and productive weekend!