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5 Popular Business Models You Can Start Using Today
By Quiet Light
With numerous resources available to help entrepreneurs succeed, there’s never been a better time to start (or grow) your own online business. Whether you’re seeking a change in your work-life or looking for an exciting investment opportunity, there are several popular business models that can help you reach your goals.
This article discusses five popular business models that you can implement today to grow a profitable online business. We also address the latest trends that are affecting the online business environment.
Latest Trends in Online Business Models
Today’s business environment moves at a quick pace. Fortunately, this means that opportunities are constantly being created for those who pay attention and take action.
The Rise of Ecommerce
Ecommerce has been steadily growing for many years now, and shows no signs of slowing down. In fact, many predictions suggest that Ecommerce sales will surpass retail sales within the decade.
This trend of Ecommerce growth shows up in several different ways.
Online marketplaces such as Amazon and Walmart are experiencing rapid growth trajectories, with Amazon’s revenue increasing fivefold in the last six years. The enormous increase in volume in these marketplaces presents significant opportunities for skilled Ecommerce entrepreneurs who sell on these platforms.
“As customers become more and more accustomed to shopping online, Ecommerce will continue to become a more and more dominant element of the global economy.”
Additionally, Ecommerce has increasingly become the primary channel that businesses use when launching. Previously, large companies relied on retail stores to gain traction, with Ecommerce being a distant secondary channel. However, more and more businesses are choosing to focus on Ecommerce and then turn their attention to retail.
At the beginning of 2020, Ecommerce was already growing quickly, and the pandemic only accelerated that growth. As customers become more and more accustomed to shopping online, Ecommerce will continue to become a more and more dominant element of the global economy.
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Importance of Branding and Storytelling
With online sales booming, it’s no surprise that competition is increasing, too. Therefore, to set yourself apart, it’s more important than ever to hone in on branding and storytelling.
Branding is especially important for Shopify stores that rely heavily on developing a strong connection with their customer base. If you’re selling products on your own site, it’s not enough to compete on price, or even product features. For this reason, smart sellers are increasingly focusing on branding and storytelling to set themselves apart.
Ad Costs Are Increasing
In 2021, many businesses experienced a significant increase in their advertising costs.
With more businesses selling online, social media ad space has become more valuable. In turn, businesses have been forced to increase their bidding strategies and optimize their cost structure in order to reach their target customers.
While this trend certainly presents challenges, it also creates opportunities for marketers and ad agencies that can effectively optimize their clients’ ad budgets and stay on top of high growth marketing trends. As always, the businesses that can pivot and adapt will have the greatest chances of success.
More and more customers are opting to use cryptocurrencies for online transactions.
As a business owner, this means you could be missing out on direct sales if you’re not accepting cryptocurrencies as a method of payment. Although cryptocurrency has a long way to go to catch up with traditional currencies when it comes to point of sale transactions, many owners are realizing the importance of cryptocurrency and are implementing practices that enable crypto transactions.
Increased Demand for Sustainable Products
Customers are increasingly shopping with sustainability in mind. Not only does this incentivize small business owners to offer more sustainable products, but it also puts pressure on behemoth marketplaces such as Amazon and Walmart.
In 2019, Amazon co-founded the Climate Pledge, which established their goal to be net-zero carbon by the year 2040. Additionally, they created a Climate Pledge Friendly program to provide Amazon sellers with the opportunity to participate in their mission.
“Customers are increasingly shopping with sustainability in mind.”
Commitments such as these signal the growing sentiment among customers that businesses should grow with sustainability in mind. And like the Ecommerce growth trend discussed earlier, all indications suggest that sustainability will only become more important over time.
More Capital for Business Acquisitions
Over the last few years, private equity firms have increasingly focused on acquiring online businesses. This is especially true for Ecommerce and Amazon businesses.
The rise of private equity firms has led to a dramatic increase in the availability of capital for business acquisitions. In turn, this has led to an increase in the average purchase price of successful Amazon businesses.
“Some firms will reach out to Amazon sellers to seek an ‘off-market’ acquisition, which sellers should be very wary of.”
While this is great news for sellers, it’s still important to be cautious and thoughtful when approaching the marketplace. Some firms will reach out to Amazon sellers to seek an ‘off-market’ acquisition, which sellers should be very wary of. In almost all cases, seller can get a better deal by working with a qualified Advisor to list their business for sale.
If you’re considering selling your Amazon business, make sure to do your research and learn as many transferability tips as possible before going to market.
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5 Popular Online Business Models You Can Utilize Today
There are numerous business models that you can choose from to build a profitable online business. Here are five that have consistently proven to be great opportunities for online entrepreneurs:
- Content sites and blogs
Content Websites and Blogs
Content sites and blogs have significant profit potential and can be extremely exciting to build. If you have a passion for content, SEO, or affiliate marketing, you may want to consider starting a content website.
Building a content website or blog requires picking a niche, building a website, creating high-quality content, and establishing affiliate partnerships. Once your content site starts attracting significant traffic, it can often generate passive income through affiliate commissions and ads. In many cases, content website owners also generate revenue through online course sales, paid memberships, and other digital products.
Because blogs and content websites don’t require physical product inventory, you don’t necessarily need a significant budget to get started. However, you do need to succeed at the key activity of creating high-quality content. Therefore, many content site owners are skilled content creators who understand SEO best practices.
Content sites and blogs often take eighteen to twenty-four months to gain traction, although that timeframe can vary greatly. The faster you can create a collection of high-quality related articles, the quicker you’ll reach profitability.
SaaS Business Model
SaaS businesses earn revenue by licensing their software products to paying customers. Typically, SaaS customers sign up on a subscription basis, enabling SaaS businesses to enjoy the stability that comes with the recurring revenue model.
While SaaS companies have enormous growth potential, there are also some ‘drawbacks’ to starting a SaaS business. Typically, they require significant capital to get off the ground, leading to financing hurdles for some entrepreneurs. Often, some of these costs are incurred by efforts to develop a stellar customer experience and sales process.
Those who establish a clear value proposition and build successful SaaS businesses can have their efforts pay off tremendously. SaaS businesses that exceed $1M in earnings are often valued using a revenue multiple. This enables successful SaaS owners to fetch a higher purchase price at exit. For a more detailed overview of SaaS valuation, check out our Ultimate SaaS guide linked above.
Amazon FBA Business Model
The Amazon FBA business model is one of the most popular business models among online entrepreneurs and for good reason.
There are several paths to Amazon success, but one of the more common is through starting a private label FBA business. By developing private label products and listing them for sale on Amazon, you can access millions of potential customers shopping on the platform.
“The Amazon FBA business model is one of the most popular business models among online entrepreneurs, and for good reason.”
One of the ‘downsides’ of Amazon is competition. It’s no surprise that the marketplace has become crowded with a seemingly infinite number of sellers. However, by offering high-quality products and following proven strategies, many Amazon business owners are still able to build highly profitable FBA businesses.
Since there’s a high demand for Amazon businesses among investors, many FBA business owners can look forward to a life-changing exit, should they decide to sell. A lot of owners consider Amazon platform business models to be the greatest business model innovation of our time.
Lastly, there are numerous key resources available to help sellers succeed. In the last several, an abundance of agencies, contractors, and learning resources have sprung to help owners in all aspects of Amazon.
Building a Shopify Store
Shopify is an Ecommerce website builder that allows you to easily create your own online store. In your store, you can offer your own branded products, or ultize the power of dropshipping.
One of the advantages of Shopify is that it allows you to not be reliant on Amazon, Walmart, or any of the other marketplace platforms. Additionally, you also have significantly more customization options when building a Shopify store compared to selling on Amazon. This provides the competitive advantage of establishing a clear brand identity, building email lists, and developing a long-term customer relationship.
“One of the advantages of Shopify is that it allows you to not be reliant on Amazon, Walmart, or any of the other marketplace platforms.”
While there are several ‘pros’ to selling on Shopify, there are also some drawbacks to the Shopify business plan. Since Shopify stores can’t rely on platforms like Amazon to attract customers, they need to generate their own traffic. Often, they turn to content marketing, influencer marketing, email marketing, and Facebook ads to drive customers to their online store. This applies to both B2C and B2B Ecommerce businesses.
Other than dropshipping, Ecommerce business models typically require startup capital to fund inventory purchases. This is something to keep in mind when determining which online business idea is best for yourself.
Agency Business Model
The Agency model is another popular business model that some entrepreneurs choose. Agencies earn revenue from clients by providing specialized services, often within the marketing field.
Like content sites and blogs, you don’t necessarily need a lot of capital to start an agency. However, you do need to be highly skilled in order to provide the services that your agency offers.
Additionally, agencies also require you to build teams, manage others, and work with clients. Therefore, it’s important to have strong interpersonal skills when building an agency.
Reasons for the Popularity of Certain Business Models
There are many reasons why some business models are more popular than others. One factor that influences the popularity of various models is the relative success rate that each offers.
Successful Business Models Are Popular Business Models
Not surprisingly, most people want to follow a proven path. In other words, if a lot of other people of succeeded with a certain business model, others will be more inclined to try it as well.
The Amazon business model is a perfect example of this. Back in 2013 and 2014, the Amazon marketplace was the wild west. Few people knew that it was possible to sell on the platform and fewer did. However, many of those who started seller accounts went on to build enormously successful FBA businesses.
As more people started hearing about Amazon sellers’ success, the platform experienced a rapid influx of new sellers. In essence, the success of Amazon sellers led to a huge increase in the popularity of the Amazon business model.
Accessibility Leads to Popularity
Another element that determines a business model’s popularity is its accessibility. When many people have access to a specific business model, its popularity increases.
For example, most people can start their own blog. With a laptop, internet connection, and basic computer skills, it’s not difficult to set up your own business. This has led to blogs being extremely popular among everyone from millennial nomads, to stay-at-home-parents, to large corporations.
While starting a blog is easy, building it into a highly profitable recurring revenue business requires a bit more skill. However, that hasn’t stopped countless individuals from embarking on the journey.
The Popularity of the SaaS Business Model
The incredible success of many SaaS companies has solidified the popularity of the SaaS subscription model. Although starting a SaaS company isn’t exactly as simple as starting a blog, their high growth potential leads many entrepreneurs to delve into SaaS.
Often, SaaS businesses are most appealing to entrepreneurs with technical backgrounds who have a clear understanding of SaaS metrics.
Most Common Types of Business Models (And How to Pick One)
Each of the five business models discussed above can be considered common (blogs, Amazon businesses, Shopify stores, SaaS businesses, agencies). However, what is “common” is far less important than which model is the best fit for you.
When choosing a business model, it’s important to consider your interests, skills, budget, and goals.
If you’re not interested in the business you’re pursuing; it will be difficult to stay focused and motivated. More than likely, you’re going to be spending years of your life dedicated to building your business. If you embark on a business journey that excites you, it’s going to be significantly easier to put in the work that’s required to succeed.
“When choosing a business model, it’s important to consider your interests, skills, budget, and goals.”
Considering Your Skill Set
Additionally, it’s important to choose a business model that is consistent with your skill set.
For example, if you don’t consider yourself to be technically inclined, you may want to hold off on starting a SaaS business. Similarly, if you hate writing, blogging might not be the right fit for you either. Of course, if the opposite holds true, then owning a SaaS business or blog might be ideal.
Next, it’s smart to consider your budget when picking a business model. Of course, the more capital you have to invest, the more options you’ll have available to you.
If you’re on a relatively small budget, you will want to strongly consider dropshipping, blogging, or agency ownership. With a slightly larger budget, options such as starting a private label Amazon business become more viable. You can even consider investing in your own SaaS company if money isn’t a significant factor.
What Are Your Goals?
Lastly, every entrepreneur needs to consider their personal goals when launching a new business.
Fortunately, all of these business models can be used to create a profitable lifestyle business. However, as discussed, each of them carries their own strengths and weaknesses.
Therefore, before delving into a new entrepreneurial endeavor, it’s always wise to think critically about the impact your business will have on your life for the next few years (or longer). By taking a broader perspective, you’ll be well prepared to choose a path that leads to both personal fulfillment and professional success.
Buy a Profitable Online Business
Outsmart the startup game and check out our listings. You can request a summary on any business without any further obligation.