Here are three proven business models that have worked well for start-ups and have the ability to scale quickly.
1. The Subscription Model
Mobile payments continue to rise in popularity, and consumers are trending towards a more simple, hassle-free kind of shopping experience. These trends are leading towards explosive growth in subscription based services that consumers can easily set up, and then not worry about, knowing they will receive their product or service every month. Dollar Shave Club is one of those simple subscription services that made it much easier for men (and now women) to not worry about running out of razors, and save money. Add in some crazy, well messaged commercials with a hilarious spokesperson, and you have a brand who continues to double and even triple revenues annually.
Why It Works: This business model provides an optimal balance of value to both the startup and the customer. It’s simple and convenient for customers, and take a lot of thinking out of the purchasing process. Customers know they will receive their product every month around the same time, don’t have to worry about reorders, and know they will get a set, flat rate that will stay within a budget. On the startup end, the value lies in being able to predict revenues through recurring sales, which is incredibly advantageous for a company’s valuation. This enhances the sellability of the company, increases the attractiveness to potential VCs and buyers, and often leads to valuations up to 8 times that of similar businesses with little recurring revenue.
2. Customized Everything
The fashion industry is dominating the customization trend that aligns with a consumer shift towards more personalized goods that reflects their specific tastes. This is the reason Coke added names to their bottle packaging, automotive manufacturers make cars in any color you want, and massive retailers like Nike allow you to design your own custom sneakers. Custom-tailoring in the clothing sector has been on the rise, and services like Indochino and Black Lapel have taken the market by solving this problem for men’s suits. The services make it simple to choose the sizes, colors, styles, and budget you want, that take out the hassle of going to a tailor, and delivers right to your doorstep. The rise of 3D printers has also created a surge of mass customization startups by providing a technology that previously was much more expensive.
Why It Works: A rising percentage of the population is interested in build-to-order products and are willing to spend 25% more according to a study by Mashable.com for products built specifically to their needs. Production time and lowering costs of customization configurators also bring much more potential to the market, compared to previous years.
3. On-Demand Model
As the world speeds up, consumers have a adopted a preference for instant gratification. The on-demand economy has a growing appetite for greater convenience, speed, and simplicity. Smartphones have driven transformational shifts in how we consume goods and services, and many consumers have become acclimated to purchasing at the press of a button. On-demand startups like Uber are shaking up their industries, and also provide stead contracted work for consumers who want to become solo-preneurs. Startup, Handy, has also seen explosive growth by providing handymen at a moments notice, servicing a need for consumers that was not previously available for situations where a consumer can not wait a few days to fix a problem in their home.
Why It Works: The on-demand market leaders today know that this successful model is much more cost-effective, scalable, and more efficient that it’s ever been. The model allows a startup to leverage new technology, while utilizing existing infrastructures. Another benefit lies in the use of freelance labor with its obvious advantages in cost cutting. There has also been an influx of VC belief and capital in this revenue model.