10 Business Models for Every Entrepreneur

Summary

This video script outlines ten distinct business models for revenue generation, ranging from free products supported by advertising to low-cost, disposable items with profits from recurring purchases. It covers the freemium model, average value pricing, tiered pricing based on volume, and subscription services, among others. The speaker also offers a PDF guide for further exploration and encourages viewers to subscribe for more entrepreneurial insights.

Takeaways

• 🆓 The first business model involves giving the product away for free and generating revenue through advertising, as exemplified by YouTube.
• 💰 The freemium model allows users to start with a free service but requires payment for additional features or upgrades, similar to LinkedIn's approach.
• 📉 The average value to customer model sets prices based on the average value a customer receives, which can sometimes result in some paying more and others less than their individual costs.
• 👖 The cost plus margin model is a traditional pricing strategy where the selling price is set above the cost price by a certain margin, such as buying pants for $20 and selling them for $30.
• 📺 The recurring low subscription model, like Netflix, offers a low monthly fee that accumulates to significant revenue due to a large customer base.
• 📈 Tiered pricing based on volume offers discounts or incentives for higher volumes of purchases, which can encourage more sales.
• 💼 Commission-based revenue is a model where the business earns a percentage of each transaction, making the income variable and dependent on sales volume.
• 🛠 Low product price with additional support costs is a model where the initial product is affordable, but ongoing support or services come at an extra cost.
• 🚗 A low entry price with additional priced features model is common in industries like automotive, where basic models can be upgraded with various add-ons.
• 🪒 The disposable model involves selling a low-cost primary product with the expectation of ongoing sales of related consumables, like razors and their replacement blades.
• 📈 The script suggests that businesses can choose from various revenue models to suit their strategy, emphasizing the importance of selecting the right model to generate income effectively.

Q & A

What is the first business model mentioned in the script for generating revenue?

The first business model mentioned is giving the product away for free and making money on the back end through advertising, like YouTube does.

Can you explain the 'Freemium' business model using an example from the script?

The 'Freemium' model is exemplified by LinkedIn in the script. It allows users to use the service for free, but they have to pay a subscription fee for additional features or an upgraded experience.

What does 'Pricing based on average value to customer' mean, and how is it applied in the insurance industry?

This model means setting a price point that averages out to the value a customer receives from the product or service. In insurance, this could mean charging a single rate that accounts for both high-risk and low-risk customers, with the healthy subsidizing the less healthy.

How does the 'Cost plus margin' pricing model work, as described in the script?

The 'Cost plus margin' model involves setting the price of a product by adding a margin to the cost of production. For example, if pants are bought for twenty dollars, they might be sold for thirty dollars to include a profit margin.

What is the significance of the 'Recurring low subscription payment' model, and how is it used by Netflix?

This model is significant because it provides a steady, recurring revenue stream. Netflix uses it by charging a low monthly fee, which adds up to a substantial amount due to their large customer base.

Can you describe the 'Tiered pricing based on volume' model and how it's applied in real estate?

The 'Tiered pricing based on volume' model involves offering different prices depending on the quantity or volume of the product or service purchased. In real estate, this could mean offering lower commission rates for higher volumes of property sales.

What is the 'Revenue as a percentage of every transaction' model, and what does it imply for the business?

This model, also known as a commission model, implies that the business earns a percentage of every transaction it facilitates. It's a common practice in industries like real estate or affiliate marketing.

How does the 'Low product price but support is extra' model work, and where is it commonly seen?

This model involves selling a product at a low price but charging extra for support or additional services. It's commonly seen in software and technology industries where the initial product is inexpensive, but ongoing support or updates cost extra.

What is the 'Low entry price with priced features' model, and how does it apply to the car industry?

The 'Low entry price with priced features' model offers a basic product at a low price but allows customers to pay extra for additional features or upgrades. In the car industry, this could mean a base model is affordable, but adding features like heated seats or a sunroof increases the cost.

What does the 'Low price but money is made on disposables' model involve, and how is it exemplified by Procter & Gamble?

This model involves selling a durable product at a low price and making money on the consumables that go with it. Procter & Gamble exemplifies this with their razors; the razor handle is inexpensive, but customers must continually purchase replacement blades.

How can someone get the PDF mentioned in the script, and what does it contain?

To get the PDF, one can either text the provided number and request it by saying 'business models' or subscribe to the newsletter through the link in the video description. The PDF likely contains information on the different business models discussed in the script.

What are the two other videos suggested in the script, and what topics do they cover?

The two other videos suggested are 'Size versus Positioning', which discusses how to differentiate oneself in the marketplace, and 'How to Become an Entrepreneur', which is aimed at employees considering entrepreneurship within or outside their current company.