Wondering how some businesses seem to be raking in the profit? Here are some of the most profitable and common business models out there. Read through to decide which one is right for your business.
Sell product for a little more than what it cost to produce. The most traditional business model, which is based on a set profit margin. You create a product and sell it, but careful calculations are needed to find your break-even point. From there, you can set prices accordingly to earn a profit. An example here is Walmart or Target.
Freemium. People pay for upgraded services. Many online services, such as Spotify and LinkedIn use this kind of business model. It is important to differentiate between free services and what a customer is missing by not having the premium service to truly convert them to paying customers.
Skimming Price Strategy. Set low price initially to get market share then raise prices later to make a profit. At lower prices, additional features and/or support cost extra and that is where you will actually make your money. Most car dealerships use this type of business model with their maintenance departments.
Subscriptions or Memberships. If you provide a service, this might be the model for you as it has high customer retention rates. It also is great for the business as revenues come in regularly on a monthly basis. A great example is Netflix and Amazon Prime.
Freelance Service. With over 57 million freelancers in the United States alone that can seem overwhelming, but look at it from the business side hiring freelancers. There is a huge opportunity to find and use new talent each time you start a new project. There will be lower costs since they are not full time employees for you, meaning no insurance or healthcare for them provided by you, the business owner.
Now from the freelancers perspective. A lot of being an entrepreneur comes down to you as a person and your work ethic. Making business connections that lead to customers will be the most important thing you can do as a freelancer. There are incredible amounts of freelance markets you can enter depending on your specialty skills, here are just a few:
- Bookkeeping and Accounting
- Graphic Design
- Social Media Management
- Virtual Assistant
What pricing strategy do you use? Have you started looking into the freelance market? Or maybe you already are exploiting the amazing creativity and skills out there!
Now that you have picked a profitable business model make sure to learn the 5 Key Components of a Business Plan.
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