I wanted to kick off this post by saying that we’re all involved in business, one way or another. Sometimes even more than we might think. I’m not only talking about business owners or entrepreneurs, here.

Our jobs, our visits to supermarkets and restaurants, our internet browsing sessions—a substantial part of an average person’s everyday life is involved in business to some extent, even just as a customer.

Why am I saying all of this?

Because I’d like to talk a bit about business models, what they are, and what types of them exist. But since I don’t want this post to be aimed only at a specific audience of niche specialists, I thought I would introduce the topic with a broad overview to interest more people.

But let’s talk about our main subject.

What is a Business Model?

A business model is how a company creates, keeps, and delivers value. Choosing and developing a model is one of the core parts of a business strategy. In other words, the business model is how a company plans to make a profit.

In practice, a business model is also used as an umbrella term that represents other core aspects of business, such as purpose, customer targeting, infrastructure, operational processes and practices, and much more.

With such diverse definitions and representations of the term, it’s no wonder that the sheer number of business models and their variants is too big to fit in a single post.

Therefore, I decided to do a quick rundown of models that I find the most interesting.

Business Model Types and Examples

I should note that at the very beginning, when the term initially appeared, the business model only described a single aspect of the whole structure. Most of the time, it was the revenue model. Nowadays, however, a business model is described as a whole instead of only the most noticeable aspects.

Now, for the main part of this article.

1. Freemium

With this model, a business gives away part of its service or product for free and charges money for extra features and services. This particular model makes it possible to generate a solid customer base and then turn a profit by offering something that brings even more value to its clients. Companies using this model include LinkedIn, MailChimp, Spotify, OneDrive, and many more.

2. Low-touch

This is when a company lowers the price of its products or services by cutting down on what it offers. Some notable examples of this model include furniture businesses, like IKEA, or budget airlines, like Ryanair. The customer usually has to do something themselves (like assembling furniture) to keep the cost low.

3. Razor blade and reverse razor blade

The razor blade model is when a company sells a long-lasting product at an affordable price and maintains their clients by providing disposable components to that product. Gillette is a perfect example. In the reverse razor blade model, everything starts with a big sale, which is then complimented with smaller addons. For instance, MacBook is the main product, and the variety of paid proprietary applications generate extra profit.

4. Subscription

It seems like everything is a subscription these days, so, it’s impossible to ignore this business model. Customers get charged a subscription fee to keep using the service. Examples include Netflix and almost any other streaming service.

5. Advertising

This model has been around for quite a while but has become more and more sophisticated as time passes. Companies following this model create or gather content to show to their audience and profit off of displaying ads in the process. YouTube and major news outlets are common examples of this model.

The selection of a particular business model depends on the structure of the whole business and the goals it wants to achieve. If you have questions regarding the information in this post or want to add or discuss something—feel free to reach out! I’ll be happy to reply.