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Are you wondering how one can start an online business and make it sustainable and successful in the long run?
The concerns that most people have just starting out on their entrepreneurial journey… I totally understand.
The constantly changing landscape of business ownership can be confusing.
Now that I can look back and see clearly what it took to get me to where I am today, I want to take some time to talk about the different online business models you can use to bring your business idea to life.
Each model is very different, and depending on your personality, how much you want to work each week, and how much personal interaction you want, you will likely be more attracted to one model over another.
Now let’s move on to today’s content!
What is an online business model?
A business model describes how a company creates and delivers value. Over the years, online business models (business models for the online world) have emerged and become increasingly popular.
As you can see, an internet business is a business that operates over the Internet that serves a B2C (business-to-consumer) or B2B (business-to-business) market. There are many types of online businesses, ranging from service-based businesses to physical products, affiliate marketing, and digital products.
Online businesses tend to have many advantages, including relatively low start-up costs and high profit margins. Some of them even allow you to generate passive income. Because they are online, they are flexible and can be managed from anywhere in the world.
With measurable online marketing strategies such as search engine optimization and paid traffic available, growing your online business depends on the right business strategy.
In this short video we share how to start an online business even if you have no entrepreneurial background.
The first step to starting an online business is obvious. It’s all about choosing the right type of business.
What is the most successful online business model?
Here are 14 proven and popular online business models that you can use to start your online business. This will help you serve your niche faithfully and create your dream life today.
But which one is best for you? It depends on your goals, but this list is organized by which businesses are easiest for new entrepreneurs to start.
It also talks about choosing a business model, so be sure to check that out after you’ve looked at all the companies.
Without further ado, here are the top-rated online business models:
Business Model No. 1: Freelancing
The first business model I want to discuss is a service-based business model that is popular with people with very specific skills, namely freelancers. Freelancing is simply a type of work where you offer your services to people or companies who need them.
This is a very popular career choice. Today, 34% of American workers, or 53 million people, are self-employed.
Common freelance careers include writing, graphic design, website development/design, and other service-based fields. If you are really good at what you do, you can make money in just a few days after starting this freelancing path.
If you’re looking for a quick income, you’ll be hard-pressed to find a job that’s easier or simpler than this online job. Essentially, you can take the tasks you do at work (like social media management, writing, or Excel skills) and start freelancing right away.
You don’t even need to have your own website as you can visit niche forums or freelance sites like Upwork and create a profile.
However, since many of these sites offer jobs based solely on price, you should leave them as soon as possible. The last thing you want to do is spend most of your new career working for little pay!
Other options for finding clients include promoting your services on LinkedIn, participating in industry-related online forums, and sharing your services with your network.
The benefits of freelancing are clear. You can start a freelance business without much experience building a business. (However, experience in self-employment is required.) Startup costs are low and the barriers to entry are low.
Be careful. Freelancing takes work. Even if you are self-employed, it is still work. You should always keep your skills up to date by joining some type of group with your peers or attending industry-specific events throughout the year.
How do you finally get started with your freelance projects? The easiest way to get started is to join a platform like Upwork or tap into their network. Previous employers, friends, and family are all potential customers.
Business Model #2: Training/Consulting
I decided to get into coaching/consulting when I started an online business while working a 9 to 5 job.
As a service company, it’s very similar to freelancing. But the biggest difference is that you’re not offering a turnkey service as a coach or consultant. Instead, your job is to provide practical advice to your clients.
You are not doing any real work for them. You are telling them what to do and how to think about life or business.
Because of the significant value you bring, coaching/consulting is one of the fastest ways to build an online business that can replace your corporate income and allow you to leave your traditional job.
If you have skills that can help individuals or businesses improve their skills in a particular area, coaching or consulting may be the right solution. Coaching tends to be more expensive depending on how specialized and valuable your knowledge base is.
There are coaches and counselors in almost every field. There…
- Financial Coach/Advisor…
- Tax Coach/Consultant…
- Interior design consultant…
- Marketing Trainer/Consultant…
- Marriage Coach/Counselor…
- Advertising copywriting trainer/consultant…
…and the list goes on. If what you know can help individuals or companies grow and do their best work, you may be a good fit for coaching or consulting.
Build a 6-figure coaching business that gives you more freedom!
The reason this is one of the easiest businesses to start is because you can build a very profitable business without investing much. If you have a full-time job and are new to the business world, this is a very attractive reason to start coaching.
Think about it. If you charge $1,500 for your coaching package, you only need a little more than that to replace your salary and quit your full-time 9-5 job.
And all you need to get started are the skills you have. These skills may be learned on the job or on your own. (Think job training or health training).
You don’t even need a website. Yep. All you need is a laptop and an internet connection to get started. Most people won’t care if you have a website (they only care about the results you’re getting). But even if they ask to see your website, you can always send them to your LinkedIn profile.
A service-based business is an easy online business model to start because you can leverage your work experience or other skills to advise others on how to achieve results. The startup costs are low and you can start making money fairly quickly, allowing you to replace your salary and work full-time on your business.
It is also a high-impact job because you work face-to-face with clients to help them achieve their larger goals.
Therefore, the education business is not scalable. Instead, you have to fill your business with individual customers and then rely on other business models, such as group software or online courses, to scale your business.
The best marketing model for new coaches is to leverage your network, post your expertise on podcasts or platforms like LinkedIn, or engage with existing communities on social media.
Instead, watch this short video where I share how to start your own coaching business in the next 24 hours (yes, it can be that simple).
Business Model #3: Group Software
Another business model that is attracting interest from many sole proprietors is group software. In the group program model, coaching or counseling is provided, but in a group setting.
The advantage of this type of business model is that the group relies on your expertise while leveraging the strengths of other members. Their participation is as important as yours and, if managed well, creates a beautiful dynamic between members.
Like training and consulting, group programs can be conducted in almost any field.
Creating, building, and scaling collections software takes a lot of time and patience, but knowing the pricing structure and how often you want to run new collections can pay off big time.
Group training is also relatively difficult to start from scratch without any evidence that it is effective. If you are selling face-to-face training, you will have to build relationships with many more people than necessary.
For this reason, we recommend starting with one-on-one coaching/consulting projects first. If you reach a point where you can no longer handle one-on-one clients, you can expand your offerings by moving into group coaching.
Groupware is highly scalable and profitable. For example, if you sell one bundle for $3,000, you only need to sell three bundles to make six figures per year. Since the overhead is minimal, your profit margins will be high.
This online business model is a bit difficult to create for new entrepreneurs without an existing audience.
If you already have an audience, you can promote your group program directly to them. If not, it’s best to use the same marketing model you used when building your education business.
#4: Agency
The agency model is a more scalable form of freelancing. But instead of doing the work yourself, you hire a team to do it.
You can take agents with many numbers, 6, 7 or more.
You don’t need a lot to start an agency, but you do need a lot of experience to run an agency that delivers real value to your clients.
First of all, if you get it wrong, your profit margins will be low. Because an agency is a people-driven business, and your biggest cost is your team.
Second, without adequate experience, you will not be able to deliver the level of results needed to achieve long-term success.
Therefore, a freelancing business or a coaching/consulting business is a better starting point for a new entrepreneur. These online business models also require lower startup costs. Once you reach a level where you are filling your pipeline with clients, you can transition your business to a more scalable agency model.
The agency business is a scalable business that can be profitable if you build it the right way. The barriers to entry are low, so it’s a good business model for people who already have some freelancing, coaching, or consulting experience.
Agency work can be very unprofitable and time-consuming. To avoid this situation, it is essential to have some initial experience in building another business.
The best way to start an agency business is to leverage your existing network, audience, or client base. There are certainly ways to scale your business, but this is the most impactful strategy that will yield the highest returns in the shortest amount of time.
Business Model #5: Creator/Influencer
The creator economy is booming, with the influencer market estimated to be worth $16.4 billion. It’s no wonder. There are so many ways to create on social media. Creators can monetize through the YouTube Partner Program or brand partnerships on Instagram or TikTok through podcast promotions, Patreon donations, or Substack subscriptions.
Now, making money online through these platforms takes time because you have to build a loyal fan base first. Without hundreds of thousands of viewers, you won’t be able to monetize your channel as much as you need to to generate a sustainable income. However, once you have a large audience, your content creator business is likely to make a huge profit because their business tends to be relatively cheap.
However, one major downside is that this model is unpredictable. As an influencer, you are not only relying on the platform to build your brand, but also on advertisers. Therefore, it is a good idea to diversify your income with additional offerings such as training courses.
Build a 6-figure coaching business that gives you more freedom!
Starting a creator company is a bit tricky. Building a personal brand is hard and building an audience takes time. Unless you build other revenue streams, you’ll be relying on brand partnerships.
To become an influencer, start posting consistently on one or two platforms like TikTok or Instagram. Think of new content ideas and interesting perspectives.
Business Model #6: E-Commerce Business
The e-commerce market is worth $5.7 trillion, making it one of the most popular markets for e-commerce based business models.
You can create an online store using a store builder like Shopify, or you can create a shop on Etsy and start selling physical products online. Amazon FBA also gives you another option for creating your own ecommerce store.
There are also many tools available to promote your online store. You can use Kickstarter to fund your project or grow it by driving paid ads or traffic from search engines.
But the actual product has a big problem. First, you need to develop the product. Then you need to buy inventory (so you can sell your product without letting customers know their orders will be significantly delayed), and finally you need to ship those orders.
Overall, e-commerce costs tend to be $40,000 in the first year alone. Inventory and production costs account for 31.6% and shipping costs account for 8.7%.
Also, the actual product is often not that expensive. If your product makes $50 in profit, you would need to sell 40 products to make $2,000 in profit.
So, even if your online store is very popular and scalable, if your goal is to build your business as quickly as possible, it may be better to start your business with a lower initial cost.
Once the supply chain is established, physical products become very scalable. You can build a profitable online business if you know how to grow your business and brand. Amazon FBA can eliminate some of the headaches associated with starting an online store.
Turning e-commerce into a sustainable business is hard. It’s not a good business model for someone just starting out because it requires a lot of volume to build a business.
The first step to becoming an online seller is to develop a product that meets the needs of the market. Next, you need to find a manufacturer that produces this product. And finally, a shipping company that will ship to customers.
Read Shopify’s guide on how to start ecommerce for specific steps.
Business Model #7: Dropship
Dropshipping is a flexible alternative to other ecommerce business models.
Dropshipping is one of many ecommerce business models, but instead of manufacturing the product, a third-party seller ships it directly to the end consumer.
This means there is no need to incur additional costs such as production and shipping.
But despite the appeal of its business model, dropshipping is notorious for its scams. Many people abuse it. Unfortunately, most dropshipping products are not of high quality. That means you are not providing real value to your potential customers.
Additionally, dropshipping works like e-commerce. You can only charge a certain amount for your products, and you have to sell them in large quantities to increase your profits. Considering these factors, this is not the best business model for new entrepreneurs.
Dropshipping is a somewhat “passive” business because once you find a good supplier, you don’t have to worry about manufacturing or shipping.
Most suppliers do not provide high-quality products. Also, for this business model to be profitable, you need to build a strong system and generate enough revenue.
First, you need to find a product that fits your customers’ needs. Then you need to find a direct distributor and finally sell this product. This guide from Shopify shows you all the details.
Business Model #8: Information Products/Online Courses
If you are skilled at teaching people through written, video, and/or audio formats, you may consider creating information products to sell online and deliver to your customers through online courses.
Online courses allow you to teach students specific skills or strategies. They can be very specialized. There are digital products on topics like building tiny houses, Arabic calligraphy, and singing.
The best thing about an online course business is that you can build a scalable business. As you can see, online courses are an asset that you can sell over and over again.
However, building this business model takes time. The quickest way is to first build a service-based business and then convert your coaching or consulting curriculum into online courses.
In this short video, we explain why we chose the training path we chose before starting the course.
The course business is one of the most profitable online business models. This is where you can create an asset that can be sold over and over again at no extra cost.
Creating and building information products takes time. To build a sustainable business, you need an existing audience or large amounts of traffic.
The first thing you need to start your own training course business is a training methodology. (This is why we recommend starting with training first and then turning your system into courses.) Next, you need to build your audience.
Business Model #9: Blogging
The idea of blogging is to create a blog and then monetize it in various ways. This can be done through advertising, affiliate offers, or digital products (a combination of many other business models).
Most blogs are niche sites that focus on a particular topic, such as gardening advice, business, or careers. Blogs can be highly profitable because they require no overhead other than the cost of running the website. Ultimately, you can earn passive income (not that all income is truly passive, making money online always takes effort).
At the same time, you need to increase the number of visitors to your blog. To make money, you need traffic from organic search and other traffic sources (such as social media). Building this traffic takes time.
This is why blogging is a better business model if you have more experience in building website traffic.
Blogging is a scalable business that you can run in the background and make money through passive income streams like affiliate offers.
Starting a blog takes a long time because you need a lot of traffic to make it a profitable business. Learning how to drive traffic is a skill in itself, so this is not a business model for beginners.
The first thing you need as a blogger is a specific niche. Then blogging. Finally, it is a combination of social media traffic and organic search engines.
Business Model #10: Affiliate Marketing
Affiliate marketing is a $12 billion industry. It involves selling other people’s products and earning a commission from them. You typically build an affiliate business through a blog, YouTube, or other social media channels. For best results, focus on a specific niche (such as a nutrition or supplement program).
The affiliate business model can be profitable. After all, since you don’t have a product to develop yourself, you can also earn passive income.
At the same time, it takes time to build the traffic or following necessary to make a significant income through affiliate marketing. And you need to learn how to drive that traffic first.
As a result, affiliate marketing is not the best online business model for beginners. However, it can be a great way to make money online once you know how to drive traffic to your website.
Affiliate business can be very profitable. It is also the most “negative” business on the Internet.
For your affiliate offers to be successful, you need a lot of traffic. Ultimately, you will get a small percentage of each sale, so you need to find good offers and build traffic to them.
Affiliate marketers usually create a dedicated website that promotes affiliate offers. First, you need to find the right offer. Then launch the website and drive traffic to the offer through search engines or paid traffic.
Business Model #11: Subscription/Membership Model
A membership site is a model where people have very specific knowledge and pay a fee to become members. This is called a subscription model or membership model.
There are many variations of this model.
Some offer a printed newsletter that members receive each month. There may or may not be interaction with other members.
On the other hand, a sense of community and a level of feedback control can be the biggest selling points for certain types of memberships or subscription services.
Membership sites are very easy to set up as you can run your business as a membership site using a forum on your WordPress site or you can have a secret Facebook group that only paying members can access.
Whatever you decide, you will need to do a lot of research first to make sure there is a market and need for what you are offering. This model can be very profitable once you get it up and running and invest enough time to get comfortable with it.
At the same time, the membership model is not a passive income source. Keeping the community engaged takes a lot of effort. You may need to hire contractors to manage some of your collections.
For this reason, it is not the best business to start. Simply because it involves a lot of volatility (people signing up and unsubscribing after a few months). This is a model that can be added to an existing business once you have a stable and sustainable coaching or training business.
A subscription business is a relatively low-maintenance business that can grow.
Subscription businesses tend to have high turnover, so you need to keep attracting more people to your program. If you’re looking for a high-impact business model, a coaching model or group program might be a better alternative.
First, you need to develop a membership program to sell. The next step is to drive traffic to this offer or promote it to your audience. Different traffic channels include social media and search engine traffic.
Business Model #12: Online Marketplace
Next step: Online marketplaces. This is a fast-growing online business model that can be created to serve both buyers and sellers. Think of companies like Airbnb, Upwork, and Uber.
There are a variety of no-code tools to help you create a marketplace, such as Sharetribe. So the technical aspects aren’t too complicated.
However, creating a marketplace takes a lot of work. You first have to attract one side of the platform (sellers) and then have enough buyers to keep the sellers on the platform. This means you need to know how to build two audiences, and learning how to grow just one audience takes time!
It also takes time to create a profitable business.
Overall, while they can be very profitable if you attract enough people, markets are not a good business for small business owners.
Marketplace Business is a relatively new business model on the Internet. Therefore, there is still a lot of room to advance in various fields. Once you have successfully built a marketplace, it is relatively easy to expand it and build a profitable business.
Creating a market is hard. This is especially true if you have no experience building a business, attracting traffic, and developing your brand. Building a market is not a good option for new entrepreneurs. This is especially true if you are looking to quit your 9-to-5 job.
First, you need to come up with an idea and build a website that is “at least a viable product” to market. Next, you need to determine product-market fit. That means you need to decide if there is a market for your idea. Finally, we start promoting the market.
Business Model #13: Apps
App revenue is expected to grow to $613 billion by 2025, with the largest segments being gaming, networking, and entertainment.
In other words, the app business is booming. Therefore, it has become a popular business model used by social media platforms, app-based companies like Uber, and gaming companies.
But just like any other software company, you need a programmer on your team to help you build the app. (unless you already have the skills)
You also need to scale your app quickly, as revenue relies on small in-app purchases or monthly fees. Learning how to grow a business takes time. Since you can’t accomplish much without critical mass, you may need funding to bring your idea to life.
This is not the best online business model for new entrepreneurs. By starting an online business that requires fewer resources, you can grow your revenue faster and eventually launch and grow your app.
Some of the largest companies in the world are app companies. Apps are scalable, profitable, and can be built across industries.
App projects require both technical and business knowledge. As an app entrepreneur, the experience gained from building other businesses is essential. Otherwise, it will be very difficult to achieve the scale needed to make your app a success.
To start an app project, you need an idea and you need to write the app code (or hire someone to write the app code). After launching your app, you need to implement a growth plan to grow your app’s user base quickly.
Business Model #14: Software as a Service
The “Software as a Service” or “SaaS” business model is a business built around a software product. Users then pay a monthly fee to use the software. Think of companies like Slack or Zoom. Both are SaaS companies.
Overall, the software business model is one of the most profitable online business models. Your business is highly scalable and your software is an asset that can be sold multiple times.
But what does it take to build a SaaS business? There are plenty of no-code tools available today, but you still need software developers on your team.
Building a software project also takes time. First, you need “at least a viable product”. Then you need to launch it, build a customer base, and scale your business.
That’s why the SaaS business model is not the best online business model for beginners because it takes a long time to build.
The software business can be very profitable and scalable. After all, many large startups and established companies have used this business model to build their businesses. Software is a digital asset that does not need to be customized for each client.
Software companies are one of the most advanced business models. You need to develop and sell great SaaS software. This is not easy to do without significant external funding. This business model requires investment and takes a long time to turn into a profitable business.
