Career & Business

17 Types of Business Models & How to Choose the Right One

August 31, 2020

Hi! I'm Marie

You have gifts to share with the world and my job is to help you get them out there.

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Congratulations! Many people never take the time to think about their business model. But if you’re in business or wanting to start one, this decision will determine your life as an entrepreneur.

Today, I run a business comprised of world-class online training programs, an award-winning show, a #1 New York Times bestselling book, an audience in 195 countries, and a team distributed around the country.

When I started my business 20 years ago, you know what I sold? One-on-one life coaching services.

That’s it. A simple, one-woman shop.

I knew long term I wanted to impact tens of millions of lives through my work. And I knew I couldn’t do that serving one person at a time. Unless I grew a couple of spare brains. And ears. And arms… 

As a brand-new entrepreneur, a single, clear service was perfect for me. This simple business model crystalized exactly what I sold, how to sell it, and what value it would bring my clients.

If you want to start a business, you need to know exactly what people will pay for.

But don’t stress, it’s easier than you think. I’ve laid it all out below.

As you go through this post, keep in mind the WHY behind your business. Even though your goals could lead you down a trillion paths, it’s important to choose one clear business model to start, so you can get to work. You can always evolve, pivot, or add on later.

What Is a Business Model and Why Do You Need One?

Your business model is the shape of your business.

You know, the luscious curves, the broad shoulders, the supple — okay, no, not that kind of shape.

Your business model describes how you’re creating value and how you’ll make money. You’re essentially answering two questions:

  1. What are you selling?
  2. How are you selling it?

Yes, it might sound basic, but your answer to these questions form the bedrock of your business. Your business model determines your decisions about everything else — from operations and funding (loans, investors, or out-of-pocket) to your industry partners and ideal customers.

There are countless ways to structure your business, but I've explained 17 of the most common and successful models below. Let’s dig in.

17 Types of Business Models (& Successful Examples for Each One)

What kind of life do you want to live as an entrepreneur?

Are you a one-person shop or a small-business owner? Do you work with contractors or employees? Will you need a brick-and-mortar store or a remote team?

Having a clear picture of what you want will help you choose the best business model for you.

First, the basics. Businesses sell products or services, or a combination of both. What you sell and how you sell it determines the size, shape, and feel of your business.

The first step of nailing your business model is choosing the WHAT. Then you can pick the best HOW.

Tried-and-True Business Models Based on WHAT You Sell

The heart of any business is how you create value for your customers. Keep that goal in mind while you decide how to package and deliver it.

How you package the value you create is the WHAT of your business.

Here are some basic, WHAT-based types of business models:

  1. Product: Products are the most straightforward type of business model and the easiest one to visualize. Your customer buys physical or digital products, like cupcakes or ebooks. If you sell jewelry, handbags, clothing, fine art, baby products, or wine, you’ve got a product-based business model. 
  2. Service: Think of services as any situation where you trade time (yours or your employees’) for money. You have to “show up” to deliver a service, either by putting in time at your computer, getting on the phone, or meeting face-to-face with a client. Graphic designers, writers, coaches, yoga teachers, hair stylists, make-up artists, photographers, and personal organizers all work in service-based businesses.
  3. B2B (business to business): In a B2B model your core offer supports another business's goals. Instead of selling to a person, your company would sell to another company. Furniture wholesalers sell to retail stores and Samsung sells phone chips to Apple.
  4. B2C (business to consumer): Your core offer supports an individual’s goals — aka you sell directly to people. You likely interact with many B2C businesses every week when you buy groceries, book a massage, or use FaceTime.
  5. P2P (peer to peer): You create value by connecting two individuals together. P2P businesses like Airbnb, Uber, and make money through commissions when a transaction happens between the people they connect: drivers and riders, hosts and guests, or pet sitters and pet owners.
  6. SaaS (software as a service): Your product is software that provides a service traditionally provided by people. SaaS businesses include many of the tools you use at home or work every day — email services, website builders, calendar apps, and project management tools are all SaaS-based businesses.
  7. Content: You provide information or entertainment by producing articles, emails, or videos for your audience. Magazines, news programs, and YouTube channels are all examples of content-based businesses. 

Which fits best for you and your business? Do you sell products or services? Do you sell to other businesses, to people, or act as a middleman?

Now that you know the WHAT of your business model you can move on to the HOW.

The Best Types of Business Models Based on HOW You Sell

Once you know the value you create, the next part of your business model is how you’ll sell it.

Your HOW is the structure of your business.

Get creative with your marketing strategies, and you can sell pretty much anything in any way you want, as long as you meet your customers where they’re at.

Here are some common, structure-based types of business models:

  1. Brick and mortar: You sell your products and services through a physical storefront. Cafes, auto repair shops, dance schools, and art galleries are all brick and mortar businesses.
  2. Ecommerce: You sell physical retail products online. Amazon is the world’s largest ecommerce store, but there are multitudes of other online retailers selling outdoor gear, jewelry, home furnishings, and everything else.
  3. Advertising: You give away product access or content for free, and earn money from advertisers. Instagram, Google, and most radio stations operate on an advertising-based model.
  4. Direct sales: You sell products to customers one-on-one, no retail store necessary. The most common form of this business model is multi-leveling marketing. Think tupperware parties or Cutco.
  5. Subscription business: Customers pay a weekly, monthly, quarterly, or annual subscription fee to use or receive your product or service. Netflix, HelloFresh, and the explosion of different subscription box businesses fall into this category.
  6. Freemium: You give away access to one level of your digital product for free, and charge customers for a premium version with additional features. Mailchimp, Dropbox, and CandyCrush are all Freemium business models.
  7. Razor and blade: Sell one item (razor) at a low price that requires a related item (blades) sold at a premium price. Also known as the printer-and-cartridge model, this business strategy creates recurring revenue after locking in loyal customers with their initial purchase.
  8. Franchise: Enlist other entrepreneurs to own and run branches of your company, and earn money through fees and sales. Restaurant chains are the most prominent examples of franchise businesses. Companies like McDonald’s, Pizza Hut, and Dunkin’ charge a fee and take a cut of sales from stores owned and operated by local owners.
  9. Licensing: Another business pays to use your idea, product, or technology, and you’re not involved in delivering the product or service to the consumer. Lots of tech and software companies license their programs to other businesses. Music and other intellectual property can be licensed for use in movies or events.
  10. Influencer: Brands pay you to create content for your loyal audience, usually on social media or a blog. The rise of Facebook, Instagram, TikTok and other user-based content platforms have dramatically expanded the opportunity for influencer-based business models.

First you got an idea of WHAT your business will sell, and then you discovered different ways to deliver it, or your HOW.

Does Your Type of Business Depend on Your Industry?

If everyone in your niche seems to be doing the same thing, should you follow suit? Or break the mold?

While it’s true –– some business structures do work best in certain industries –– that’s not the whole story. Know your industry, but don’t get stuck there.

For example, SaaS products are usually sold on a subscription basis. Smartphone apps usually use a freemium and/or advertising model. You’re more likely to see cupcakes in a brick-and-mortar shop than an ecommerce store — but online cupcakes aren’t unheard of!

How you sell your products and services determines how your business fits into your life, so make sure you set up a business structure that helps you create a life you love.

Just because every other cupcake slinger in your town operates brick and mortar shops, doesn’t mean you can’t sell cupcake catering services or launch a cupcake-of-the month subscription.

Looking at competitors can help you understand what business models are most profitable in your industry, but following the status quo isn’t always the best way to go.

Can You Combine Business Models or Should You Stick to One?

Great news for creatives: you can stack and combo business models to your heart's content! Lots of companies have multiple revenue streams that combine methods for selling products and services.

TheSkimm is an example of a freemium model for a content-based company with multiple revenue streams.

TheSkimm’s core offering is a daily email where readers get free, curated news. The company makes money off of advertising, a paid premium subscription, branded content partnerships (influencer marketing), and more.

If the value you offer is information, talent, or advice, you’ll likely end up with a multi-pronged business model.

For example, you might sell coaching (a service) and an online course (a product). You could sell a monthly membership to group coaching in addition to one-on-one coaching, and you could get paid to speak at conferences and seminars.

Start with the value you offer. Then you can mix and match business models to create a unique business that highlights your skills and interests.

I only caution you not to start everything at once. Start small and simple, with one product or service, and let your long-term business grow deliberately based on what your customers want.

Can you imagine if I’d tried to launch online programs, host MarieTV, and write a book back when I was just getting started with one-on-one coaching? I would’ve imploded!

In business, starting small is a beautiful thing.

How to Choose the Right Business Model for a Life You’ll Love

When it comes to shaping your business, the key is to know thyself.

Design a business model that focuses on your strengths, so you can thrive and find joy in your work every single day.

Every single human is born with a unique set of strengths — or, as I like to say, special gifts.

Are you a great learner?
Do you have a strong sense of empathy?
Do you thrive on competition?
Do you have a knack for imagining the future and getting people excited about it?
Can you win other people over even if you’ve just met them? 

All those things are strengths you can lean on to shape your business. For instance, empathy might make you a great service provider, a knack for getting people excited could set you up to lead a large team, and winning people over would help you excel in B2B sales.

Your strengths are with you for life, and you can use them to create a business you’ll love. 

Don’t fret about choosing the perfect business to align with your strengths. As your business launches, grows, and evolves, you can make self-aware decisions that allow you to work happily and successfully.

Pick a Model — and Move On

Here’s the kicker: Whatever type of business model you choose now… it may not be the way your business looks next year or in 10 years or in six months.

You might change direction or expand — and that’s great!

In business, there’s no such thing as forever. So don’t get stuck on which type of business model to choose. Just get to work, and focus on progress, not perfection.

Now let’s turn this insight into action.

Grab a notebook, and spend 5 to 10 minutes working on this exercise.

Don’t worry; this is simple and can always change later! Fill in the blanks about exactly how your business will make money:

My customers are __________________.

They are paying me to provide ___________________.

Remember, focus on what value you are creating for people first. Everything else flows from there.

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