Content Outline

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What You'll Learn

Unless you are a 100% grant-funded nonprofit, your key to success as a venture is a sustainable, scalable, and repeatable business model. In this section, you'll learn about the core elements of a business model, different pricing strategies, understanding unit economics, and figuring out which revenue model makes sense for your venture.

What's a Business Model?

Broadly, a business model is a design for the successful operation of a business, encompassing revenue sources, customer bases, products, and details of financing.

Essentially, a solid business model is the difference between a startup and a company. Remember, a startup is simply a "temporary entity designed to search for a scalable and repeatable business model.

When you find a business model that works, you are in business!

There are four elements that make up every business model:

1. Product: What you sell
2. Price: How much you sell it for
3. Cycle: How frequently you sell it
4. Customer: Who you sell it to

For example, if you are working on a new mobile app:

Product: An app that helps you locate local dining establishments Price: Free for users, fee for restaurants Cycle: Restaurants charged every month based on number of users finding them in the app Customer: Local restaurants with at least $1.5M in annual revenue

The process of market research and customer discovery will help you figure out your product and market. In this section we'll focus mostly on how to determine the price and the cycle of your business model.

Business Model Examples

Multiple Revenue Streams

Many successful companies have multiple business models, more commonly referred to as multiple or diversified revenue streams. So shouldn't your startup? There are very clear perks to having multiple revenue streams:

• You are more insulated from sudden market changes.
  • Uber Eats continued to bring in revenue even when traditional Uber rides plummeted during COVID
• You expand your market by selling more products to the same market, or the same product to new markets, or both.
  • Think Casper —> not everyone can afford their mattresses, but many more can afford their pillows
  • Or Tesla —> they sell different cars (economy, luxury) to different income groups

Diversified revenue streams are great for companies, but not so much for startups. Why?

<aside> 💡 The fundament of a successful startup is doing one thing well, over and over again.

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For young companies, chasing diverse revenue streams can distract them from creating a scalable and repeatable business model, which is the entire point of being a startup. If you are constantly trying new revenue streams, you might overlook valuable data on which one is the best, or you might reject it before it thrives.