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Business and Operational Models in Startups

Updated: Dec 7, 2023


Different Business Models of Startups

In the dynamic realm of startups, crafting a solid business model is crucial for success. A business model serves as the blueprint for how a company creates, delivers, and captures value for its customers, while also defining the internal processes and structures that enable it to function effectively.


Business Model:

A business model is the fundamental structure that outlines how a company plans to generate revenue. Various Factors such as Target Customer, Competitors, Revenue Streams, and Cost Structure, Technology are considered before finalizing a business model.


Few Questions you need to answer before finalizing your business model:

  • Will you sell products online?

  • What will your revenue streams be?

  • Will you have a single source of income or multiple revenue streams?

  • Do customers need to pay a monthly subscription for your services?

  • Is there going to be a free and premium version of your app?

  • Will you make money off of advertisements?

  • Do you want to sell through a third party or opt for direct-to-consumer?


Deciding on business model is a process and it involves over the period as you understand your customer behaviors, your product / service performance and target market and competitors.


Types of Business Models

Startups employ a variety of business models, each tailored to their specific industry, products, and target customers. Here are some common types:


1.Subscription-based model: Customers pay a recurring fee to access a product or service, providing the startup with a predictable revenue stream.

Examples: Netflix, Spotify, Adobe Creative Cloud,

Cure.fit and Cult.fit: Fitness centers that offer a variety of fitness classes and programs for a monthly membership fee.

Zomato Pro and Swiggy Super: Food delivery services that offer exclusive discounts and benefits to premium members.

Amazon Prime and Flipkart SuperGold: E-commerce platforms that offer a variety of benefits, including free shipping and early access to deals, to premium members.

Hotstar Premium and SonyLIV Premium: Streaming services that offer ad-free viewing and access to exclusive content to premium members.

Audible and Audible Plus: Audiobook platforms that offer a monthly subscription for access to a library of audiobooks.


2.Freemium model: Customers receive a basic version of the product or service for free, while premium features require a payment.

Examples: Evernote, Dropbox, Slack

Canva: A graphic design platform that offers a basic free plan with limited features, while premium plans provide access to additional features and tools.

Grammarly: A grammar and spell-checking tool that offers a basic free version with limited suggestions, while premium versions provide more comprehensive feedback and additional features.

Trello: A project management tool that offers a basic free plan with limited boards and cards, while premium plans provide access to unlimited boards, cards, and additional features.

MailChimp: An email marketing platform that offers a basic free plan with limited contacts and features, while premium plans provide access to more contacts, features, and support.

Evernote: A note-taking and productivity app that offers a basic free plan with limited storage and features, while premium plans provide access to more storage, features, and offline access.


3.Transaction-based model: Revenue is generated from each individual transaction or sale.

Examples: Amazon, eBay, Uber

Ola and Uber: Taxi and ride-hailing services that generate revenue from each individual ride.

MakeMyTrip and Yatra: Online travel agencies that generate revenue from commissions on flights, hotels, and other travel bookings.

BookMyShow and Paytm Insider: Online ticketing platforms that generate revenue from ticket sales for movies, concerts, and other events.

BigBasket and Grofers: Online grocery delivery services that generate revenue from orders placed by customers.

Flipkart and Amazon: E-commerce platforms that generate revenue from sales of products across various categories.


4.Advertising-based model: Revenue is generated from displaying advertisements to users.

Examples: Google, Facebook, YouTube

InMobi and AdMob: Mobile advertising networks that generate revenue from displaying ads in mobile apps and websites.

Times of India and Hindustan Times: Online news publications that generate revenue from displaying ads on their websites.

Network18 and India TV: Online news and entertainment channels that generate revenue from displaying ads on their websites and streaming platforms.

Jagran New Media and Dainik Bhaskar: Online news publications that generate revenue from displaying ads on their websites and mobile apps.

Housing.com and NoBroker: Online real estate platforms that generate revenue from displaying ads for property listings.


5.Marketplace model: The startup acts as a platform connecting buyers and sellers, earning a commission or transaction fee.

Examples: Airbnb, Etsy,

Urban Company: A home services platform that connects customers with service providers for a variety of tasks, such as plumbing, cleaning, and beauty services.

Meesho: A social commerce platform that connects resellers with customers, allowing them to sell products and earn commissions.

Dunzo: A hyperlocal delivery platform that connects customers with local stores and service providers for on-demand deliveries and errands.

ShareChat: A social media and content sharing platform that connects users and allows them to create and share content, while also generating revenue from in-app advertising.

Practo: A healthcare platform that connects patients with doctors and hospitals, providing booking and consultation services.


6.Direct to Consumer Model: The startup acts as a directly selling the goods to their customers via online channels like Website / Mobile Applications / E-Commerce Agreegators or through Exclusive Brand Outlets (EBO). In this model , organization try to eliminate the middle-men and wholesalers and reach directly to consumers.

  • Boat: BoAt is an India-based consumer electronics brand that markets earphones, headphones stereos, travel chargers, and premium rugged cables.

  • Mamaearth: Mamaearth is an Indian based startup that offers a wide range of cosmetic products to elevate its customers' daily skin care routine.

  • Coolberg: Non-Alcoholic Beverage Brand.


7.DropShipping Business Model: Dropshipping business model is in which the inventory is not held by the startups and it is directly shipped from buyers warehouse to the customers which any hassle of maintaining the inventory, deliveries, customer service, etc. This type of business model required low-investment and can be successful only if you have strong customer base.


Operational Models

While the business model outlines how a company creates value, the operational model defines how the organization executes its strategies and delivers that value. It involves the day-to-day processes, workflows, and systems that keep the business running efficiently.


Key Components of an Operational Model

  1. Organizational structure: Defines the hierarchy of departments, teams, and reporting relationships.

  2. Processes and workflows: Outlines the standardized procedures for key activities, such as product development, customer service, and marketing.

  3. Resource allocation: Determines how the startup allocates its financial, human, and technological resources to achieve its goals.

  4. Performance measurement: Establishes metrics to track progress and evaluate the effectiveness of the operational model.

Examples of Business and Operational Models in Action


1. Ola and Uber: Hybrid model combining subscription-based (discounted rides) and transaction-based (individual rides) revenue streams, with an operational focus on efficient matching, dynamic pricing, and robust customer support.


2. Flipkart and Amazon: Marketplace model connecting sellers and buyers, generating revenue from commissions, direct sales, and advertising, with an operational focus on efficient inventory management, secure payments, and seamless delivery.


3. Zomato and Swiggy: Freemium model offering basic services for free and charging premiums for additional features, generating revenue from individual orders, with an operational focus on restaurant partnerships, efficient delivery, and user-friendly interface.


4. Paytm: Dual revenue stream from advertising and transactions, offering financial services, with an operational focus on building a large user base, expanding merchant partnerships, and enhancing user experience.


5. ShareChat: Marketplace model connecting content creators and users, generating revenue from in-app advertising, offering additional features, with an operational focus on content moderation, community management, and targeted advertising.


Conclusion

In the fast-paced world of startups, business and operational models are not static; they evolve as startups grow, market conditions change, and new technologies emerge. By continuously adapting and refining their models, startups can maintain a competitive edge and achieve sustainable success.



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