Are you ready to get out of the feast and famine freelancer cycle and start implementing some SERIOUSLY profitable revenue models for startups? Keep reading.
As new entrepreneurs, we often start our businesses filled with enthusiasm and an “I’ll-do-anything-it-takes” mentality. We’re ready to get down and dirty and do whatever is needed to strike out and build something of our own.
When we get our first client, we’re over the moon.
It may not be for much money – but hey, someone is paying us to do what we love, right?
We land another small project here, a gig there, until all of a sudden…our calendar actually starts to look pretty full with all these “small projects”.
Pretty soon, the clients you were SO happy you signed may start to become demanding. They’re asking for changes, blowing up your phone, requesting meetings and tasks left, right and center.
Not exactly the “freedom entrepreneur lifestyle” you imagined, huh?
While I now run my startup Data-Mania, a multi-6-figure data training and advising company, I too used to know this struggle all too well.
Here’s my story…
I was a solo data freelancer working to quit my 9-5. I started my freelance career taking requests and small projects in the evening after my day job – often only for a couple of hundred bucks.
And while eventually I got enough of these small freelance jobs to quit my 9-5, I still had no predictable way to bring in revenue into my business. I didn’t have a specific buyer avatar – nor did I specialize in a certain service. I’d never thought to consider the ideal revenue models for startups – I’d simply taken whatever work came my way.
Pretty soon I had 10 different freelance clients from 10 different industries, all underpaying me to do 10 different types of services.
My business was not scalable, not at ALL profitable, and definitely not fun.
One of my mentorship clients, Kam Lee, actually coined a name for this phenomenon. He coined it the low-budget hamster wheel.
He joined my mentorship program so he could escape that hamster wheel. And wouldn’t you know – in just 1 year – not only did he get off the hamster wheel, but he managed to transition from burnt out data services provider to scaling data CEO making $350k/year through his data business and SaaS company, Finetooth Analytics.
Ask myself or ask Kam Lee, the reality is that being a solo freelancer often simply isn’t sustainable – or scalable, in the long run. To really hit that next income level, as well as create a business that isn’t 100% dependent on your TIME, you have to start looking into other revenue models for startups.
Below are some of the BEST revenue models that have worked both for myself and for other founders in data-intensive industries. So if you LOVE tech, are data-driven, and want to know the best types of models to build a business that’s bigger than yourself, keep reading!
If you prefer to read instead of watch then, read on…
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First Things First: Business Models vs. Revenue Models
Before discussing any of the revenue models for startups, it’s SUPER important to understand the difference between a revenue model and a business model.
Simply put, a revenue model is just a portion of the business model that’s responsible for bringing revenues into the business.
A business model, on the other hand, is a conceptual model that explains how a business delivers value in exchange for money.
So technically, a business could have multiple revenue models. You could combine some of these on the list to amp up your revenue!
Revenue Models for Startups #1 – Unit Sales
Let’s get into the very first of the revenue models for startups – that being unit sales.
Essentially, this is just the direct sale of ownership of a product.
For an online business, this could be the sales of merchandise or the sale of a license to use a digital product, like a course or an ebook.
Pros to this revenue model
One of the biggest pros is that this revenue model is super scalable. If implemented successfully, you can use it to hit 7 figures in your business.
Another bonus is that you can automate or delegate most of the client delivery work. So it’s not actually taking any of your personal time to deliver the products.
Cons to this revenue model
The biggest negative to this revenue model is that it can be almost impossible to implement if you don’t have an audience. You can create an incredible product and try to sell it, but if you don’t have a large enough audience to sell it to, it’s going to be extremely difficult.
Another risk to this type of revenue model for startups is the product development time.
You always (and I mean ALWAYS!) want to make sure that you validate your offer BEFORE spending hours and hours building it and taking it to market.
How to implement this revenue model
If you already have an audience, the best way to go about implementing the unit sales method is to FIRST sell 1-1 coaching or advising and build out the offer. By offering your solution in a 1-1 capacity first, you can validate your transformation, fill in the gaps as you go, and then productize it.
On the flip side, if you’re not an expert, or have a small audience or no audience at all, then you’re going to want to make a small digital product first – something less than $99. You can sell that product to your audience as you work to grow that audience size!
Revenue Model #2 – Licensing
Let’s move on to the licensing revenue model. Essentially, this is where you sell a license to someone in exchange for their right to use your intellectual property.
By implementing the licensing model, you sell your customer a license in exchange for the right to use your intellectual property as if it was their own.
Often, these types of products go by the name of:
- White label products
- PLR products (i.e. private license rights products)
- Done-for-you content
Pros of this revenue model
The pro to this type of content is that it is VERY easy to develop. Plus, you can actually use it to make sales as you grow your audience.
A great example of this would be PLR content, in other words, private license right content.
Most of this content for sale on the internet is super affordable – it’s usually always less than $100. Because it’s low-priced, it’s a great way to create something (relatively easily!), sell it to a bunch of clients so they can use it as their own, and grow your audience along the way!
Cons to this revenue model
The biggest negative to licensing is that selling a product like this is not a high-ticket sale. It’s a low-ticket earner.
You want to be absolutely sure that you distinguish yourself from every other PLR provider out there. Because if I’m being honest, there’s a lot of white label or PLR content that is absolute garbage. You DON’T want your brand to be associated with all of the other spammy brands that sell PLR products.
How to implement this revenue model
I would suggest starting by Googling phrases “PLR” and “white label data products” to see what kind of other stuff is already out there.
You could even buy a few low-cost products just to get your feet wet and see what is being offered by other providers.
Next, you’ll want to start thinking about your specific data expertise to see what you could sell through licensing.
Finally, you’ll want to look for quality markers within any sample products you buy to see where and how you could make upgrades and distinguish yourself in terms of quality branding.
Another good way to find inspiration for what to create is to do market research. See what people in your community are struggling with so your product can help them solve their problem.
Just remember – whatever you put into the world, people will associate with your brand. Don’t produce anything that would ultimately harm your brand’s reputation!
Revenue Model #3 – Subscriptions
Thirdly, let’s take a look at the subscription model.
Essentially, this is the right to access your product, service or community on a subscription and pay-as-you-go basis.
In some cases, this could look like a service retainer package.
Pros of this revenue model
The big pro on the subscription model is that they’re generally easy to sell. It’s also a GREAT way to get paid while you build out your product suite and test the service with users. Another plus? It’s got a fairly small time to market (unless you’re trying to sell SAAS subscriptions, of course!).
With the subscription model, you can continue to bring revenue into your business month after month as you continue to grow your audience through social media marketing.
Cons to this revenue model
On the flip side, the CON to this type of revenue model for startups is that it can be extremely high-maintenance.
If your membership gets too big, you’re going to have to bring in team members to help you run the administrative side. You’ll have to deal with people joining and cancelling, asking questions and requiring customer support.
If you DO choose to go with the membership model, you’ve got to be super clear in your contract about what your membership includes, and what it doesn’t.
While I can totally see why some people dig this model, the idea of having to admin it and all of the headaches that would come with people joining and cancelling are why I’ve never decided to pursue a membership.
However, I do think that if you keep it small and manageable, it can be a great way to add a new revenue stream to a data business.
How to implement this revenue model
A SUPER quick way to implement this would be to create a Facebook support group, agree to give a monthly curriculum drop and then do a once per month Q&A group call. Say you offered that package for $77/month, and sold that package to 13 people, you’d have your $1,000 per month in monthly recurring revenue! Not bad, right?
Revenue Model #4 – Fee for service
The fee for service model is where you sell your services according to a fixed price like a lump sum – OR an hourly basis.
But I want to stop you right here.
Never, ever, sell your time for money when doing data implementation work.
That is a fabulous way to go from having one boss at your 9-5 job to having 15 “micro-bosses” all trying to manage your time and tasks.
Pros of this revenue model
Want to start a data business FAST? The biggest pro to the fee-for-service model is that it’s super simple and easy to get started.
Even if you’re a brand new data entrepreneur, you can still begin selling data implementation services for at least $150/hour. But the key here is to sell your services by the DELIVERABLE – never the hour.
Say, for example, you build custom chat bots. You’d charge a package fee to build the bot, rather than charge your clients for hours worked on their bot.
Cons to this revenue model
With the fee for service model, you’ll quickly find out that it’s not very scalable. You only have so many hours in a day. At a certain point, if you start off with a fee for service revenue model, you’ll have to switch into something like an agency or a software as a service business model.
How to implement this revenue model
The answer to this is simple! All you need to do to get started straight away is log onto UpWork and start browsing freelance jobs in your chosen specialty.
As you get more experienced, however, you may want to look into more long-term strategies to attract high-end clients, such as building your brand on social media.
At the end of the day, there is SO much you can do with a data-driven business. Don’t limit yourself to freelancing or being a services provider if you think your heart may be elsewhere! Get creative, assess your strengths and personality, and dive deep into these revenue models for startups to see which one would work FOR YOU. The world is your oyster!
Want more resources to start, grow and scale a data business? Download my FREE Data Entrepreneur’s Toolkit, a collection of 32 free and low-cost tech tools & processes that I used to scale my business, Data-Mania, into the multiple 6-figure range.
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