Archive for Revenue Model
Before you start your business, know what your business model is
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Now here is a crazy thought! How about knowing how your going to make money before starting a business? Crazy right? I mean what does making money have to do with business?
And that is why the majority of start-ups become finish-downs.
I know, I know. Just build it for the sake of building it and see what happens. That’s great if you don’t need the money and have a lot of time on your hands, but if you are going to start a business you best know how you are going to make money.
Now before we go into some of the different ways to make money I think it is first important to see that you have multiple ways of making money. If you are going to be putting blood, sweat & tears into something make sure you have many avenues of success while still maintaining focus on your core business. Note: When you launch your company you don’t need to launch every revenue stream, just make sure you have a few as you grow.
The easiest example of this is a Restaurant. A retaurant can have the following revenue streams:
- The basic: People coming in and eating in
- Take Out
- In house catering/parties
- Catering in other locations
- Selling Packaged food through other locations
- Selling a specific product commercially (ie: Our Special Bar-B-Q Sauce)
- Party Planning Service
- Gift Baskets
- Frozen Pizzas
See what I mean? Now mostly I would like to focus on internet businesses since I think it is pretty obvious what your business model is when you are running a retail outlet of any kind, but online we have been brought up with the idea that it is a numbers game and as long as you have a lot of “eye balls” you can figure out the rest later. Now that is a great thought and if you became an internet sensation like Twitter, then that’s great, but for the 99.9999% of the rest of internet start-ups you really need to have a clear business model in order to raise funds and of course to succeed.
Now the problem I have with the “eye balls” theory is that the main business model that people are shooting for is an advertising model and that is a very dangerous place to be for many reasons; the fist being that if advertising revenue dollars were to suddenly drop, so will your revenue. I know of many companies that have gone under in the current recession specifically because the ad revenue dropped by more than 50%. If your going to build a business, build it on a need, something that people want and not something that you are going to annoy them with. That’s just my opinion.
A recent article on Mashable titled “5 Business Models for Social Media Startups” points out some of the main ways to earn money online and can even be used for non social media startups. Let me know what you think!
http://mashable.com/2009/07/14/social-media-business-models/
Ben Gurion Airport Arrivals hall is missing out on a tremendous opportunity
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Today, my cousin Yishai and his family made aliyah and I and a whole bunch of family went Ben Gurion Airport to welcome them home.
Don’t ask, but to make a long story short we waited almost two hours before they came out and there was absolutely nothing to do. Sure there is a very nice cafe and my Mom did buy me an ice coffee (thanks Mom!), but I wasn’t all that hungry. Now because I knew I would be waiting I brought with me a book so that was ok, but other then a few small stores (50% of them cell phone shops) there is nothing to do there.
But before we get to “things to do” they are missing out on a huge advertising opportunity. Thousands of people a day are waiting for people to come out through the doors and they are constantly looking at the huge boards with the times of arrival. But there is space on both sides for a super large screen that can be used for entertainment and advertising opportunities. They could show videos of user generated Israeli talent or even just videos of places to visit in Israel. Even national news would be good, but there is nothing. Granted there could not be any sound, but videos even without sound could be highly entertaining. Just ask Charlie Chan.
Now it also would make sense to have some sort of internet access or even computers there as well as a mini arcade or entertainment center. Something that you can do while your waiting for your loved ones to come out. Even some stores with rotating products would be welcomed and not the same old flowers books and balloons. Just my 2 agurot.
Whenever I hear about a new start-up, one of the first things I look for is what is the Revenue Model. The second thing I do is make sure that the revenue model is not based on Advertising. Often trying to find a sustainable revenue model puts a damper on the excitement of starting a new business, but remember that the key word here is "business" and without revenue you may have a nice hobby, but it aint no business!
Now while it is possible to earn significant revenue from advertising once you have hundreds of thousands or more of daily users, that should not be your sole revenue model but you should consider it as icing on the cake. Also, it is ok when you are a start-up to temporarily use advertising to bring in some cash, but it should not be your long term revenue goal.
So is it ok to start a web application or another web 2.0 project just for fun and worry about revenue later? Sure you could, and should! As long as you are not expecting it to pay any of your bills, you look at it as a hobby, and you don't expect anyone to invest in it. I don't want to put a damper on innovation and if you have an idea that you would love to bring to the world, I say go for it! But don't call it a business start-up. Perhaps an internet start-up would be more apprapo, but then again when people hear internet start-up they are also thinking it is a business.
Just call it "This Good idea I'm working on".
Sometimes a great idea really takes off even with no revenue model in site. For example; Twitter. (You can follow me on Twitter here).
Twitter is a great idea, but when it was started and still till today, they are not sure exactly how to monetize it. And even when they do, I'm sure it will be advertising based, but you never know.
But Twitter is the exception to the norm. The one in a million, the lucky few! You can't build a start-up hoping you are going to end up like Twitter.
The good thing about when you become so huge as Twitter is, you can find other smart people that are more than happy to help you out with a revenue model. See this post below and check out the links to read the whole article published by AlleyInsider.com where they suggest 11 different revenue models for Twitter. They actually ran a contest asking all of their thousands of readers to suggest a twitter revenue model and they bost the results here:
Deadline for entry into our Create Twitter's Revenue Model contest
is up and we thought we'd share some of the best entries. We haven't
decided on a winner yet, so check them out and let us know what you
think.
We'll consider your feedback before we choose a winner. When we do
pick one, we'll re-post that person's plan and resumé here. We'll allso
email both to Twitter CEO Ev Williams, whom we hear is busy building a
business staff at the startup.
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