A profitable web based business is dependent upon choosing the right business model. There are more than twenty existing business models from which to select. With so many options, pay close attention to the factors will influence your choice for a web based business. The main factors that affects whether your web business is profitable are:
1.The goods or services you are selling,
Your target market, and
2.The marketing channel you use to reach clients or customers.
3.This article addresses each factor. It also gives simplistic examples of how selecting the right online business model can increase web business profitability.
Goods or Service and Web Business Profitability
Juana sells computer supplies out of her home. When she first started up the business, the compact disc (CD) had just been invented. She charged customers $4 per disk. For a while, this enabled her to run a profitable web based business. Once the DVD came along, however, the demand for CDs dropped. Juana still had a large unsold inventory of CDs.
Her solution was to switch to a loss-leader business model. This is selling an item at or below cost—in this case CDs—to attract customers. This helped exhaust her supply of CDs while also offering state-of-the-art DVDs, which replaced CDs as her web business’ profit center. The key then is to identify which items in a product portfolio can be profitably used in the loss-leader model.
Your Target Market and Web Business Profitability
Darnell runs a profitable web business selling factory-second cookware. The merchandise sold in his web business includes pots and pans that have slight imperfections which don’t affect the items’ performance. Darnell can never be sure of the quantity of goods his web business will receive in a given month. His regular customers know this, too.
He therefore uses an online auction business model. Customers submit bids online, with the highest bidding winning the item. Darnell web based business profits vary from month to month, but over the long run he is quite successful.
Reaching Clients and Customers and Web Business Profitability
Margaret is a software programmer. Her profitable web business sells tax preparation software out of her home office. Since her online business customers are mostly one-time buyers, Margaret employs a freemium business model learned from lead-edge training on starting a web business. She offers a basic downloadable digital product free, adding a premium for advanced features that streamline tax filing.
The freemium model has increased Margaret’s web based business profitability since the majority of people attracted to the stripped-down free version come back for the premium version.
Other Business Models that Make Web Businesses Profitable
The stories of Juana, Darnell, and Margaret offer just three examples of how to start a web based business with various business models. Other models and the kinds of profitable online businesses include:
The collective business model. In this model, web businesses owners profit from pooling their resources, including information. Sometimes, the web business owners form a trade association. An example is selling insurance from home.
The professional open-source model. In this model, a web business owner profits from selling professional services to users of free open-source software. This is a type of software whose design or architecture is open-ended so that any user can modify the design to suit her or his needs.
The subscription business model. The arrival on the scene of the personal computer gave a new twist to this age-old model, which in turn led to a number of very profitable web based businesses. All these profitable web businesses publish magazines or newsletters in some area of expertise. These are available online to subscribers only.
The franchise model. Originally available only to retailers in such areas as fast-food sales, the franchise model has also been modernized by the invention of the PC. Nowadays, profitable web businesses sell health and beauty aids and numerous other products and services as franchisees of a company that supplies and in many cases ships the items purchased.
