What’s the right business model for your small business?
Which model will afford you the financial sustainability you crave with the type of work, flexibility, and satisfaction you value?
And do you really need to create an online course or membership site or ebook to be living the dream?
There are a lot of people out there trying to sell business owners on their particular idea of what building a thriving business looks like. But very few resources for those who want to shop around a little. What are your options? Is there one that will help you reach your goals and craft a lifestyle that fits your priorities?
Today, I’m laying it all out on the table so you can build a great business for yourself—without constantly second-guessing your choices or vision.
I started a business by accident.
Maybe you did too?
I mean, I set out to work for myself and make money from blogging. But I didn’t realize that I was starting a business. Or that, one day, that business would have employees, a health insurance plan, or an advertising budget.
Whether your business developed by accident or you had an idea that you were starting a small business, there’s a good chance you were not thinking about your business model when you got started.
Instead, you were just trying to figure out what you could sell, who would buy it, and how in the world you’d charge good money for it.
Over time, you’ve considered those questions again and again. You’ve pieced together a functional, if not wholly sustainable, small business.
That’s wonderful!
And, there’s a good chance that today is an opportunity to reimagine your business as not just a set of offers or varying client agreements but as a system.
That system?
That’s your business model.
When you get clear on the business model you’re operating in and how that model works, you can make better decisions about spending your time and resources.
Ultimately, you can shift your business so that it’s more sustainable, more resilient, and easier to run.
This article will explain what a business model is and some common misconceptions about how they work. I will also explain 7 simple (and highly misunderstood) business models common in the small business space online. I’ll also share some thoughts on 2 simpler product-based business models. You’ll learn about their revenue potential, common marketing strategies, support, and more.
Inside This Article
- What Business Owners Get Wrong About Business Models
- Why More Is Not Better
- Which Business Model Is Right For You?
- 7 Simple Business Models For Small Business Owners
- 2 Models For Physical Product-Based Businesses
- How To Choose Which Business Model To Build
- Do You Need Multiple Streams Of Revenue?
- Do You Need Entry-level Or VIP Offers?
- Final Thoughts
What Business Owners Get Wrong About Business Models
If you’re confused about what a business model is and how it applies to your specific business, you’re not alone.
A business model is the system that a business uses to create value, deliver value, and exchange value. That’s just a fancy way of saying your business model is how you make things better for people, the way you make things better, and how you sell that product or service.
One misconception that’s out there is that there’s a “right” business model for you to follow. Further, there’s a perception that your job is to develop a standardized set of offers like puzzle pieces that add up to a whole, functioning business.
However, every business is unique. There are undoubtedly good frameworks to use as a foundation (you’ll find a bunch below). But each company is going to craft its own way of creating, delivering, and exchanging value based on what it’s good at, who its customers are, and how it wants to operate.
There’s also a misconception that there are good and bad business models.
Or, that there are business models with certain revenue constraints that others don’t have.
For instance, many people believe that working with clients one-on-one can’t meet their needs. And, instead, they need to develop a digital product, a membership site, or a signature course to make more money.
The truth? There are businesses built on all manner of business models that are making $500k or $1 million per year. And there are businesses built on all manner of business models generating less than $40k per year.
The business model you develop certainly impacts how your business generates revenue. But it doesn’t limit your potential for success and sustainability.
More Is Not Better
There’s another misconception that a business model with more offers is somehow better (or more likely to produce massive profits) than a business model with fewer offers.
Nothing could be farther from the truth.
Simple business models generate more revenue with fewer expenses. They’re more personally & socially sustainable, too.
What I’ve noticed over the years, though, is that there is plenty to be learned about new, trendy ways to make more money. But there are far fewer resources on what specific businesses look like and how they function.
This lack of knowledge only makes it more likely that you’ll add band-aid offer on top of band-aid offer to close a revenue gap or meet the disparate needs of a poorly defined customer base. When all you see is messaging about how to launch an online course, or write an ebook, or offer VIP days, you’re going to keep trying to add in new ideas to make it all work.
What if the answer to solving the revenue gap in your business was to simplify and offer less? What if the best way to meet needs is to get super clear on exactly who you serve best?
Over the decade-plus I’ve been working with small business owners, I’ve gotten to see the inner workings of enviably simple businesses. These businesses generate solid (or mind-blowing) revenue. And their owners enjoy a sense of satisfaction and ease that others can only dream of.
Is there something special about these people? No. I mean, they’re special—just not because they dreamed up these businesses!
What Business Model Is Right For You?
I’ve been thinking a lot about how few resources they are for understanding how and why simple businesses are so successful.
So I decided to put together my observations of the enviably simple business models that I’ve had the joy of learning more about over the last 12 years.
My goal is to give you a starting point for thinking about the business model you really want to operate. I want you to be able to choose the one that makes the most sense for your personal priorities, your bank account, and the impact you want to make in your community.
You can reimagine most businesses to work in most of these models. So again, it’s not about finding the one that matches what you do or who you work with.
Figure out which business model is best for you by weighing all of the factors. Take into account your skills, your customers, the way you like to work, the risks you’re willing to take, the type of team you want to build (or not build), etc…
So I’ve tried to give you a look at how that can play out in each business model.
Remember that these are big, broad categories as you consider the business model you want to build. There is room for lots of variety in each model. There are almost infinite ways of executing each model.
So get creative. But remember: also keep it simple.
And for my part? I’m not immune from overcomplicating my own companies. I’ve learned the lesson of simplicity the hard way. Today, though, I’m acutely away that my businesses can’t be sustainable if they’re not simple.
The following is not designed to be an exhaustive list of simple business models. As such, the 7 models I review in-depth apply most to service-based & digital products-based businesses. I’ve also thrown in 2 descriptions of physical product-based businesses that lean toward simplicity.
I hope this is a solid introduction to how different types of business models play out and how each one of them can create immense success in their own way.
7 Simple Business Models For Service & Digital Products Businesses
The list below is in no means exhaustive—either as a whole or as it describes each model. Some businesses operate these models in drastically different ways with positive results.
I describe what I have observed over the years in terms of how each business builds out its marketing, target market, sales process, team, and client load.
I’ve also provided some examples for each and a section on “the math.” Some of these numbers might surprise you—but I assure you that they’re all grounded in reality and based my experiences with businesses thriving in these models.
If the prices or packages I outline below seem like a fantasy, ask yourself what’s stopping your business from operating in that way.
Productized services
- Marketing: Word of mouth & referrals
- Customer: Narrow, highly specific client base
- Sales: Little to none, primarily a question of fit
- Team & Support: Varies, can be 1 person or a bigger team
- Client Load: Varies, 4-6 for a 1-person business, 10+ for a team
A productized service business offers a set package with a clear deliverable. It’s exceptionally process-driven but creates very personalized outcomes depending on the client you’re working with.
Part of a productized service business’s simplicity is its clarity about who it serves. The processes only work when applied to appropriate goals or problems.
Productized service businesses might seem a little stiff or impersonal if you’re new to the idea. But they actually can make clients very well taken care of because the processes are so well-defined and seem to account for all of the clients’ needs.
Productized service businesses can be project-based. But they often serve clients who pay a recurring monthly fee—which only adds to the simplicity.
These businesses tend to thrive on word of mouth and referrals, requiring little to no marketing. The sales process is straightforward, too, because it’s all about fit. The business has one offer, and the customer is either looking for that outcome that service provides or not. And the customer is either the right fit for the business or not.
Productized service businesses can be managed efficiently by one person serving just a handful of clients. But they can also grow to accommodate multiple team members in more of an agency-style structure.
This type of business’s revenue potential is relatively high. They often function with very few expenses other than payroll. Plus, clients typically stick around for a long time because of this type of service’s dependability.
This model is great for someone who loves systems and frameworks. It’s also great for someone looking to build a business with a clear exit strategy or someone who wants to build a company that’s bigger than they are—but doesn’t know what that’s going to look like yet.
Productized Service Business Examples
Candice Prather is a Washington, DC-based interior designer. She and her firm work in a productized service model to help new homeowners make their homes reflect their success.
Candice’s package is based on an above-market flat-fee rate, with options to add additional rooms.
Let’s Do The Books is a bookkeeping agency for coaches and freelancers founded by my friend Mark Butler. The execution of doing the books for any given client is unique—but the process isn’t.
Mark honed & documented his process so that he could train people how to do the books for a specific kind of business owner (the website explicitly states that they can’t work with physical products businesses).
Let’s Do The Books has even developed a flexible fee structure based on monthly revenue—something that would be impossible in a business that hadn’t been made highly predictable and process-driven. That also means that the fees can stay objectively low while maintaining profitability.
On the other hand, Rita Barry & Co is a digital marketing agency specializing in measurement marketing. They work with a very small group of clients (less than 15 at this time), managing advertising and data analysis for female-led online businesses. In 2020, they could tie their work to over $60 million in revenue for their clients.
As Rita was building the agency, she worked hard on the agency’s processes and internal training so that she could hire a small team to work with her on client accounts. Now, the agency charges a substantial monthly fee that allows them to focus on creating great results—and has never lost a client.
Do The Math
A productized service business might engage 5 clients at a time paying $2500/month for a consistent deliverable. That’s $12,500 per month or $150,000 per year with almost no expenses.
A different business might engage 15 clients at a time paying $5000/month. That’s $75k per month or $900k per year. This business employees 6 full-time employees at $80k per year (salary plus benefits + taxes) plus the owner at $120k per year. That’s $600k in payroll expenses and at least $200k in profit.
Packaged 1:1 Coaching
- Marketing: Word of mouth & referrals
- Customer: Varies, a strong niche is simpler to attract
- Sales: 1:1 “right fit” call or sample coaching session
- Team & Support: Easily run by 1 person
- Client Load: 6-8, sometimes more depending on the structure
A business using a packaged 1:1 coaching model offers a distinct structure for the client-coach relationship. This structure is most often time-bound (i.e., 6 months or 1 year). It’s also often structured around a particular goal, transition, or practice.
Within the structure of time and goals, the business offers a standardized mode (or modes) of support. The support almost always includes some live support. It can also have asynchronous support through channels like email, voice memo, or private chat.
A packaged 1:1 coaching business typically requires little outward marketing. Early on, partnerships (such as podcast interviews or livestreams) can introduce the coach to the right people. Later, a simple blog or newsletter can be enough to keep the pipeline full. Almost invariably, most clients come through word of mouth or referrals, though.
The sales process is usually built around “right fit” calls or sample coaching sessions. There’s no pressure or false urgency.
One person—the coach—can efficiently and effectively run this kind of business. Some coaches prefer to work with an assistant to create additional space for clients, but many manage it independently.
A 1:1 package coaching business can generate good revenue, but it’s in the profit & life margins that these businesses shine. The expenses are minimal, and when the pricing is correct, these businesses can create a lot of personal flexibility.
This model is perfect for someone who likes to work intimately with their clients and values provided highly personalized support. It’s also great for the person who wants to keep things as simple and flexible as possible.
Packaged 1:1 Coaching Business Example
Keina Newell is the founder of Wealth Over Now, a financial coaching business specializing in single women and creative service business owners. I had the chance to speak with Keina on the What Works podcast and fell in love with how she owned her business’s simplicity—and success.
Keina offers 2 1:1 coaching packages: one geared at personal finance and one geared at business finance. Both are 5 months long and include live support, email support, and self-service resources.
Ashley Gartland is a business coach who helps her clients streamline their businesses to make more room for their lives. Fittingly, Ashley works in a packaged 1:1 coaching model for the same reason!
Ashley offers 2 ways to work with her: a 6-month partnership or a 2-hour intensive.
Do The Math
A business coach enrolls 8 clients at a time into a $20k per year coaching package. That’s $160k per year with very few expenses and lots of flexibility.
An executive coach offers a 6-month package for $30k and works with 6 clients at a time. That’s $360k per year with few expenses and lots of flexibility.
Packaged consulting
- Marketing: Word of mouth & referrals, SEO
- Customer: Varies, a strong niche is simpler to attract
- Sales: 1:1 sales call, by proposal or agreement to a standardized package
- Team & support: Easily run by 1 person, or a small group practice
- Client Load: 2-5
A packaged consulting business could be considered the intersection of productized services and packaged coaching.
A packaged consulting business likely has defined deliverables. But the deliverable is a knowledge product instead of the outcome of a service. Think a report or strategic plan rather than a website, copywriting, or brand suite.
This type of business most often sells to other businesses—often businesses that are much larger than the provider. Like with coaching, a focused niche can make marketing and sales incredibly simple. Marketing again is most often through word of mouth & referrals. Search engine optimization or search engine marketing can also be a significant factor in finding the right clients.
The sales process revolves around a 1:1 sales call or series of calls. A client either agrees to a custom proposal or a standardized package that outlines the structure & deliverables.
Like coaching, one person can run this business by themselves or hire an assistant to increase their capacity or flexibility. But A small group of consultants can also deliver packaged consulting, similar to the productized service model.
Again, this kind of business combines a productized service model’s revenue potential with a packaged coaching business’s margins. Especially when working with larger firms, the business might only need to carry a few clients at a time to generate significant revenue.
This model is great for someone who enjoys creating outsized results even while charging a relatively high price. It’s also perfect for someone who enjoys being the go-to expert or best-kept secret for individuals and teams operating on a high level.
Packaged Consulting Business Example
Lindsay Petersen, the founder of Ironclad Brand Strategy, typically works with about 4 corporate clients per year. While the exact proposal might vary from client to client, she consistently delivers the same outcome: a complete brand strategy for a product or line of business.
Her clients know that making a significant investment in their brand strategy will come back to them many times over.
Do The Math
A consultant offers a signature workshop to enterprise-level companies for $25k. They do 10 of these workshops per year and generate $250,000 in revenue with minimal expenses. Their clients pay for premium travel to workshop locations.
A consultant offers a strategic plan for business development to corporations for $70k. They work with 5 clients per year. That’s $350k in revenue per year with minimal expenses.
Packaged Group Coaching
- Marketing: content marketing, referrals, partnerships
- Customer: A clear niche
- Sales: self-directed or 1:1 sales calls
- Team & support: Client support & admin, potentially other providers on contract
- Client Load: 12-20
A packaged group coaching business introduces additional leverage into the 1:1 packaged coaching model. Instead of working with 1 person at a time in a standardized structure, this model groups clients with similar needs or goals and guides them through the same coaching structure at the same pace.
Again, it’s easier to market this type of business with a clear and specific client niche.
A packaged group coaching business is likely to require marketing with more leverage, too. Content marketing (blog, podcast, newsletter) can attract the right people in higher numbers. But referrals and partnerships play a significant role here, too.
Sales are often handled 1:1. But some businesses use self-directed sales (email marketing, webinar, sales funnel, etc.) to fill their programs.
One person can manage group coaching businesses, but, most often, they involve some other folks. Having a dedicated client support person and admin can give the provider more mental space for actually coaching. Usually, group programs incorporate guest coaches or experts, too.
A packaged group coaching business is likely to be serving 12-20 clients at a time in a program. Depending on the program’s structure, a business might run 2 or more cohorts simultaneously or run the program 2 or 3 times throughout the year.
This business’s revenue potential is high, depending on the niche the business is serving and the outcomes its program is working toward. However, this model tends to require more non-client work time, potentially reducing financial margins and life margins. Investing in non-client work time is a good trade-off, though, for people who enjoy creating structure, intellectual property, or content.
This model is great for someone who loves to facilitate individual transformation through collaborative, group conversations. It’s also great for someone who wants to share their ideas with a larger audience of people.
Packaged Group Coaching Examples
Joelle Hann is the founder of Brooklyn Book Doctor and the creator of Book Proposal Academy. Instead of coaching aspiring authors through the book proposal process 1:1, Joelle guides a small group of authors through the book proposal process as a group.
There’s still plenty of individualized feedback and help—so the fee for joining is a comparable investment. But Joelle picks up solid leverage in being able to speak to all of her clients at once.
Annie Schuessler is the founder & host of Rebel Therapist and a business coach. She specializes in helping private practice therapists transition out of the therapy room and into a more expansive business model. Her coaching program—Create Your Program—is a 5-week deep dive that takes a small group of therapists to identify what they want to pilot, design the program, and sell their offer.
Do The Math
A coach offers a 6-month group experience to 3 cohorts of 10 clients each for $10k per client. That’s $300k in revenue per year, which covers a full-time program assistant earning $60,000 (salary plus benefits + taxes).
Signature course
- Marketing: content marketing, advertising, SEO
- Customer: Often less specific than other models
- Sales: Self-directed, often through a webinar or email marketing series
- Team & support: Customer support, ad manager, technical support
- Client Load: 50+
For our purposes, I’m differentiating a signature course from a group coaching package based on the level of support & individualization provided. A group coaching program will have the capacity for each participant to receive some sort of feedback. Whether they avail themselves of that opportunity is a different story.
On the other hand, a course may have opportunities for support. But the offer’s value is not based on the promise of individual support or guidance.
Course-based businesses get a lot of press for being “scaleable,” but there are some key considerations to look at before choosing this model.
With a signature course as a business’s core offer, the business’s primary activity becomes marketing. The business generates content (video series, podcast, blog, newsletter, social media) to fuel its marketing. And many businesses amplify that work through advertising or a deliberate SEO strategy. Similarly, the sales process (at least partially self-directed but often supplemented with 1:1 sales) needs to be tested and optimized to ensure that the right people are buying at a predictable rate.
Course-based businesses generally require a multi-person team. Someone needs to manage customer support. An ad manager needs to monitor and optimize ads. These businesses often require some sort of technical support (either internally or customer-facing), too. Often, these businesses also have an operations manager and marketing manager.
Course-based businesses need to enroll many more students at one time than the other models we’ve looked at so far. Sometimes, this is ongoing, and other times through time-limited sales campaigns a few times per year.
These businesses can generate lots of revenue—but higher expenses for payroll, software, advertising, and marketing offset those higher revenue numbers. Lower margins can be a great trade-off if the owner wants to spend their time creating free content and intellectual property.
This model is perfect for the kind of person who doesn’t mind a little additional complexity if it’s in service of impacting a big group of people. It’s also great for the audience-builders, the performers, and the communication whizzes who enjoy spending a lot of time creating.
Signature Course Business Examples
Bari Tessler is a financial therapist, author, and the creator of The Art Of Money program. The Art of Money is a 12-month program that guides participants through developing healthier money habits and systems and addressing the emotional and psychological components of managing money.
Bari’s been running this program for years with hundreds of happy customers.
Molly Mahar developed her signature course, Reclamation, to create a container for the personal growth and actualization journey she’d been guiding herself and other women on for years. Her company, Stratejoy, does offer other shorter programs throughout the year. But everything they offer leads back to Reclamation as a keystone experience.
Do The Math
The course creator enrolls 200 students per year at $2000 per student. They pay out $1000 for affiliate commissions for 30 of those students. They pay $1000 per month for advertising and another $1500 per month for social media marketing. They also employ a full-time student concierge and a full-time operations manager for $60k each. Plus, they pay $1000 per month in the software they use to run and market the course. The business owner takes home about $200,000 per year.
High-end Subscription
- Marketing: referrals, content marketing, SEO
- Customer: Clear niche
- Sales: Guided either through sales calls or an application process
- Team & support: Customer support, potentially account managers or other providers
- Client Load: 10-30 or more
For our purposes, I’m defining “high-end” less as it relates to price and more as it relates to the client relationship. A high-end subscription involves some level of individualization or service. Retainer-based businesses can fall into this category, but this model also includes coaching gyms and some forms of productized services. Licensing and certification often fit into this model, as well.
Referrals often drive high-end subscription models, but new clients can also come in via content marketing and SEO. As with most of the models we’ve discussed, serving a clear niche makes the marketing & sales process much more seamless.
The sales process for this model is typically guided in some way. It could be pretty hands-off, or it could be more hands-on. Product demos, webinars, personal invitations, or even an application process get prospective customers in the door.
In its very simplest form, one person can run this business model, too. However, it’s more common to have a customer support person on the team. As the subscriber base grows, the model might require account managers or junior providers to support clients.
The revenue potential for this business is very high. Depending on the offer, the margins can be pretty high, too. Revenue-wise, though, the most significant benefit of this model is predictability, with a core group of clients paying their subscription fee every month.
This type of business is perfect for someone who values predictability and consistency—and is willing to make what they offer predictable and consistent to match. It’s also great for someone who wants to grow to support a team but wants to do it slowly and carefully.
High-End Subscription Example
Tara Newman is the founder of The Bold Leadership Revolution. She offers a blended 12-month mastermind that includes mastermind sessions, group coaching, and 1:1 support alongside a lower-priced training community. This model creates consistent, predictable revenue each month, allowing her to focus on her clients and her business’s continued sustainability.
Nancy Jane Smith offers 1:1 asynchronous coaching via Voxer for women living with high-functioning anxiety. This model allows her to give her clients the support they need (and then some!). Plus she also generates steady, predictable revenue and lots of flexibility.
Do The Math
A facilitator runs a blended mastermind and coaching experience for $18000 per year for 12 clients. The facilitator earns $216,000 per year with few expenses.
A community builder hosts a paid community for 40 members, where each member gets monthly access to a coach, for $500 per month. That’s $240,000 per year with $50k per year in expenses for the coaches as subcontractors and $30,000 per year for a part-time member experience specialist.
Low-end subscription
- Marketing: content marketing, advertising, referrals
- Customer: Can support a broader niche
- Sales: Self-directed, email marketing to sales page & checkout
- Team & support: Customer support, potentially community manager, ad manager, and referral marketing manager
- Client Load: 200 or more
A low-end subscription business banks on providing access: to people, to content, to an app, to a box in the mail every month. Unlike a high-end subscription, there’s very little individualization, and the customer has the responsibility of making use of the product to fill their needs.
These businesses require an investment in marketing—not only to bring in new customers but to reduce churn. Content marketing, advertising, and referral marketing are all excellent choices for growing this type of business. In keeping with marketing that appeals to a broader base of people, a low-end subscription business can typically support a more general niche. But that also means that it can be challenging for the right people to know they belong.
These businesses’ sales process is most often self-directed, frequently happening through email marketing, product demos, or webinars that guide prospects to a sales page and checkout.
Low-end subscription businesses, like course-based businesses, typically require a team to support them once they get to a sustainable number of customers. The team can include a customer support person, community manager, additional providers, or marketing help.
Typically, this type of business needs at least 200 paying customers to be truly financially sustainable. But depending on the fees, the number might be much higher. To that end, this business has high revenue potential but a long runway to get there, especially if there isn’t a large existing audience to market it to.
A low-end subscription model is perfect for someone who enjoys creating flexible solutions for large numbers of people. This person might have natural strengths in community building or facilitation. It’s also perfect for developers who are creating tools that solve problems or enable new capabilities for their users.
Low-End Subscription Examples
Anne-Laure Le Cunff writes a wildly popular email newsletter on neuroscience, creativity, and metacognition. Using that newsletter as a springboard, she developed the Ness Labs community, which takes the subject matter she explores and makes it interactive. Members get access to like-minded seekers as well as additional training and workshops.
Another trendy iteration of this model is the paid newsletter. While platforms like Substack and Revue have revitalized this type of offer for the 21st century, it’s as old as direct response marketing! I subscribe to Culture Study by Anne Helen Petersen and @Work by Nilofer Merchant, among a few others. Some writers use this model to generate full-time income; others use it as a predictable monthly paycheck to supplement freelance writing or consulting work.
Do The Math
A newsletter writer has 500 paying subscribers who each pay $12 per month to receive twice weekly content. That’s $60,000 per year with minimal expenses and loads of flexibility.
A community builder has 300 paying members who each pay $30 per month for content and events. That’s $9000 per month or $108,000 per year, with $30,000 per year for a part-time member concierge. Additional expenses for marketing and software.
2 Physical Products Business Models
Most of my experience over the last 10 years has been with service-based and digital products-based businesses. But I’ve also spent some time immersed in physical products businesses, too, and I don’t want to leave this type of business out in the cold.
Most retail businesses are relatively complex. Even when the product selection is highly focused, there’s still the complexity of dealing with multiple wholesalers, managing margins on inventory, and marketing different products to consumers.
Two product-based business models feature simpler systems for creating, delivering, and exchanging value, though.
Wholesale
The first model is wholesaling. In this model, a designer or maker creates a distinct collection of products to sell to retailers (which then sell it to consumers).
While wholesale purchasing is being done increasingly online, traditionally, wholesalers’ primary sales channel has been trade shows that bring together buyers for concentrated shopping events.
In a wholesale model, designers trade higher margins to focus on their products instead of consumer marketing and the efficiency of dealing with large orders instead of purchases made piece by piece.
These businesses often do some retailing of their own products through their website, in a boutique, at shows, or some combination.
Direct to Consumer
The second model simple product-based businesses use is the direct-to-consumer model (DTC). This model flips wholesaling on its head. Instead of trading higher margins for the relative simplicity of producing a line of goods, DTC businesses trade the variety of a line of goods for higher margins.
DTC businesses often produce just 1 or 2 products at a time. Others create a few items in a limited-run collection.
For these businesses, marketing and brand development are critical to their core competency. They have to be just as good at building an audience hungry for their product as producing the product itself.
In some ways, this adds some complexity, but owning the whole customer journey is its own form of simplicity for customer-obsessed businesses.
Which simple business model is right for your business?
As I mentioned earlier, you can reimagine most products or services to fit into any of these business models. So the question is rarely which business model is suitable for your product or service or even which will make you the most money and, instead, which is the one most aligned with your personal priorities and skills.
Since you can create massive success with any of these models, it’s important to intentionally choose the model the matches the relationship you want with your customers, the way you want to market your business, and the team you want to build (or not build).
You’ll need to invest (time, money, other resources) in building out different critical capabilities for your business. One model might require more marketing automation. Another will need you to put time and energy into nurturing referrals. And yet another business model will require skilled management of a small support team.
How do you want to spend your time as a business owner?
That all leads me to a critical question for considering how you develop your business model: how do you want to spend your time?
Each business model will require you to show up differently and spend your time doing different things.
A signature course model will require you to spend a lot of time creating content to find and nurture new prospective customers. A 1:1 packaged coaching model will need you to spend more time “face to face” with your clients. A packaged consulting business might require travel to the companies you work with and intense periods of service delivery followed by very quiet periods.
Different business owners prefer to spend their time differently. For instance, I love writing massive articles like this one and producing a weekly podcast. I spend most of my working time creating content others consume for free. You might prefer spending your time coaching team members or working directly with your clients, or doing the work of delivering your service.
One of the biggest challenges I see is business owners operating a business model counter to how they want to spend their time. They keep waiting and waiting for the day when they can do what they want to do. But that day never seems to come.
Instead, they could build a business model that affords them the ability to spend more of their time doing what they love.
Before I wrap this up, I want to address 2 other assumptions that offer pop up when I talk about building simpler businesses: the need for multiple streams of revenue and super affordable products to prime buyers to spend more later on.
Do you need multiple streams of revenue?
Recently, someone wanted to know if they needed multiple streams of revenue. Is it okay to just offer one thing? Can a business grow to $500k or $1m or beyond with one offer?
When I was just getting started in business coaching & strategy, everyone was preaching having multiple streams of revenue. I certainly jumped on that bandwagon! It made sense to me.
But over the years, I’ve come to realize that developing multiple streams of revenue is often a way of addressing some defect in the core revenue stream—not a requirement for building a financially sustainable business.
Today, I often see businesses generating 80% of their revenue from a single offer and 20% of their revenue from something else (often multiple things). But how do the owners divide their time? They’re often spending upwards of 40-50% of their time marketing, selling, and delivering that 20% offer.
At the least, wouldn’t it be nice to reclaim that time for yourself even with a 20% pay cut? For many, the answer is absolutely yes.
But this sort of a “worst-case scenario” most of the time. Often, 40-50% of the time is spent mucking up messaging and positioning so that the business has trouble getting the traction it could get if the owner stopped spending all of that time on marketing & selling what is essentially a side project.
What’s more, given that newly allocated time, the entrepreneur could reinvest it into the offer that’s generating the majority of revenue so that it produces even more.
Now, that’s not to say that I believe everyone should get rid of their extra streams of revenue—just that business owners should be much more discerning about what activities are actually generating what revenue and where multiple offers might be adding friction to how the business runs.
I might even go so far as to say that a business that requires multiple revenue streams to “work” doesn’t work at all.
Do you need an entry-level offer, a core offer, and a VIP offer?
Another trend that’s made business models much more complicated than they need to be is the idea that a business is supposed to have an entry-level offer, a core offer, and a high-end VIP offer.
There are a couple of key problems with this—not that it doesn’t sometimes work out okay.
The first problem is how very few people go from an entry-level offer to a core offer to a high-end VIP offer. This 1-2-3 step journey is the kind of customer journey a business owner builds for themselves—not for their customer. Sure, it’s neat and tidy, but it’s not a true reflection of how most customers buy or what they’re looking for at different points in their journey.
The second problem is that, often, this model requires 3 different core competencies, marketing styles, sales processes, and delivery mechanisms. Getting good at all of those things requires immense time and resources—and likely a fairly robust team. It also creates necessary complexity—and that’s going to produce friction in the business, no way around it.
Taking the time to get one thing right at a time makes a business stronger—and will likely negate the reason to develop multiple streams of revenue or different levels of offers.
Then, from that place, you can make a thoughtful choice about whether you want to create something new or support clients in another way and invite the complexity that’s going to come with that.
Does your business model need to be simple?
Yes. And also no.
At the core of every successful business, there is a simple business model.
However, that core business model allows for expansion and added complexity given time and resources—if that’s what you truly want as a business owner.
Complexity should be a choice, not a default mode for operating or growth.
Hopefully, this deep dive into simple business models has given you some new perspective on the choices you can make for how to run and grow your business.
If you know someone who is struggling to figure out how to develop their business, please pass this article on to them. I know they’ll thank you!
And if you’d like more deep dives into what it really takes to run and grow a sustainable business today, check out The What Works Network. This is precisely the kind of thing we dig into on a regular basis.
