Developing good analytical techniques to help you monitor your business performance is important. It will help you avoid silly mistakes that can negatively affect your business. If you have an SaaS product or B2B business model, your recurring revenue is subscription based and often times, contracts differ and generate different income. The terms; committed annual recurring revenue (cARR), annual recurring revenue (ARR) and bookings are used interchangeably. However you should commit to using one to normalize all your revenue. Being consistent will avoid confusion and mistakes. Here’s a break down what each of these terms mean so you can pick what’s best for your business.
ARR, MRR & cARR
Annual recurring revenue (ARR) normalizes the recurring revenue of your term subscriptions into a one-year period. It is the amount over a set period of time usually the contract length, in a year. Committed annual recurring revenue (cARR) is similar to ARR except it is a future amount. It is a committed amount, because that revenue is not readily available to your business just yet. ARR and cARR is especially useful if the majority of your contracts are minimum 1 year. Monthly recurring revenue (MRR) should be used if your contracts are typically below one year. The recurring revenue in a one month period.
ARR Vs MRR
When is Annual recurring revenue (ARR) used? ARR is used in B2B subscription businesses when the minimum subscription period is one year. Businesses with multi-year contracts are more likely to use ARR, and businesses with lower transaction volume and higher transaction value are more likely to use it. B2B and B2C businesses with monthly subscriptions should use MRR. Companies might use MRR and ARR interchangeably and tend to use ARR as a valuation metric and MRR as an operating metric. Let us compare these two metrics. ARR is useful to reference in board meetings or when analyzing the overall performance of the business. MRR is more useful to analyses day to day operations of the business.
ARR Vs Bookings
The total amount signed over a period is referred to as the bookings. This period can vary depending on many things. It could be, the business, individual or customer. In contrast to ARR’s minimum one-year subscription period, no time frame is specified. For instance, suppose we examine three different revenue streams for companies A, B, and C;
A: $1,000 in bookings with a 2 year contract
B: $1,000 in bookings with a 3 year contract
C: $1,000 in ARR
Looking at these three companies, we notice they have $1,000 in bookings. However, if we standardize this to ARR we can easily compare each of these companies revenues. Company A has $500 ARR, company B has $333 ARR and company C has $1000 ARR. This is where analyzing revenue can get confusing if not all normalized to one metric. For simplicity, bookings are standardized to the ARR metric.
Adopting the ARR metric to your business practices will simplify the way you analyze your revenue!
When it comes to funding a business there are many options. Before you decide to seek funding from investors, it’s important to know that there is more than one type of investor to fundraise from. So, how are they different, and how are you going to do it?
There are three basic types of investor funding: equity, loans and convertible debt. Each method has its advantages and disadvantages, and each is a better fit for some situations than others. Like so much else about the fundraising process, the kind of investor-based fundraise that is right for you depends on a number of factors. The stage, size and industry of your business. Your ideal time frame; the amount you are looking to raise and how you are planning to use it; as well as company goals for both the short-term and long-term.
Pursuing an equity fundraise means that, you are buying an ownership stake. Equity investors provide capital in exchange for a percentage of the profits (or losses).
Equity is one of the most sought-after forms of capital for entrepreneurs. In part because it’s an attractive option: no repayment schedule and high powered investor partners.
How It Works
At the outset of your fundraise, you set a specific valuation for your company. Based on that valuation and the amount of money an investor gives you, they will own a percentage of your company. For which they will receive proportional compensation once your company sells or goes public.
When to Do It
Not every business will start generating income as soon as it launches. Spending a few years in R&D doesn’t mean your company isn’t a viable business proposition. Internet companies, for example, are notorious for going years in operation without even attempting to charge their customers. If you’re going to need a lot of operating cash to sustain your business before it starts turning a profit, equity investments are the only form of capital that makes sense.
When there is no collateral
To obtain a loan, you must have something to provide as collateral in the event that things do not go as planned. If you don’t have something of value to give loan providers as collateral, your only real choice for funding is to find equity investors prepared to take a risk on your idea with nothing to “sell” if it fails.
When you can’t possibly bootstrap
While home-growing your company from your garage or spare bedroom bit by bit may not sound as glamorous as hitting the ground with investors already in your lineup, most investors will expect you to start there before they invest. But some businesses require a massive amount of capital just to get off the ground. In those cases, you have little choice but to go directly to equity.
When you’re positioned for astronomical growth
Equity capital tends to follow businesses and industries that have potential for massive growth and exponential paydays. Your local coffee shop concept may do really well, but it doesn’t have the potential to become Facebook. Therefore, you’re not likely to attract many equity investors. On the other hand, if you’re looking to build the next Starbucks chain, chances are investors will be very interested in jumping onto your bandwagon on the road to IPO.
Consider the following:
Your options are whittled down when you have equity:
When it comes to the future of your business, going the equity route drastically limits your options. One thing is essential to equity investors: liquidity. That means they won’t be happy with a percentage of your annual income. They’ll assume that once you’ve accepted their money, your company’s endgame will be a sale or an IPO. They’ll want guarantees that your idea will sell and sell big before they invest in the first place. But, before you go the equity fundraising path, make sure that this is indeed your vision.
For high risks, equity investors expect big rewards:
Many entrepreneurs would take advantage of the fact that they could walk into a bank and get a loan to fund their business idea. Banks, on the other hand, are extremely risk averse and only want to provide loans that they are certain can be repaid. That’s where equity investors come in: they’re willing to take chances that lenders aren’t willing to take. However, there are two sides of that coin: an equity investor isn’t looking for a quick return on their investment. They’re taking on a lot of risk in exchange for a lot more reward, and they’re going to want to see results.
There’s a lot of competition for equity investments:
The number of people searching for equity investors far outnumbers the number of checks being written. In a given year, most equity investors will see hundreds of transactions before funding even one. Obtaining an equity investor is extremely difficult!
Raising equity capital takes time:
Finding the right investor will take anything from 3-6 months. That doesn’t include the time it takes to finish the final legal papers that release the funds. If you and your company are in a hurry, equity funding may not be the best option.
When it comes to relinquishing equity, it is a one-way path;
You can’t get your equity back after you’ve given it up. It’s extremely unlikely for an entrepreneur to repurchase the equity they gave away early in the company’s growth. If you’ve sold a certain amount of your business—say let’s 40 percent—you won’t be able to sell it again. Whether you like it or not, once you sell equity to an investor, they become a part of your life. As tempting as it may be to shake hands with anyone willing to write you a check, it’s critical to seek out investors with whom you feel comfortable working for years to come.
Loan or debt-based fundraising is the easiest to understand: you borrow money now and pay it back later, with an established rate of interest.
Debt is also the most common form of outside capital for new businesses. While angel investors and venture capitalists get all the big headlines for funding exciting companies, it’s the debt providers that are behind most of the investment dollars.
How it Works
When you opt for debt-based fundraising, you specify the interest rate associated with loan repayment in your fundraise terms. Additionally, you may include an estimated time frame for loan repayment.
The other critical component of the loan puzzle is collateral: something tangible, sellable that lenders can take from you if your business fails and you are unable to repay your loans. The more collateral you have, the more likely you are to secure substantial financing.
When Do You Do It?
There are a few situations where debt, like equity, is the best choice for funding your business.
When you don’t require more than $100,000
Debt raises are well-suited for small amounts of capital. Giving up equity makes little sense at such small amounts; and with smaller goals, there is less risk—for investors and entrepreneurs alike—than when large sums are involved.
When you urgently need funds
Is there a market opportunity for your company that you would miss if you do not raise money immediately? Then you’d be wise to avoid equity—a procedure that is notoriously time-consuming. Debt increases pass more quickly, increasing your chances of having the money you require when you require it.
When there isn’t any equity available
If you are unable or unwilling to begin offering equity, a debt raise may be the best course of action. Many business owners are hesitant to give up control of their company and a straightforward debt raise offers the appealing benefit of retaining ownership and control.
Consider the following:
Collateral is king: Contrary to popular belief, banks and other lenders do not profit handsomely from a single loan. As a result, they say “yes” to only those transactions in which they are certain they will not lose money. Their sense of security is derived from collateral.
Explore your options: When considering funding options, it’s critical to thoroughly investigate all of your debt options to determine what’s available and from whom. Our approach to debt is as follows: it is always preferable to have financing and not need it than to require financing and not have it!
Convertible debt is essentially a hybrid of debt and equity: you borrow money from investors with the understanding that the loan will be repaid or converted into shares in the business at a later date—for example, following another round of fundraising or reaching a certain valuation.
How It Works
At the time of the initial loan, the specifics of how the debt will be converted into equity are established. Typically, this entails offering investors some sort of incentive to convert their debt to equity, such as a discount or warrant in the subsequent round of fundraising.
If investors are offered a discount-the most common are 20% and 25%- it means they are able to convert their loan at a reduced rate of 20% or 25%. For instance, if an investor lends you $1 million to you in the first round, they would expect to get $1.25 million in return.
Likewise, a warrant is also expressed in percentages—for example, 20% warrant coverage. Consider the same $1 million case with 20% warrant coverage. In the subsequent round, the investor receives an additional $200,000 (20% of $1 million) in securities.
You will also need to set an interest rate, just like you would for a straight debt raise, to reimburse your investors until they convert, as well as those who do not convert.
Additionally, convertible debt fundraises typically have a “valuation cap,” which is a maximum company valuation at which investors can convert their debt to equity, after which they will have missed the boat and will have to settle for having their loan repaid or reinvesting in the company on new terms. However, over the last few years, an increasing number of companies have chosen to leave their convertible debt offerings uncapped.
When To Do It
For start-ups that are not yet prepared to evaluate the company, a convertible debt fundraise makes the most sense either because it is too early to determine one, or because they believe the value will be much higher later.
If you believe that the valuation of your business may well be skyrocketing soon, but you can’t wait and raise your equity straight away later—the ability to offer convertible debt offers you the money you need right now while enabling you to protect your equity’s value later.
Things to Keep In Mind
The best of both worlds; Convertible debt offerings offer investors the best of both worlds. For the time being, they have the debt structure’s exit strategy and the associated security; however, they also have the potential for a discount on your equity if they choose to convert. Additionally, investors get to observe how your business performs, which enables them to gather additional information and determine whether they like your direction before jumping on the equity train.
Know what you’re doing: Because convertible debt raises are by definition more open-ended than debt or equity, it’s critical that you can articulate both the rationale for your decision and an expectation of how things will unfold, both for yourself and for the investors.
Prior to committing to a structure for your fundraise, it’s prudent to delve deeper into the specifics of that structure—or, better yet, thoroughly explore each option.
Avoid becoming frustrated or discouraged: this is a large question to address, and even experienced entrepreneurs are not comfortable with all forms of capital. The more informed you are about your options, the better equipped you will be to make the best decision for you and your business, and the more likely your fundraising efforts will succeed.
Even though you have a great product, it WON’T sell itself. Every founder will have to sell their product at the very early stages and often times don’t have the skills or practice to do so. It is not an easy task, and it is the most crucial part for every company. What’s the point of putting your blood sweat and tears into a product you can’t even sell. So next time you’re negotiating with your first few customers , remember these 10 tips to make sure you close every deal.
TIP #1: Be Passionate
It should be a given that you are passionate about your product otherwise you might be in the wrong business. Share this passion with your clients, nobody is going to trust a product that its own founder is not passionate about, you will lose clients immediately. Show them how much you care about believe in this product and you’ll gain their trust.
TIP #2: Get to know the customer
Closing a deal is more than pitching your product; it is about connecting with your customer and getting to know them and their needs. Build relationships before sales, people are more inclined to buy from people they like. A Linkedin study shows that a salesperson who creates connections with their customers create 45% more opportunities. Ask the right questions and have conversations try to find things you can relate to such as hobbies, sports, kids whatever it might be. Be viewed as a person who is genuine and wants to help rather than just sell. They might not need your product but if they like you they will want to support you.
TIP #3: Don’t oversell
Creating trust and being transparent is super important with your customers. If you break their trust then you’re building a bad reputation for you and your company. Creating a good reputation is especially important for companies in the early stages of their business. Now the worst thing you can do is make promises you can’t keep. Do not commit to things you can’t deliver, its dishonest and will break the immediate trust you have with a customer.
TIP #4: Learn from others
Get ahead of the competition. Check out what your competitors are doing to sell their products, what’s working, and not working with their customers, use this as leverage. Explore products that you might buy and see what those companies are doing. Do your research and learn from other peoples mistakes or other peoples wins.
TIP #5: Improve your pitch
Giving a great pitch is key in a startup. It is not something that comes easy, it takes a lot of practice to master it. Practice it repeatedly until you can amaze your audience. However, don’t focus solely on pitching a presentation, remember to connect with your customer as well.
TIP #6: Persevere
Do NOT give up easily and do not take no for answer! Follow up with your customers without being too pushy.
TIP #7: Know you will not close all deals
Do not be too hard on yourself if you don’t close the deals, it’s going to happen. It’s important to not let that get you down and to keep pushing through it. Do not give up easily just because you lose a few deals it’s all part of the process and you’ll only learn from your mistakes.
TIP #8: Referring to competitors
As mentioned, being trustworthy and transparent is key with new customers. Refer to your competitors and show your customer how your product is so much better than the rest. Do not be afraid to highlight how you’re company differs and even if your price point is a bit more than the competition, stick by your products worth.
TIP #9: Fire bad customers
Talk to the right people, and don’t waste your time and energy in customers who have no use or interest for your product. Focus on the target market and find the right people to sell to. Spend your time with prospects who are ready to buy your solution.
TIP #10: Celebrate the wins!
Celebrate every new customer! It’s easy to get too ingrained in the daily grind of sales and building a company and forget to celebrate the wins. Celebrate every win with your co-founders and your team.
A great way to build a top-notch marketing plan is to use social media data. It’s not just about of a few items being shared and crossing your fingers that it works. You will need to formulate a well-thought-out social media content plan to grow your brand. Here are some tips that will support you on your way.
Firstly, you need to come up with a set of goals that you would like to achieve for your company. This will be the basis of creating a marketing strategy that aligns with your goals. As tempting as it is to imitate a business that is comparable to yours, you need your own marketing plan as everyone’s business goals are different.
For example, say you are running a sustainable cosmetics business. Perhaps someone like you wanted to increase Facebook’s brand recognition by concentrating on a vegan audience. And in their target, they succeeded! So, you do the same thing. But, there is a small problem you didn’t think about, there is beeswax in your products. The vegan community then shuns you for selling a non-vegan product. And to top it off, you get a negative reputation for misinformation. This is why creating your own goals will help you plan a better strategy. Just remember to be specific and tailor your objectives.
The wonderful part about setting goals is that it will help you decide what your values are. Values may get a little bit lost when setting up a brand. So, this is a perfect chance to go back to the origins and see why the organization was set up.
Creating your own objectives will encourage you to prepare a better approach. A major part of setting goals is that it will assist you in deciding what your values are. Values seem to be really, well, respected on social media, so look at why you set the company up in the first place.
Know Your Audience
A big part of boosting your content is to sell it to the right audience. This links in with planning your goals and staying on-brand, too. It’s not just a waste of time to try to share the content with everyone and anyone, but it is also a waste of money as you will not have any returns on your investment. For example, if you make and sell aquarium decorations there would be no point in making a video of an aquarium featuring your decorations in it and then posting it to a page dedicated to dog care.
Just because it’s related to pets, doesn’t make it relevant.
The first step is to research your audience and know them inside out. Collect as much qualitative data as possible. Join many groups that discuss the thing you are selling. It doesn’t matter what type of product you sell, there are many suppliers out there. No matter how niche your product is, there will be some sort of group relating to this. Facebook marketplace is the perfect place to start.
Knowing your audience inside out will help you create content across the board. Whether you are writing a blogpost, social media posts, or even something else entirely, it is important to stay on-brand for your content.
Now you need to see if your marketing strategy put in place is working, and if its not working tweak your strategy. Examine what content is working best at engaging your audience. A lot of analytical tools are available and free to use, like on Facebook for example you can track the number of people interacting with your content and track its performance. Using a forum for social media management and digital asset management (DAM) helps you to look at back-end specifics. This is a perfect opportunity to check if the results are consistent with your objectives. You can also take this chance to follow individuals that are important to you who share your content.
Engage and Respond to your Audience
People love to feel connected, that’s the whole point of social media. Engage and respond to your audience, it will allow them to build a connection with your brand. This is also an easy way to get customer feedback right away. Listen to what they have to say, its an opportunity, if necessary, to build a great customer service experience.
Develop your Brands Tone of Voice
Like we said before building a connection with your audience is key and developing a voice for your brand is also key. To develop a tone of voice for your brand, you need to analyze your target market and see what will resonate with them the most. Once your set on that, addressing situations and sharing content is your way of establishing a voice for the brand. For instance, claim you are a brand of vintage fashion and share to an upcycling blog. Here, you see the points that people engage with and get the chance to promote your brand. A strong tactic is to address situations for the chance to resolve their frustration and look trustworthy to an audience of thousands. If someone writes a comment, answer it, even if it is a negative one.
Use a Content Calendar or Sharing Platform
Use one platform to share all your content to all your social media platforms, it will make things a lot easier and save you a lot of time. Since Facebook and Instagram are now connected, they have built in publishing tools that allow you to schedule your posts for both platforms simultaneously. You can schedule when posts go out and this will help you keep your social medias active without worrying everyday to make a posts. This will also leave more room for you to analyze your audience engagement with the posts and keep an eye out on current events and developments in relevance and e-commerce.
From setting goals to engaging, there are many ways to use social media and the data you get from it, to boost content. Just be aware that content will not be a success on all platforms. That’s because each site is designed for different audiences. If there is content that isn’t being shared as much, try changing the language, picture, or title. Small changes can make a huge difference.
Remember, marketing for your brand is more than just creating content, its about engaging with your audience and building connections with them. Social media is a great place to do this and if you follow these tips you’ll be able to leverage this.
Writing a great headliner is difficult, especially for your own startup. Everyone wants to be the next Apple or Nike and create inspiring marketing. However, as a startup you shouldn’t focus on creating inspiring headliners. Instead focus on simple and functional marketing. Startups can’t play by the same rules as established brands when it comes to marketing, it just won’t work. Before you sit down to write your next big marketing headliner, know these tips to be sure you get a high conversion rate every time.
Let’s start of by looking at the 4 best performing headliners:
“You could be due a mileage refund. Find out if you can claim for the last four years”-Mina
“Photo Books in 5 minutes”-Popsa
“Cook Restaurant Quality Meals at Home”-Simply Cook
“Increase App Store Conversions and Pay less for Every Install”-Storemaven
Straight away, we notice that these headliners don’t sound like the conventional marketing we see every day. They aren’t inspiring or clever. However that’s the key, it doesn’t need to sound like marketing at all. Boring and functional is what you’re aiming for. I know it’s hard since as a founder we all want to create the next “Just do it” however as a startup you can’t compare yourself to these big brands.
If we examine the famous headliner “Just Do It” almost everyone in this world would know it’s Nike’s brand. This headliner has had so much success because Nike has spent over 40 years building their brand. Everyone already knows what they do so they have earned the right to create inspiring marketing. But as a startup, nobody knows who you are so you can’t do that just yet.
Its all about what your customer can do
Before you can inspire, you must first inform people about what you do, but more importantly, your marketing must convey what THEY can do. But what is the difference? A successful marketing message doesn’t talk about the product but talks about what they can help people achieve. With this in mind, here’s a tip on how to achieve this. Write a headliner and then insert the words “Now you can” at the beginning of it. Ask yourself, how does it sound? Does it flow well or is it awkward? For example, let’s look at the previous headliner “Cook Restaurant Quality Meals at Home” . If we insert “Now you can” we get “Now you can, cook restaurant quality meals at home”. This is an example of a good headliner because it focuses more on the customer rather than the product. It clearly shows what the company can offer to its customers.
Let’s compare this to a bad example, “The all-in-one flexible HR software”, if we add the words “Now you can” we get “Now you can, the all-in-one flexible HR software”. This phrase doesn’t flow nicely and it shows that its more focused on the product instead of what the customer can do, which is what you don’t want.
When writing a good headliner, you need to think of what is your customers “now you can?”. What are the customers struggling/hoping they can do? That will make a great headliner. As a startup, these types of headliners will see 5 to 10 times more conversion. Be sure to know who your customers are and what they want before you attempt marketing to them, this way you can find the perfect “Now you can” promise.
The ability to fundraise is a highly critical skill that every founder needs. Knowing how to raise the proper financing at the right moment makes it easier to carry out the founders’ vision and allows them to concentrate on product and business objectives. Fundraising looks and works differently at different stages of a start-ups life. Raising your first check is frequently the most challenging and daunting. We identify crucial aspects in this post that may assist founders in securing their first investment, as well as resources that connect them to angel investors in that are relevant to their current stage and industry.
Credibility: At the early stages investors are investing in your team rather than the product. Its important to have the right team in place and expertise.
Angel Investors or accelerators at the early stages: Approaching a VC at the beginning is tempting but angel investors and accelerators will be much more beneficial.
Approach: It might seem quicker to use a template and send a mass email but you’ll have a higher conversion rate reaching out to them individually.
Network: The most successful tool for your business will be to grow your network. You can do this through pitch competitions, demo days or check out Montreal’s very own Startup fest or C2 MTL.
In the early stages, its important to build your credibility in order to sell your vision. Investors prefer to focus on investing in people and their vision rather than things. The most successful founders have already existing skill sets, relevant experiences and backgrounds, and existing ties. Investors want proof that the early management teams have worked together before, have had success and be able to execute said vision. Being able to onboard the right people will be an extremely valuable asset to your start-up.
This is especially crucial during the product development stage because businesses do not have the luxury of giving validation through traction, growth, or financial KPIs at this stage. It’s also more difficult to determine and demonstrate product market fit. Simultaneously, some solid techniques for demonstrating product-market fit include signing first clients (even if at a loss) and creating a large pipeline of potential clients ready to acquire the product when it’s ready.
Angel Investors or accelerators at the early stages
There are many different types of investors in today’s Startup environment, each with their own set of criteria and objectives. While venture capital is an attractive and crucial part of the system, it may not be the most appropriate source of funding for the idea stage. Many founders are also enticed to apply to VCs because it is extremely simple to do so. VCs frequently have application portals and intuitive channels on their websites. However, this is a waste of time and resources. Often times they are uninterested in the idea stage and product development. Not to mention, if you don’t get the funding, that can hurt your company from going back for financing in the future.
As a result, early-stage enterprises should contact angel investors or accelerators rather than venture capitalists. These investors are looking for companies in the early stages of development, so they align themselves with start-ups at your stage. Applying to high-quality accelerators early on can have a tremendous payoff for a start-up. They provide access to top advisers, mentors, network growth and advice which results in increased credibility in the founder’s concept.
When engaging potential investors, there are a few things to keep in mind. It’s crucial to be aware of and respectful of other people’s time and effort. Reaching out with a templated email is good, but reach out to each person individually and, ideally, customise each note. Verify emails or your emails will be sent to spam by default if there are too many rebounds.
At this point, your pitch deck is especially important. A clear and concise value proposition, identified problem, suggested solution, team, advisor description, competitors, market sizing, and early traction information are the most critical parts. Make your presentation flow like a story by fitting it into a narrative.
Growing your network is an easy and effective tool that can easily create long term opportunities for your business. Attend events and competitions to promote your business and make it stand out even more. These provide short- and long-term funding opportunities, as well as increasing your competitive edge by giving it legitimacy.
At the early stages, your start-ups best chance at fundraising is applying to an accelerator. The chances of receiving funds are much higher than from an angel investor or a VC. Not to mention, it will be much more beneficial for your start-ups growth as it can provide your start-up with all the tips mentioned here. It will give your start-up credibility, provide you resources, mentor you and give you access to a large network. If your start-up is looking for an accelerator you can visit our accelerator program and mentorship program!
A business model is a comprehensive framework for defining, understanding, and designing your whole business. Defining your business model for your start-up is key to increase your companies long term value and will simplify your operations. Early founders often misunderstand the importance of company models, for a deeper understanding, check out these 50 various kinds of business models, as well as company examples. Use this guideline to help define your next business venture.
1. Franchise Model
Franchising is the best way for a business to expand since it enables the franchisor to license its resources and brand name. For a franchise to offer its goods and services in return for a royalty, intellectual property and rights are required.
Best for a company’s expansion
Can license its resources and brand name
2. Multi-Sided Platform
A multi-sided business model is used by any firm that provides services to both sides of the business, LinkedIn is a great illustration of this, since it offers membership services to individuals looking for jobs as well as HR managers looking for applicants for their open positions.
Offers services to both sides of business
LinkedIn- it offers subscription services for people to find job opportunities but also for HR to find candidates
3. Cash Machine Business Model
This model is also referred to as the cash conversion cycle (CCC). It simply refers to how fast a business transforms cash to goods and services, and then back to cash. This strategy is employed by businesses who have a low profit margin yet have a disruptive position in the market. Amazon, for example, makes a large profit from its online shop before paying its suppliers. Another perspective is that Amazon’s supply chain is based on vendor credit.
Good for companies with low-profit margin
Good for inventory type of business
Amazon-they generate a large amount of cash from their products before they pay the suppliers
4. Freemium business model
This model offers a mix of free and paid services, normally used by tech companies. For example, Software as a Service model (SaaS) or apps would use the freemium model. Companies offer a limited free version of their software or with limited features, to unlock the full software you would need to pay.
Grows business and acquire customers
Good for SaaS or apps
Great initiative to get customers to try the software
5. Subscription Business Model
This approach enables customers to get services by paying a set monthly or annual fee. In this scenario, the business must offer sufficient value to its customers so that they return to the website on a regular basis.
It enables businesses to segment the market and provide a limited number of things in their content under various plans and pricing, referred to as tiered offers.
In a peer-to-peer transaction, the buyer and seller deal directly with each other about delivery of the product or service and payment exchange. Typically in a peer-to-peer economy, the producer is an individual or freelancer owns both their equipment (or means of production) and their final output. It’s not like a normal partnership when a company sells its services to customers (B2B or B2C). It earns money by charging commissions on the service. Uber is a good example of this since the app acts as the middleman to connect a driver with a passenger and the app keeps commission.
7. One-for-one Business Model
Known as the social entrepreneurship model, It’s a hybrid approach that incorporates both for-profit and non-profit services. Many businesses are adapting their business strategies to appeal to socially aware millennials, despite some concerns about its long-term viability. The greatest example is TOMS Shoes, which donates a pair of shoes to a kid in need for every pair sold across the world.
Appealing to socially aware millennials
Long term viability since overtime “buy-one give-one” strategy will become costly
8. Hidden Revenue Model
This model is a revenue generating method in which consumers do not have to pay for the services provided, but the business still makes money from other sources. Google, for example, makes money from advertising dollars paid by companies to bid on terms ( key words), despite the fact that consumers do not pay for the search engine. Many social media companies use this model, especially Facebook. They gather data on peoples profiles and sell them to companies for advertising purposes.
9. Razor and Blade Business Model
In this paradigm, one item (the razor) is offered at a cheap cost, while another (the blade) is sold at a high cost. A printer and cartridge business model is another name for it. The cost of an inkjet printer, for example, was a one-time cost; nevertheless, having a new ink cartridge changed is an ongoing cost for customers. If you have a devoted client base and can establish a lock-in scenario with customers, this strategy is ideal.
Need for recurring sales of an associated item
Continuous flow of revenue
Need a devoted client base
10. Reverse Razor and Blade Business Model
The business model is the reverse of the razor blade business concept. It entails selling low-cost goods to entice consumers to purchase higher-cost ones. This business model employs a one-time offer for the premium product and, over time, generates additional income from secondary products.
Apple; sell apps, movies, music at a low cost but sells iPhone, iPad at high cost
11. Direct sales business model
Products are directly sold to end consumers under this approach, either one-on-one or in small groups (remember Tupperware home parties?). Every sale earns the salesman a commission. Despite the fact that technology has mostly replaced direct sales in many aspects, many businesses still want to provide a human touch to their consumers.
12. Affiliate marketing business model
Companies earn money in this model by promoting, evaluating, and recommending the goods and services of other businesses. Consider websites that provide product reviews. These websites are compensated depending on the number of sales opportunities they generate for their sponsors.
13. Consulting business model
The consulting business model is used by companies that offer consulting services by employing experienced and qualified individuals and assigning them to client projects. These businesses often bill on an hourly basis and/or take a portion of the project’s success as compensation (cost reduction project). This approach is used by multibillion-dollar companies like Mckinsey and Boston Consulting Group.
14. Agency-based business model
An outside company is contracted to perform a particular job under this project-based business model. Businesses that lack internal knowledge have traditionally hired agencies to obtain a customised solution for their requirements. Do you remember Mad Men? Netflix original series about an advertising firm and its clientele. Digital marketing, design & architecture, survey, promotion, media, public relations, branding, website development, social media, and other specialised agencies are examples.
15. User-generated content business model
User-generated content is collected and sold to businesses looking to capitalise on their customers’ ideas and material in order to advertise their products.
This approach is powered by a variety of digital commodities, including videos, reviews, photos, blog entries, testimonials, and any other kind of material produced by brand users. And it’s all done via social media.
16. Online Educational Business Model
This business model is aimed towards the educational sector, including students and instructors, and enables them to access educational materials via flat course costs or subscriptions. It’s a hybrid of freemium, course fees, and a subscription-based business model.
17. Instant News Business Model
This approach focuses on sharing and updating news in real time, without the need of a middleman.
This approach allows trustworthy main or secondary sources to convey breaking news or important announcements directly to their audience via open and dependable channels.
18. Multi-brand business model
This strategy is built on selling more than two goods that are almost identical but compete with each other and are distributed by the same company but under various brand names. It is carried out in order to achieve economies of scale and to establish an empire.
19. E-Commerce Business Model
E-commerce is a simple yet powerful business concept that enables consumers and sellers to connect and trade via the internet (online shop). Business to Business (B2B), Business to Customer (B2C), Customer to Customer (C2C), and Customer to Business (C2B) are all examples of e-commerce business models (C2B).
20. Distribution based business model
This approach is used by a business that integrates with its end consumers via one or a few major distribution channels. Companies that utilize this approach offer dealers, brokers, supermarkets, retailers, and other channels for companies to sell to consumers. Unilever, for example, devotes a significant portion of their income on ensuring appropriate distribution.
21. Drop-shipping business model
Drop-shipping is a company concept that is both cost-effective and interesting. A wholesaler drop-ships goods straight from the manufacturer to the consumer once an order is made on the company’s website. The company owner does not need to keep any inventory and delegates all shipping and logistics to a third party.
Start a niche e-commerce business website with limited up-front cost
22. Entrepreneurship Business Model
Enterprise business strategy is focused on obtaining huge agreements by concentrating on and targeting only large customers. Fortune 500 customers, for example, often have multi-billion dollar budgets. Boeing, Raytheon, SpaceX, and Goldman Sachs are examples of Enterprise business models since their sales efforts are directed at extremely big corporate enterprise clients or governments.
Social Enterprise business model
23. Social Enterprise business model
Social enterprises apply business solutions to social problems. The goal is to achieve sustainability by enabling non-profits to support themselves financially instead of relying solely on grants and donations. Since there are no shareholders in a non-profit organization, the profits from the related social enterprise are completely re-invested in the work of the organization.
24. Direct-to-consumers business model
This approach enables businesses or brands to sell their goods directly to end users. Customers must be retained via very successful marketing campaigns and advertising activities.
25. Family-owned business model
A family-owned company is one that is managed by a family and whose decision-making procedures are overseen by two or more family members. The company’s leadership is handed on to the heir, who will transmit the baton to their offspring.
26. Blockchain based business model
Blockchain, the most sophisticated, futuristic, and contemporary technology, has transformed the whole landscape of global transactions using decentralized network systems. Consumers may transact peer-to-peer via a decentralized network, which increases confidence. Tokens are used by blockchain-based companies to generate revenue and to provide Blockchain as a service.
27. Vertically integrated supply chain business model
Vertical integration is where two businesses at different stages of the supply chain join together. For instance, a business that relies on another for its supplies may find that it is unreliable, which is affecting business. In turn, it may vertically integrate with its supplier in order to reduce late deliveries and increase efficiencies. When a business has more control over how a product is manufactured and supplied to end users, it may offer goods to customers at cheaper costs (with a higher profit margin).
28. Combination of chains and franchise business model
This strategy consists of a mix of owned and operated chains as well as licenced shops (franchising). Starbucks is the most well-known example of a business that has both company-operated and licenced locations.
29. Data licensing business model
In today’s environment, a data-driven business strategy has taken on new significance, particularly in the technology industry. Data is a vital component of web technology since it allows businesses to carry out operations and generate money.
Google sells real time data to its partners used for advertisements and customer insights
30. Influencer business model
The influencers business model, works on the basis of the advertising paradigm, earning money by capturing the attention of their target audience. A brand finds an influencer who has a connection to the target audience the brand wants to reach. The target audience could be the brand’s existing audience, or a new demographic the company hopes to reach but hasn’t yet.
The brand and influencer enter an agreement. The influencer then creates content, usually with the brand’s oversight. They share the content with their followers. “When an internet service is free, you are not the customer,” Apple CEO Tim Cook famously wrote. “You are the finished product.”
31. Discount with high quality business model
Supermarkets and department shops that buy goods in bulk and offer them at wholesale prices often use this business model.
32. Nickel and Dime business model
The lowest pricing approach for the fundamental product or service is used in this company model. Because the base price is kept as low as possible, an extra fee is paid for the additional benefits and services that come with the primary basic service. The nickel and dime business model is prevalent in the airline industry. Airline companies that offer various services divide their service to charge for them individually. If a customer wants to pay for these additional services, they have to pay for them separately.
Spirit and Frontier Airlines, for example, are budget airlines that charge fees for extra services such as printed boarding passes, carry-on/check-in baggage, seat choice, priority boarding, Wi-Fi, beverage, meal/snack, phone booking costs, and so on.
33. Aggregator business model
The aggregator business model has come to disrupt every industry. This model, frequently confused with other kinds of platforms, usually involves organizing, under one brand, a very populated sector, such as taxis, hotels, travel, groceries, food, etc.
To make it simple, the aggregator may act as a sort of middleman, but unlike other platforms, it keeps tight control of the entire experience of its users.
34. API licensing business model
Application programming interface (API) is a term that refers to a set of (API). It’s essentially a collection of subroutine definitions, communication configurations, and program development tools. API licensing is a business strategy that offers licensing mechanisms that enable third-party plugin/add-on applications for well-known platforms to be created by the developer community. Developers must also pay a fee to get access to APIs.
35.Crowd source business model
Companies may use the crowdsource business model to get access to operational solutions such as ideas and technology, improved customer engagement, possibilities for co-collaboration, operation optimization, and cost reduction.
36. High touch business model
Customers’ engagement and participation are prioritised in the high-touch business strategy to customise the experience. It’s a phenomena in which a client forms a kind of relationship with the company. Larger accounts need more attention since they pay more and are more loyal.
Buying a vehicle, a home, or business SaaS requires numerous contacts with the salesman
37. Low Touch business model
Of course, a low touch business model is the polar opposite of a high touch business model, in which the product or service is provided with the least amount of client contact. Low touch is ideal for low-cost software solutions where gaining clients is more straightforward.
38. Flex Pricing business model
Flexible pricing is a business approach in which the ultimate price of an item may be negotiated. In other words, buyers and sellers may haggle over the price that best suits their needs.
39. Auction based business model
This concept is built on the opportunity to purchase a product or service via bidding. Although the concept is no longer widely utilized, it is still used in sectors such as antiques, real estate, collectibles, and commercial transactions.
On online sites that trade new and used goods, such as eBay and Amazon, the contemporary version of the auction concept may be seen
40.Reverse action business model
This business strategy adheres to a rigorous pattern of establishing the highest pricing and allowing customers to bid appropriately until the prices begin to fall. Businesses looking for suppliers often utilise a reverse auction. At each subsequent round, eligible providers bid lower and cheaper in order to attract the company and win the contract.
41. Brokerage business model
The brokerage business model gives buyers and sellers a single platform to communicate about transactions. Depending on the featured category, it charges a fee for every transaction between the parties, either from the buyer or the vendor.
42. Bundling business model
Bundling is a business technique that involves combining goods or services to create a bundle that can be sold as a single unit for a cheap price. It is a method of buying many goods and services from a single company unit in a convenient manner.
Microsoft office 365 bundle (PowerPoint, Word, OneNote, Outlook)
McDonald’s combo meal
The Disintermediation Model eliminates the need for outsourcing or the use of a third-party middleman. In reality, businesses that follow this model interact directly with clients and consumers via various channels such as the internet. Tesla is a good example of this since clients will go through their website or application for service. It creates a smoother more efficient customer service for their clients.
44. Fractionalization business model
The fractionalization model involves selling a product or service for just a portion of its intended use or in distinct portions. It’s a technique that separates goods and services into subcategories to provide diversity to the products while charging individually for each category.
Example selling pizza by the box or by the slice
45. Pay as go (utility) Business model
The pay as you go model makes profit based on how much a product or service is used. In recent years, governments and NGOs have used the Pay-As-You-Go model to deliver common commodities like solar panels to rural communities, which they pay for over time. This model, for example, includes businesses that provide power, water, and mobile phones, as well as Amazon Web Services.
46. Product as a service
This model sells the service of a product instead of the product itself. For example, at a printing shop you can pay to use a printer. Therefore, you’re paying for the service of the printer.
47. Standardization business model
Standardization refers to the process of making a once-customized service general. This attracts customers because of the convenience and cheap costs. For example, Coca-Cola uses a global standardization in marketing keeping its design and theme the same even in countries with different languages.
48. User base communities
User-based communities make money by creating an engaging platform where users may connect with one another while also advertising. Subscription and advertising fees fund this model.
49. Leasing business model
Leasing is the practise of renting rather than selling big or high-profile goods such as machinery and technological equipment.
Home Depot (tool rental)
50. Pyramid Scheme Business model
A pyramid scheme is a business strategy that is unlawful or contentious. Rather than providing investments or selling goods, the business works on the single principle of recruiting members by offering them a return in the form of money or services if they agree to enrol others in the scheme.
Financial management is a challenge for many small business owners. As a business founder, it is your duty to ensure that your company grows and thrives in the most efficient manner possible. However, if you’re not cautious, you may wind up making expensive errors. A recent study shows that in the first year 4% of Canadian businesses fail and that percentage rises to 30% in the fifth year. In Canada, 7000 businesses go bankrupt every year. A lot of different factors lead to this failure but poor financial planning is one of the main causes.
A lot may go wrong, from capitalization problems to budgeting to incorrect accounting procedures. Whether the company is just getting started or has already made it through the first few years, sound financial management is essential.
To avoid financial catastrophe, stay away from the following frequent blunders:
1. Separating personal and business accounts
Many entrepreneurs will fail to open separate business accounts and use their personal accounts. When first starting it out, it may seem easier to just work from your personal accounts, however this will become difficult to maintain your business budget and expenses. It’s important to create separate accounts so you can effectively monitor your businesses finances.
2. Poor tracking expenses
At the early stages of a startup, there may not be that much capital to invest for growth, however it’s important to keep track of every expense. You need to have a control of debt to avoid digging yourself into a debt hole that’ll sink your business.
3. Sticking to a Budget
This is the most crucial part of financial management. It will allow you to not spend more than what’s coming in. Sticking to a budget will protect your businesses sustainability and it’s a good way at addressing resources.
4. Business Credit
In todays world, credit score means everything. Having a bad credit score will impact your financial management tremendously. For a business, a bad credit score will cause a lot of difficulties to obtain loans which is imperative for a business growth. Not only is maintaining a good business credit important, but personal credit will also still have an impact on your business. For startups, since the business is still small creditors will look at personal credit scores of the shareholders and determine if they will grant the credit. A bad credit score ruins your credibility in terms of your financial management which is not a good look for a startups founder.
Different types of business credit:
Business credit card
Seasonal commercial loans
Business Line of Credit
A lot of founders tend to be confused about business taxes. When first starting out, you should seek professional help in order to avoid any mistakes. A small mistake can end up becoming costly to your company and you don’t want that at the early stages of your business. Make sure to file your taxes on time, monitor due dates and regulations.
These small mistakes can easily slip under the radar but will end up costing you big time. So be sure to stay away from these common mistakes to keep your small business a float for a long time!
Whenever we need a product or service, we’ll turn to our family or friends for recommendations. For instance, studies shows that a buyer is 50 times more likely to purchase a product that is recommended by family or friends. Referral programs take advantage of this word of mouth marketing by using your already loyal customers to act as brand advocates. This is done by providing a referral code to your customers to share with their networks. When a friend uses the code to make their first purchase the referrer is compensated. This may be in the form of a discount, a freebie, or a monetary reward.
Referrals are a good way to get new clients because people are more likely to trust their friends and family. This is why one of the most effective communication strategies for organically scaling a company is word of mouth. Via in-person encounters or online social networking messages, we exchange positive user interactions. In a nutshell, referrals are more important and reliable than paid advertisements and other media platforms. Look no further ,this guide will teach you the fundamentals of referral marketing as well as how to run your own referral program.
Why Start a Referral Program?
If done properly, this marketing strategy can acquire a lot of new customers for your business at very low costs. By taking advantage of your current customers to spread the word, customer acquisition cost (CAC) is very low. The customers that you gain will also become of high value and are more likely to refer more people.
Referral programs have been proven to help business generate higher revenue. For example, Paypal is famous for using a referral program and helped the company achieve 7-10% daily growth and a user base of over 100 million people.
With the right software, referral programs are easy to track in sales and provide a business analytical tool to use.
How to Build a Referral Program?
1. Have Amazing Products
Before even considering starting a referral program, make sure you have exceptional products and services ready. If you don’t have any great products, nobody will want to refer your business to their network.
2. Designing your Perfect referral Program
Key things to remember when designing your referral program:
Choose the right software
Easy to refer
Many different software’s already exists that help you to create your referral program very easily, choose the right one for you and your business goals.
Next, you need to craft the program to get your customers attention if you want to get them to refer your business. Use catchy headliners that describe what the program is and what are the benefits in one sentence. For example, a good headliner would be “Refer a friend for 15$” or “Give 30$ get 30$”.
On top of sharing referral codes, you should consider crafting automated messages to make it easier for your customers to share with friends. The message should be kept straight and to the point but in a friendly manner. Make sure that sharing the referral code is as easy as a click of a share button either to social medias or emails. If your customer has to take extra steps, chances are they won’t refer. Most referral program software’s already give this option to link to social medias and other platforms.
3. Choose an Incentive
Two sided incentive
Type of reward
Based on your marketing goals, choose an incentive that will respond well with your customers. First, figure out who will benefit from the reward, either your customer, the referred or both parties. Rewarding both parties is the most effective method, customers will be more likely to refer people from their network.
Next, determine what kind of reward you want to give. Since every business is different, every reward will be different. Its important to know your customers and offer rewards that align with your brand. Don’t offer incentives that wont interest your customers. It can be in form of discounts, cash, coupons, points, company merchandise etc. Also choose something that wont cost you your profits.
4. Promote the Program
Promote the program through your website, social media & emails. Let your customers know! For instance, you can implement automated messages to appear as soon as customers enter your website to get their attention!
5. Track your Progress
It’s critical to set up an analytics and analysis framework for your referral service if you want to see results. Choose a referral program software that has built-in analytics like referral relation delivery, A/B checking, and referral monitoring. Use these analytics to help you determine what content is more efficient.
Instagram is now just as popular as Facebook is in terms of social media platforms. Just when you thought you finally mastered creating content for Facebook, there’s now Instagram to take into consideration. Different strategies are used when marketing through Instagram since there’s different features and tools available. If you’re completely lost on how to create content for your brand on Instagram or running out of creative ideas to post don’t worry we got you covered! We’ll give you some inspiration for content you can post to keep your audience engaged and active to raise your brand awareness.
Tutorial posts or videos
Post videos on how your product works. This can be in any form depending on the company, it can be a tutorial or it can simply demonstrate how the product is used to really get the full benefits of it!
Motivate audience with quotes
Posting quotes is highly engaging as its something everyone can relate to. Everybody can use a bit of motivation or inspiration, can’t ever get enough of these. What’s great about quotes is that you can quote just about anyone. This can be famous/notable people, or it can be people in your team, testimonials, customers etc. Pick quotes that are relevant to your brand and to your followers. You can create graphics that match your brands theme. Quote images are also more likely to go viral. If you create nice graphics, your followers might share them and this can reach out to a larger audience!
Promote blog posts
If your company has a blog page on their website, use the content to post on your Instagram! You can create visuals for them by using quotes or captions from the blogs. This is an easy way to create content to match your brand, and generate traffic on your website!
Repost Content/Brand collaborations
Its important to keep your Instagram active and to keep your audience engaged. Sometimes it becomes too time consuming to constantly create graphics or content to post. Reposting content is the easiest thing you can do. All you need to do is share it to your story! Find content that is relevant to your brand and relates to your audience values.
If you collaborate with other brands, this is another great way to generate content to repost on your story. This is also an easy way to reach out to a larger audience and you can share each others content. Choose brands that can relate to your brand and to your audience, otherwise you might lose some of your followers if you repost content they’re not interested in.
Poll the audience/ Questions
Another way to keep your Instagram active is by creating polls and asking questions through your stories. This is a great way to get advice from your users/audience. It engages them and you can get peoples opinions on how to improve your products. You can create polls on developing ideas for new products or maybe to get ideas for events the audience might like. However, it doesn’t have to be related to your products it can be just about anything to start a conversation and engage your followers. People love to share their ideas and this allows them to easily interact with the brand and stay connected. You can also answer questions and share the answers on your story. This can be used as a real time FAQ.
Show behind the scenes
Show snippets of some behind the scene work that goes into making your product. People love seeing how much work goes into creating products. Be fun/creative with this! You can show off your team and the people involved at making your awesome products. This not only interests them, but will engage your followers to see your company as more than just a brand or business, it’ll humanize it. Like we said before, people love to stay connected!
Instagram is a great tool to create brand awareness and promote your product. Its becoming increasingly popular, especially with influencer marketing on the rise. It’s rally easy to get started and if you use it right, it can be great for your company! Remember people love to stay connected, that is why everyone is obsessed with social media. Create content that will allow your followers to connect with your brand and engage them.