24 Types of Business Models Proven for Making Money

A business model is a plan that outlines what a company sells, how it delivers value, and who pays for it. There are many types of business models—some focus on selling products, while others center on services, digital goods, or subscriptions.

The best model ensures that a company earns enough to cover all costs and grow. So, without a clear idea, a business can fail.

In this article, we will cover 24 business models that will help you succeed. They also fit different industries and goals. Here are the topics covered in this guide:

• How to select the right model to achieve success and growth.
• Product-based and service-based models.
• Subscription, advertising, and commission-based models.
• Marketplace and platform models.
• Strengths and weaknesses of each model.
• Some examples.

Follow this article to learn more about what a business model is and how it works.

Let’s begin with the types of business models.

Types of Business Models

There are many types of business models companies use to generate revenue. Different models are used to meet specific customer needs and industry demands.

Anyway, in the following sections, you will see models that focus on how businesses sell products to customers. These models can be categorized into five main categories:

1- Sales & Distribution Models

These models focus on how businesses sell products to customers.

• E-commerce Model.
• Direct-to-Consumer (DTC) Model.
• Direct Sales Model.
• Franchise Model.
• Brick-and-Mortar Model.
• Drop Shipping Model.

Let’s take a look at each one in-depth.

E-commerce Model

It is a way to help your company to sell goods or services online ( using the internet). So you can use websites, apps, or marketplace to reach customers. The transactions can be done digitally using payments that are processed online.

Many companies use this model to reduce costs and expand their customer base.

Here are the strengths and weaknesses of this model:

Strengths

• It can be sold anytime
• It’s cheaper than stores
• It reaches worldwide
• Tracking sales is easy
• Automation uses technology

Weaknesses

• Cutting prices to compete
• Trust takes time
• Shipping cuts margins
• Returns add costs
• Online businesses risk hacking

Direct-to-Consumer (DTC) Model

The direct-to-consumer (DTC) model allows you to sell products directly to consumers.

It avoids middlemen such as retailers and wholesalers. It can be a website, app, or retail store.

This kind of model gives companies control over specifications such as price, marketing, customer experience, etc.

It teaches companies to create a connection with their audience. The direct-to-consumer model helps companies remove third-party fees, which allows them to achieve higher profits.

It also helps industries collect customer data to improve their marketing and products. However, it requires having strong branding and direct marketing efforts.

If your company has no retailers, the direct-to-consumer model will handle many things, such as storage, shipping, and returns, but these add costs.

The below table shows you the strengths and weaknesses of this model:

Strengths

• Higher profits, no middlemen
• Control branding and pricing
• Direct customer relationships
• Customer data boosts marketing
• Easier product launches

Weaknesses

• shipping, and return cost
• Marketing needed
• Big brands doing the competition
• Acquiring customers is costly
• In-house support is required

Direct Sales Model

The direct sales model helps your business to sell products or services directly to customers without third-party retailers.

Here, sales can be done in many ways, such as in-person meetings, online stores, or company representatives.

You can build relationships and provide personalized service using this model in your business. It is common in industries like cosmetics, home goods, and insurance.

Here is a table that shows you the strengths and weaknesses of this model.

Strengths

• No middlemen – higher profits
• Control pricing and branding
• Builds customer relationships
• It suits premium items
• Flex – in-person or online

Weaknesses

• Scaling takes time
• Requires full sales training
• Time in customer acquisition
• high-pressure sales tactics
• Relies on regular sales

Franchise Model

The franchise model allows the franchisor (the business) to let franchisees (others) use its brand, products, and systems.

Franchisees pay fees and follow the set rules. This model helps companies expand quickly without owning all locations.

There are many Industries that use this model such as fast food, retail, and services.

Here is a table containing strengths and weaknesses.

Strengths

• Fast growth – low-risk
• Franchisees invest money
• Shared marketing – brand
• A proven model cuts risk
• Fixed revenue from fees

Weaknesses

• Consistent quality is tough
• Franchise fees are high
• Limited franchisee control
• Needs strong training
• Conflicts may arise

Brick-and-Mortar Model

The brick-and-mortar model is a traditional way of doing business with physical stores or offices. Customers visit in person to browse, buy, or receive services.

Many industries are using this model such as retail, restaurants, and healthcare. Also, others combine it with online sales to reach more customers.

Here is a table showing you the strengths and weaknesses of this model:

Strengths

• Direct interaction builds trust
• Customers try products
• Products available immediately
• Stronger community brand presence
• Personalized service boosts experience

Weaknesses

• High rent -utilities – staff
• Limited to local customers
• Fixed hours limit sales
• Has online competition lowered traffic
• Its expansion needs more locations

Drop Shipping Model

The dropshipping model gives your business the ability to sell products without keeping inventory. The seller forwards an order to a supplier when a customer places it, and the supplier ships it directly.

Here are two lists that show you its strengths and weaknesses.

strengths:

• Low startup costs—no need for inventory.
• Wide product selection without storage.
• Easy to start and scale online.
• No need to handle packaging or shipping.
• can run from anywhere.

Weaknesses:

• Lower profit margins due to supplier fees.
• Shipping times can be slow.
• Quality control depends on suppliers.
• High competition in the market.
• Returns and customer service can be difficult.

Anyway, let’s move on to the following section to explain what revenue models are.

2- Revenue Models

This only focuses on how to generate income.

• Subscription Model.
• Freemium Model.
• Advertising Model.
• Affiliate Model.
• Razor-and-Blades Model.
• Bundling Model.
• Pay-As-You-Go (PAYG) Model.
• Licensing Model.

Let’s explain each in depth.

Subscription Model

The subscription model lets you pay regularly for access to a product or service. This setup gives businesses a fixed flow of money. You get convenience and a set cost without surprises.

Many industries use this model, here are examples:

• It asks for a fee each month for movies and shows.
• A gym charges for a membership instead of single visits.
• A software company sells access instead of a one-time download.

This model keeps customers around for longer periods.

This model has benefits. A business can predict earnings and plan. You get a lower upfront cost. The risk comes when customers do not see value. They leave fast. A company must keep content fresh. A sign-up process must stay simple. An easy way to cancel helps, too.

Freemium Model

The freemium model lets you use a product for free. You only pay if you want extra features. Many apps, games, and websites use this approach. It helps companies reach more people and turn some users into paying customers.

This model works best for digital tools that cost little to share online. There are some clear strengths.

• You get a large audience fast because people try free products.
• Happy users spread the word and bring in more people.
• People test the product first. They pay only if they see value.

But there are real downsides too.

• Most users never pay. That limits how much money you make.
• You may spend time and money helping free users.
• If you focus too much on paid features, your free version may suffer.

Advertising Model

The advertising model lets you earn money by displaying ads to your audience. You provide free content, and advertisers pay to reach your visitors.

Popular platforms like social media blogs and streaming services use this approach. It works best when you have steady traffic. Here are some strengths:

• You make money without selling products or services.
• Free access draws in more visitors.
• A large audience brings higher-paying advertisers.

But there are some weaknesses:

• Too many ads annoy users and drive them away.
• Earnings drop if advertisers pull back.
• Success depends on fixed traffic which make it can be hard to maintain.

Affiliate Model

The affiliate model pays businesses or people to send customers to a company’s products. Affiliates get a commission when sales or clicks happen. This model works well in e-commerce, blogging, and online marketing.

Razor-and-Blades Model

The razor-and-blades model sells a main product cheaply. The items you need to keep using it cost more. Examples include razors and blades, printers and ink, or gaming consoles and games.

Bundling Model

The bundling model combines several products or services into one price. Companies use it to sell more and give better value to customers. Examples are software bundles, meal deals, and subscription packages.

Pay-As-You-Go (PAYG) Model

The PAYG model charges you based on how much you use. It’s often used for utilities, cloud services, and transportation. You only pay for what you use, which makes it flexible.

Licensing Model

The licensing model lets a business charge others to use its ideas, brand, or tech. It’s common in software, patents, and entertainment. Companies earn money without giving up ownership.

In the following section, you will learn another type of business model. Let’s move forward.

3- Intermediary Models

These models connect buyers and sellers.

• Marketplace Model.
• Peer-to-Peer (P2P) Model.
• Agency Model.
• White Label/Private Label Model.
• Crowdfunding Model.

Let’s take a look at each one in-depth.

Marketplace Model

The marketplace model connects buyers and sellers on one platform. You earn money by charging fees for sales – listings or transactions. Popular platforms like eBay Airbnb and and Etsy use this model. It works well for digital and physical goods or services.

Here are some strengths:

• You earn from every sale without selling your products.
• More sellers bring more buyers, creating growth.
• The platform can grow fast with low inventory costs.

But there are weaknesses:

• You depend on keeping both buyers and sellers happy.
• Strong competition can make it hard to attract users.
• Handling disputes and support for users can be costly.

Peer-to-Peer (P2P) Model

The peer-to-peer (P2P) model lets people connect and trade directly. You make money by taking a fee from each deal. Platforms like Uber and Airbnb use this model. It works when people trust the platform and each other.

Here are some strengths:

• You earn without selling products or services.
• People often pay less than they would with businesses.
• A good experience brings more users through word of mouth.

But there are real downsides:

• People may not trust strangers on the platform.
• Arguments between users can cause trouble and cost you money.
• You need to keep both buyers and sellers happy to stay successful.

Agency Model

The agency model lets you sell products or services on behalf of others. You earn a commission from each sale. Travel sites real estate agents and app stores usually use this model. It works well when you connect sellers with buyers and handle transactions.

Here are some strengths:

• You make money without owning products.
• Sellers benefit from your platform and reach more buyers.
• Your earnings grow as sales increase.

But there are some downsides:

• You rely on sellers to keep their products available.
• Competition can force you to lower commissions.
• Poor service from sellers can hurt your reputation.

White Label/Private Label Model

The white-label or private-label model lets you sell products made by another company under your brand. You buy the product and customize the packaging or features.

Many retailers from grocery stores to online shops, use this model. It works well when you want to build your brand without making products yourself.

Here are some strengths:

• Starting is faster since you skip product development.
• You control pricing and branding to stand out.
• You can build customer loyalty with your branded products.

But there are downsides:

• You depend on suppliers for product quality.
• Building a strong brand takes time and marketing.
• If suppliers raise costs, your profit can shrink.

Crowdfunding Model

The crowdfunding model lets you raise money from many people. The mission of you is to share your idea on a platform. Backers support your project with small contributions.

Here are some strengths:

• You collect money without borrowing or giving up ownership.
• Supporters usually share their ideas with others.
• A successful campaign shows you that people want your product.

But there are some downsides:

• You may not reach your target funding.
• Campaigns take time and need strong marketing.
• Backers expect updates and rewards that can cause stress.

Let’s move on to the following section to take a look at asset-based models.

4- Service & Asset-Based Models

These models monetize services or shared assets.

• On-Demand Model.
• Leasing Model.
• Rental Model.
• Insurance Model.

Let’s take each one in detail.

On-Demand Model

The on-demand model lets people get products or services whenever they need them. Users place orders through apps or websites. Companies like Uber and DoorDash use this method which is fast and easy service.

Here are some strengths:

• You earn money from quick repeated orders.
• Customers enjoy fast service with little waiting.
• More users join when services are easy to use.

But there are downsides:

• Slow service can irritate customers and put your reputation at risk.
• Competition can shrink your profit margins.
• You need enough workers to handle the work.

Leasing Model

The leasing model lets people use products for a set time without buying them. Customers pay regular fees to use items like cars, equipment, or property. Companies like Hertz and Enterprise usually use this way. It works well when people want access without ownership.

Here are some strengths:

• You will earn a fixed income from regular payments.
• Customers like using expensive items without buying them.
• Renting out products again and again can make more money.

But there are downsides:

• Taking care of things can cost money.
• If customers break items you lose value.
• Finding new customers when leases end can be a challenge.

Rental Model

The insurance model collects payments to cover risks. Customers pay premiums for protection against losses. If something happens, the company pays a claim. Companies like Geico and Progressive use this model. It works well when people want security from accidents or damage, or loss.

Here are some strengths:

• You earn a fixed income from regular premiums.
• Large customer pools reduce risk and boost profits.
• Customers value protection and peace of mind.

But there are downsides:

• Big claims can cause large losses.
• Fraud can increase costs and lower profits.
• You must manage risk carefully to stay profitable.

Insurance Model

The insurance model collects payments to cover risks. Customers pay premiums for protection against losses. If something happens, the company pays a claim. Companies like Geico and Progressive use this model. It works well when people want security from accidents or damage or loss.

Here are some strengths:

• You earn a fixed income from regular premiums.
• Having lots of customers lowers risk and increases profits.

But there are downsides:

• Too many claims can cause big money losses.
• Fraud can raise costs and cut profits.
• You need to handle risks well to make money.

5- Mission-Driven & Emerging Models

Models with a social impact or built on new technologies.

• Social Enterprise Model.
• Non-Profit Model.
• Blockchain/Decentralized Model.

Social Enterprise Model

The social enterprise model earns money while solving social or environmental problems. You sell products or services to fund your mission. Companies like TOMS and Warby Parker use this approach. It works well when people support causes through their purchases.

Here are some strengths:

• You make money while helping people or the planet.
• Customers feel good supporting a meaningful cause.
• A strong mission builds loyalty and trust.

But there are downsides:

• Balancing profit and purpose can be hard.
• Running programs for your mission adds costs.
• People may question your impact if you are not clear.

Non-Profit Model

The non-profit model focuses on helping people and supporting causes. You raise money through donations grants and events. Groups like the Red Cross, Habitat for Humanity, and local charities use this model. It works best when people believe in your cause.

Here are some strengths:

• Provide real change by helping communities.
• Build support through donors and volunteers.
• Benefit from tax breaks and grants to grow your impact.

But there are downsides:

• Focus on fundraising but expect slow progress and uncertainty.
• Provide funding for programs and staff as both require ongoing costs.
• Stay transparent or donors may withdraw their support.

Blockchain/Decentralized Model

The blockchain or decentralized model removes the need for middlemen. It uses a shared digital record to track transactions. Platforms like Bitcoin and OpenSea use this approach. It works well when people want secure, direct exchanges.

Here are some strengths:

• Transactions stay safe and easy to verify.
• No middlemen means lower costs.
• Users control their data and privacy.

But there are downsides:

• Technology can be hard to understand.
• Hacking or scams can cause big losses.
• Networks can slow down with too many users.

So, the question remains: how do you choose the right business model for your company? Let’s move on to the following section to understand the answer.

How to Choose the Right Type of Business Model?

Picking the best business model helps you succeed. It shows how your company makes money. Start by learning about your customers. Know their needs, habits, and problems.

Study other businesses like yours. See what works for them and what fails. Choose a way to earn money that fits your idea. Test your plan with a small group. Gather feedback and change what doesn’t work.

Offer something people want or need. Make your offer better than what others have.

Focus on costs and profits. List your expenses. Be sure your model makes enough money to cover costs and earn profit. If it doesn’t, change your prices or spend less. Stay ready to adjust as markets change.

Examples and Case Studies of Different Types of Business Models

• Netflix: Started as a DVD rental service. Shifted to streaming subscriptions and creating fixed revenue.
• Airbnb: Began with the founders renting air mattresses in their apartments. Built a global marketplace for travelers.
• Spotify: Used the freemium model. Attracted millions of users, then converted many to paid subscribers.

Wrapping Up

There are many types of business models, each with a unique way to earn money. Some models sell directly, others connect buyers and sellers, and some offer ongoing services. Each model has strengths and works best for certain industries.

Choosing the right business model helps your company succeed. Start by knowing your customers and studying competitors. Pick a revenue stream that fits your idea, then test it on a small scale.

Focus on covering costs and staying profitable. Be ready to adjust your model as the market changes. Look at successful examples like Netflix, Airbnb, and Spotify for inspiration.

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