3 Business Models To Consider For Your Home-Based Business

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Launching a home-based business is an idea that holds strong appeal to many people. Nothing beats the convenience of working at home, and the revenue opportunities are just about endless. To build a successful home-based business, though, you need to be able to follow a business plan that will let you earn money by fulfilling real market demands. Here are three business models to consider:

1. Subscription Model

There’s absolutely nothing new about the subscription business model, first pioneered way back during the 1700s by publishers of books and periodicals. In today’s digital economy, though, this tried-and-true business model is expanding to include a vast variety of other goods and services.

Some subscription models are meant to meet a consumer’s ongoing needs for a specific type of product. The Dollar Shave Club is one great example. For a bargain price, a man or woman can sign up in advance to get razors and other grooming products delivered directly to his or her doorstep on a regular basis.

But maybe you’re already selling a high-ticket product that doesn’t lend itself well to subscription-based pricing. If so, you can generate additional revenues by adding subscription-based services. Fender, for instance, now sells subscriptions to online guitar lessons, beyond its non-subscription-based sales of guitars.

Pros: Use of a subscription-based model makes it easier to predict your revenues due to recurring sales. If you’re interested in growing your home business to the point where you can attract VC investors, or sell the business for a profit, you should know that valuations for subscription-based businesses can be as much as eight times higher than for those without recurring revenues.

Cons: If you’re dealing with physical inventory, you’ll need reliable access to merchandise as well as efficient inventory management and logistics systems, even if you’re working from home. Also, with so much competition among subscription businesses, it’s best to either differentiate your service from others in your category or introduce a novel new service. Netjets, for instance, is innovating with a high-priced subscription service that lets customers choose how many hours they wish to fly each month and then reserve that time as a share of the company-owned private fleet.

2. Online Marketplace Model

The online marketplace model has been around since the early days of the web, with companies such as Amazon, eBay, and Craigslist among its biggest and best known success stories. Essentially, practitioners of this business model bring together supply and demand.

Newer online marketplaces such as Uber and Lyft use mobile apps to match up people who need rides, while Airbnb matches those who want unique home rentals and travel experiences with locals offering those services around the world. In today’s global economy, with so much domestic and international travel, there’s considerable demand for both of these types of services.

Meanwhile, businesses like Consultants 500, Expert360, and FlexJobs all match up corporate clients with freelance professional business consultants. Other online marketplaces are devoted to helping consumers find medical or legal specialists, for example.

Pros: A marketplace model eliminates the headaches associated with performing merchandise procurement, inventory management, and logistics from your home. It’s also attractive because of its low cost of entry. You can generate hefty revenues by charging various types of fees to sellers, buyers, or people on both sides of the supply/demand equation.

Cons: Your business will require an easy-to-use, dependable and scalable e-commerce platform, although those aren’t that difficult to find. Also, you’ll need to recruit enough suppliers of services, whether that means vehicle drivers or business consultants, to keep up with customers’ requests. If you’re matching up freelancer consultants with clients, running ads on freelance job boards can be an effective approach. Again, with so much competition in this space, it’s advisable to either differentiate in an existing category or identify a new unfilled market niche.

3. Direct sales model

Direct sales is another highly popular and successful business model. As statistics tell it, 18.6 million people in the U.S. took part in direct sales during 2017, in a total market amounting to $34.9 billion, according to the Direct Selling Association (DSA).

In this business model, independent contractors, representatives or distributors sell a company’s products or services directly to consumers, either in person or online. Many direct sales people work from their homes. Direct sellers can choose from among direct sales companies specializing in many different types of items, including jewelry, beauty, fashion, and food, for instance. For example, one major direct sales company, Amway, sells more than 450 premium products in the areas of health, beauty, and the home.

Typically in the direct sales industry, contractors are paid commissions on the sales of products. All it takes to get started is a low-cost investment in a sample kit. For each product sold, a portion of the product cost is then set aside as a bonus. The bonus is shared among contractors who work together in sales groups, according to their contracts with the direct seller.

Pros: Startup costs are practically nonexistent. Contractors can put in as much or as little time as they want. Direct sales can be a highly effective business model for those who want to work part time and earn some spare cash as well as for entrepreneurs looking to launch a lucrative full-time career. The direct sales company provides the product along with free training, support, mentoring, and online tools, leaving the contractor free to focus only on selling.

Cons: Despite all the benefits of the direct sales model, home-based contractors should be careful to partner with a highly reputable and reliable direct sales company, which offers products that lots of customers have been proven to buy. Often direct sales companies get labeled as scams, and although Amway isn’t a pyramid scheme, it’s dealt with rumors for years.

Conclusion

If you’re thinking about starting a home-based business, put together a business plan based on a model that will let you generate revenues by meeting real market needs. Good luck!

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