Selecting the right business model

LaunchCategory
6 min read
Ashliegh Gehl

As an entrepreneur with a small business idea, you have your own vision of what success looks like. Perhaps you’ve gone as far as reading articles (and there are a lot) that delve into the habits of successful entrepreneurs. You may have learned that focusing too much on an idea is one of the most common mistakes startups make. The solution? Craft a robust business model.

It’ll put you on the path to success while inspiring the big-picture thinking needed to launch your ideas.

Related: How to start a business in Canada

Top 5 business model types

The process of choosing a business model helps you move your idea from pie-in-the-sky to viable. Here are five options.

  1. Brick-and-mortar model.
  2. eCommerce model.
  3. Freemium model.
  4. Subscription box model.
  5. Sharing economy model.

Scan our list, then keep reading to learn why you should choose a business model early.

What is a business model?

Business Model People Working at Table
Take your time working out which business model makes sense for your startup.

No one knows your idea better than you. When given the chance, you can talk passionately about it for hours on end. It’s this passion that draws people in and has them wanting to learn more.

Your business model shows how your small business idea will make a profit.

This requires you to stand on the periphery of your idea and look at it objectively, the way a potential investor would. Your passion will hook them, but your business model will seal the deal.

As mentioned earlier, great ideas can’t sell themselves and they definitely can’t make money on their own. They’re backed by strategy, vision, market research and a thoroughly thought-out plan of action that can easily be explained to those looking to invest in your startup.

The big five

Reading through our list of business models, you may find one jumps out at you. It’s a good idea to consult a trusted advisor or accountant to confirm your selection.

1. Brick-and-mortar model

This business model is rooted in your idea having a physical presence. Unlike online businesses run out of the owner’s spare bedroom, brick-and-mortar businesses have a showroom, shop or office that customers can visit.

Think grocery stores, banks and those street-side boutiques you casually stroll into as you wander your city’s downtown. As it turns out, Canadians like this model.

2. eCommerce model

With an eCommerce business model, your home base is online. There’s no physical location.

There are several different revenue models for eCommerce businesses.

There’s drop-shipping and wholesale/warehousing, which require investments up-front to rent warehouse space. With eCommerce, it’s important to know online business law and regulations if you’re looking to reach other countries.

Editor’s note: Build a high-performing eCommerce shop with Online Store. This all-in-one builder is perfect for those who have no technical skills. Try it free!

3. Freemium model

If your online business idea is to create an easy-to-use platform that enables people to do something free with the option of upgrading to a paid plan, a freemium business model may be for you.

This model gets people hooked on a product or service that satisfies some (but not all) their needs.

For example, you might offer an app that lets users make eCards, newsletters, posters and advertisements for free, but select more sophisticated designs and a wider range of options for a price.

4. Subscription box model

Many newspapers and magazines have adopted a subscription box model. In many ways, it mirrors the freemium model. In some cases, you get to read 10 free articles a month, but after that you’re prompted to subscribe.

Another example is Crave. It’s Canada’s video-on-demand network and competes with other subscription box model providers, such as Netflix and Amazon Prime Video.

5. Sharing economy model

Business Model Uber App on Smartphone
This business model connects service providers with consumers.

When Uber, the ride-sharing app, became mainstream it opened a world of possibilities for entrepreneurs everywhere. All of a sudden, we can Uberize pretty much anything. For example:

  • With Rover Parking, you can rent someone’s parking spot in Toronto.
  • AskforTask lets you schedule a cleaner or handyperson.

The sharing economy invites users to register as a customer and/or as a contract employee. You’re basically connecting suppliers with consumers.

Why is a business model important?

Let’s say you’re looking to launch a clothing line that incorporates cutting-edge technology. Textile computing isn’t mainstream (yet), but with a business model, you can create a roadmap for making it affordable, accessible and profitable.

Here are the three main reasons why you should start with a business model first:

It’s a realistic assessment of your idea

Business models take time to construct because they ask a lot of you. They’re demanding. It’s you and your idea in the ring, and you’re looking at it from every possible angle.

Ask yourself:

  • What are my idea’s strengths?
  • What are its weaknesses?
  • What can be improved?
  • What steps can be taken to improve it?

The more honest you are with yourself, the stronger your business model will be.

Answer the tough questions (before someone else asks them)

Business Model Two Women Going Over Notes


What problem is your idea trying to solve? To use the textile computing example, if you want to launch a clothing line that incorporates this technology, the problems are plentiful.

The technology needs to be safe for humans to wear, in the short term as well as the long term. How sustainable is your clothing? Thinking about how a consumer might dispose of your item will give you an advantage, as buyers are becoming more and more concerned about the lifespan of their purchases long after they’ve disposed of them.

Those who are interested in investing in your startup will want to know that you’ve taken the impact of your idea — the negatives as well as the positives — into consideration.

Create value

This is two-fold. Your business model can help define how your small business idea creates value for your customers and your investors. The values for each would be different and would most likely change based on how you segment your audience.

Once you have your idea fleshed out, explore the various types of business models to find one that’s right for you.

Choose wisely then begin with confidence

As you’re considering your options, keep in mind that business models are not one-size-fits-all. Your business model will be unique to you, your idea and how you want to differentiate your startup from others. Be realistic as you assess your idea, ask those tough questions and know how your idea creates value. Once you’re satisfied, you’re ready to begin.