This article is for educational purposes and does not constitute legal, employment, or tax advice. For specific advice applicable to your business, please contact a professional.
Your business model encompasses all the reasons behind how your company makes money, how you interact with customers, and how you create value for the people you serve.
Having a business model is an important part of building a successful business. (17 percent of startups fail, according to CB Insights, for failing to have one) But adapting to it is important, too. As shopper tastes change, trends fade, or new markets open up, your business may have to evolve with the times and find new ways to meet customer needs.
Exploring a new business model can mean anything from testing out different channels to sell your products to partnering with other companies to running your business in entirely new ways. Testing and flexibility are key to success, especially in unpredictable times. You can try out new business models at a small scale (or for a limited time) in order to understand their feasibility and profitability before making any long-term decisions.
Here are 10 types of business models — framed through the lens of operating a fictitious business that sells garden plants — that may be worth exploring as you consider adapting your company to new realities.
Different types of business models to consider
Operating a brick-and-mortar store is one of the most common business models. To illustrate each model below, we’ve created a hypothetical business called The Greenery, an independent neighbourhood plant store that sells local and exotic plants.
Here’s what it could look like if The Greenery pivoted away from only in-person sales to try out 10 popular business models.
Become a distributor
How to do it: Buy plants and resell them.
A distributor purchases items from manufacturers or producers and then sells them to other groups, such as retailers or customers in the general public.
The Greenery would likely buy plants from growers in bulk and sell them to retailers or customers at higher prices, helping it turn a profit. By engaging in a distribution-based business model, The Greenery becomes a distribution channel for the manufacturer’s goods — in this example, plants.
Become a wholesaler
How to do it: Grow plants and sell them to retailers.
A wholesaler either
- Produces its own goods and sells them directly to retailers — who then sell them to customers — or
- Purchases goods from a distributor, then warehouses them before selling them to retailers or customers.
As a wholesale plant business, The Greenery would likely operate as a grower (also known as a plant nursery), selling plants to other garden stores, or selling its distributor’s plants directly to other stores or gardeners.
How to do it: Launch a plant-of-the-month club.
Subscription-based business models charge customers or members a set fee, typically monthly, quarterly, or annually, for a certain set of products or services.
As a subscription plant company, The Greenery may mail a unique bundle of seeds (aligned to the season) to members every quarter, or deliver a special plant of the month to customers’ doorsteps every 30 days.
How to do it: Give free consultations, but charge premium members for plants.
In a freemium business model, a company offers a basic set of its products or services free while charging for upgraded products or features.
Freemium business models are most common among online, service-based businesses (like SaaS, or software as a service, companies). In our plant store example, a freemium model might involve offering Greenery customers free consultations with a landscape architect, and signing them up for paid memberships if they decide to buy the suggested plants.
Become a marketplace
How to do it: Connect buyers and sellers of rare plants.
Marketplace businesses connect buyers of goods or services with sellers while collecting commissions on each transaction. The marketplace may not even house any inventory and/or handle the goods, but rather facilitate transactions between parties.
As a plant store marketplace, for example, The Greenery may operate as a website connecting growers of rare plants with avid gardeners or landscape designers looking for unique products.
How to do it: Grow and sell rare plants through social media.
Direct-to-consumer (D2C) business models cut out the so-called middleman by eliminating any intermediaries between the manufacturer, producer, or wholesaler and the end customer.
While some D2C businesses opt to operate retail stores, most primarily sell goods directly through social media and other online channels. As a D2C plant business, The Greenery might grow rare or exotic plants, for example, and sell them directly to interested audiences on Instagram, Facebook, Pinterest, and its own online store.
Sell and donate one-for-one
How to do it: Plant a tree for every tree sold.
Companies with one-for-one business models create value by coupling the sale of their product offering with the donation of that same product to a person or cause in need. Doing so helps the business build a reputation for charitable giving that appeals to socially or environmentally minded customers.
As a one-for-one plant store, The Greenery might plant a tree or other plant every time it makes a sale, and make this eco-conscious policy a key aspect of its marketing and branding strategy.
Try a razor-and–razor blade (and reverse) approach
How to do it: Sell the same planter, but send new seeds every season.
The razor-and–razor blade business model offers a key item designed for ongoing use (like a razor) at a low price in order to encourage the continual sale of companion products that come at a higher price point (the blades). In the reverse version of the model, the companion products cost very little so that the high-priced item seems like a good investment.
If The Greenery deploys a razor-and–razor blade business model, it might sell a special planter at a low cost to members who sign up to receive special seeds (at a high cost) every season. Were it to roll out a reverse razor-and-blade model, the planter would be more pricey whereas the seasonal seeds would be inexpensive in comparison.
Offer consulting services
How to do it: Provide project-based plant guidance services.
Consulting business models make money by sharing expertise. Customers tend to hire consultants to provide guidance on specific projects, with defined goals in mind for the end result.
As a consultant, The Greenery may offer landscape consulting services to people or other businesses looking to grow their own gardens, earning money for successfully completing their projects under a set budget and by a certain date.
Become a franchisee
How to do it: Buy a plant store that is a part of a franchise.
A franchisee operates a business using the name, intellectual property, and other resources of a larger brand (often one with a loyal, built-in customer base).
As the owner of a plant store franchise, The Greenery would no longer be The Greenery. Instead, it would pay an up-front franchise fee, ongoing royalties, and a percentage of monthly sales to a larger brand in order to sell plants under terms defined by that corporate parent. (Note that this business model is a long-term commitment, so it’s not something you can test or experiment with before taking it on.)
Find the business model that works for you
Ultimately, exploring new business models can help you better serve customers while increasing your revenue. There’s no need to only offer your products or services in one single, static way. There’s nothing stopping you from offering consulting services in addition to selling a subscription product, for example.
Maintaining flexibility in how you sell, and paying attention to your customers’ changing needs, can help you determine new ways to do business that create more value, win new customers, and help you thrive through changing times.