Imagine if you could make your business more profitable just by changing the structure of how it works. In most cases, this is the best way to actually do it. Lots of companies have great products and services but they have the wrong business model operating. When this happens, it makes it much more challenging for them to develop their cash flow streams and really produce the revenue that’s going to push their companies forward. That’s where this post helps. We look at some of the business model upgrades you can make usually overnight to massively improve how your company functions and how competitive it is in the marketplace.
Switch to recurring revenue models
One of the easiest ways to make a lot of money is to switch to recurring revenue models via subscriptions. This transformation is something that a lot of companies are now calling servitization. Recurring revenue models are profitable because they often increase the lifetime value of every customer. They reduce churn and enable higher margins while also increasing the number of customers since many clients are willing to pay a small subscription cost rather than one large upfront fee.
A good example of this is Adobe’s shift from boxed software to Creative Cloud. It’s also something that’s used in service-based companies like Dollar Shave Club instead of getting consumers to buy razors and shaving cream ad-hoc when it suited them. Dollar Shave Club systemizes the process by sending them a package in the post every month.
Installing renewable energy systems
Another business model that really works these days is installing renewable energy systems. Many companies are now putting solar panels on their roofs and building windmills near their facilities to power their electrics. This works because of the development of the technology. It’s now become one of the best ways for companies to reduce their long-term energy costs and boost their margins.
Our advice is to find the best solar installer you can and work with them. They can provide you with assistance and tell you how much money you are likely to save long-term.
Move to advertising supported monetization
Another approach is to move your business model to advertising-supported monetization. The idea here is to offer your core service for free or for low cost and then take money from advertisers and offer consumers premium upgrades. One of the reasons this is almost always profitable is that once you reach scale, your marginal costs go to zero while your advertising revenue scales with the number of users that you have. Furthermore, during high-growth periods you are more likely to attract premium users who are willing to pay you a subscription month, which means that you can combine this model with a subscription-based service.
Take YouTube for example. The company makes money from advertising on its platform and it also shares ad revenue with creators. Creators then create better content which it can use to sell premium subscription services. Users pay a monthly fee of about $15/month.