Try one of these business models on for size

There’s more than one way for a business to earn revenue – as pioneers such as Netflix, Apple and McDonald’s have proven.

There’s more than one way for a business to earn revenue – as pioneers such as Netflix, Apple and McDonald’s have proven.

Each of these innovative companies turned a relatively unknown business model into massive profits and brand-name recognition.

Netflix makes billions of dollars using a subscription model. Apple reaches millions of young buyers through its affiliate program. McDonald’s embraced franchising to put its ‘golden arches’ into cities and towns throughout the world.

Read on to learn how these business models might work for your business.

1. The subscription model

What could be better than monthly, recurring revenue?

Netflix combined video-on-demand (VOD) services with a monthly subscription model to create an irresistible offer: for just a few dollars a month, you can watch hundreds of movies, television programs and documentaries any time you want.

Offering products or services to subscribers on a pre-paid basis is an excellent way to earn a steady stream of income and favourable cash flow. In 2015 alone, Netflix earned $6.78 billion USD in revenue.

The internet has facilitated an explosion of subscription-based businesses. From grocers to clothiers, you can go online and find many examples of companies embracing the subscription business model. A subscription model has the potential to work for nearly any type of business, provided your customers are willing to commit to recurring payments in exchange for defined products or services.

The key to winning over subscribers is to offer a solution with a high perceived value at a low flat rate – like your monthly gym membership or favourite mobile phone app.

2. The affiliate model

Apple markets to students through campus representatives, recruiting a young army of affiliates who agree to do product demos with their peers.

An affiliate is someone who helps sell a product or service in return for a commission or a perk. Affiliates never take ownership of the product – or even handle it – instead, they are rewarded for referring customers to a business when that customer buys something.

These affiliates often use social media and blogging to attract new leads through their personal networks in exchange for a percentage of each sale.

Getting people to re-sell your product or service gives you the ability to reach more customers than you could on your own.

3. The franchise model

In order to expand, McDonald’s founder Ray Kroc chose franchising as the best strategy to scale the original restaurant concept. Today, McDonald’s operates in 100 countries and enjoys over $26 billion in sales.

If your company has the potential to develop an effective turnkey system that earns money, and can easily be replicated by other businesses, you can license your system for a fee. According to the Canadian Franchise Association (CFA), franchisees invest between $10,000 and $1 million per franchise unit.

Like Ray Kroc, the franchise model is attractive to entrepreneurs who want to scale business growth but don’t necessarily want to own or run additional locations.

With this model, you’ll first need to develop a proven business system that is (almost) fool-proof for other people to operate. Once your system proves successful, you can leverage your now established brand to attract franchisees or licensees.  

As the process of franchising can be complicated, it’s best to work with an experienced franchise consultant.

Talk with Scotiabank small business experts

At Scotiabank, our advisors understand business owners.  We’re ready to help you – just as we’ve helped thousands of business owners like you to achieve their goals.

Get more business advice, access helpful resources and learn about available financing solutions by speaking with a Scotiabank Small Business Advisor today.

Helpful tips

Disclaimer: The advice provided in this article is for informational purposes only.  You know your business best – so be sure to implement what works for you and contact professional advisors as necessary.

Find content for your business stage

Planning my new business

If you have not yet started your business, let us help you determine the feasibility of your new idea.

Go

I’ve started my business

If you've been in business up to 2 years select this option to identify how to run your business more effectively.

Go

I’m growing my business

If you have been in business for more than 2 years, determine the crucial next steps for growth.

Go