In this post I'll explain the 10 proven business models that will let you create and grow a successful online business that generates online income.
One of the most common mistakes new entrepreneurs make is they jump into a business idea and start executing without understanding and clearly defining their business model.
Make sure to understand the different business models and focus on the one that best aligns with your skillset, experience, goals and aspirations.
Let me know if you have any questions in the comments below.
1. Selling digital services — freelancing or creating an agency
This option entails providing digital services to a client in exchange for a set project fee, an hourly rate or a recurring monthly retainer.
Example: MashMetrics is an agency that offers Web Analytics services — mashmetrics.com
Becoming a freelance digital service provider has the lowest barriers to entry with the highest short term earning potential. If you have marketable skills that others are willing to hire you for, then you can in a short space of time find a handful of projects or clients and generate an online income.
The rate that you will be able to charge depends on your ability, your experience and your past success stories. What can you offer a potential client, what can you help them achieve or achieve on their behalf and what success stories do you have under your belt that will convince clients that you are the right service provider to work with.
Example: UpWork is a market place that matches freelancers with rewarding projects — UpWork.com
Any area of expertise that can be delivered digitally and worked on remotely can be sold as a digital service. These can include, but are not limited to:
It’s fairly easy to start freelancing, but as a freelancer your income is capped by the total number of hours you can work per month or by the number of clients that you can service at any given moment. Also keep in mind that your income potential and potential for being hired is directly proportionate with your skill level, your experience and how competitive the market is for what you are offering.
If your goal is to earn more and take on more clients than you can handle yourself, then you will need to start hiring contractors and/or employees to build a team. By expanding your freelance business will grow into an agency. Building a digital agency comes with it’s own set of challenges and opportunities, and can be very lucrative in the long run if done correctly.
You can find many freelancers on UpWork and Fiverr. And here is a list of top 100 agencies.
2. Selling digital consulting, coaching or training services
This option entails providing strategic advice and support to an individual or a company via online video calls or sessions.
Example: Willo Sana offers coaching services — WilloLovesYou.com
If you have the knowledge and experience in a given area and you are willing to share your expertise and guidance with your clients, then this is a viable option. With this model you are not doing the work on behalf of your client, but you are merely accompanying and guiding them along their journey.
As a coach or consultant you can offer one-on-one, group or team sessions. If needed and when possible you can offer in person sessions, but sessions can also be conducted online via platforms like Skype or Zoom.
Here are some examples of coaches and consultants based on their expertise:
Here are 3 examples of life and business coaches: Willo Loves You, Charlie King Coaching, & Million Dollar Coach. And here is an example of an online language tutoring platform: iTalki
3. Selling physical products online — eCommerce
This model entails creating your own physical product and/or selling someone else's product in exchange for a margin or a sales commission.
Creating a new product from scratch is generally speaking no minor undertaking. You’ll need to start with an idea, come with the design, manufacture a prototype, conduct extensive product testing, and market the product well enough to generate sales. Even though manufacturing has become a lot more accessible, it still has major risks and requires a fair amount of start up capital.
Having said that it also depends on your specific product. Creating and selling custom designed and hand made face masks or swim wear is less complicated compared to designing, manufacturing and selling electric skateboards or a DIY hydroponics system.
If you do manage to design, manufacture, distribute and sell a new or improved physical product profitably, then you are in a position to build a bigger brand and product portfolio. You’ll also have a competitive edge over your competition, assuming the product you sell is unique and cannot easily be copied.
Here are three great examples of products that are being successfully sold online: The Roost Stand, Switch Pod, and Minaal.
Example: The Roost Laptop Stand — therooststand.com
Besides creating a brand new product, another option would be to sell an existing product either via your own online store or via a larger online retailer like Amazon, using their FBA (Fulfilled by Amazon) program. If you do not hold your own stock and you outsource the fulfilment of your orders, then this model is referred to as drop shipping.
Here are examples of the top 500 Shopify stores: and here are some of the top Etsy stores.
4. Selling digital products
This option entails creating, marketing and selling a digital product online. Digital products can include books, audio books, games, online courses, templates, sheet music, musical recordings, recipes, building plans, checklists, or software to name a few.
The benefit of selling digital products is that distribution has become a lot easier to scale and once the initial production is complete, you can sell unlimited copies of your product.
Once you’ve coded a game, written a book, recorded a song or finished filming and editing the lessons of your online course, you package the product once and can keep selling copies of it for years to come. By keeping overhead and recurring costs low, it’s possible to generate high margins when selling digital products.
Example: Data Driven U sells online courses, as well as a monthly or annual membership — datadrivenu.com
One major downside of the digital product business model is that digital products can easily be copied and pirated, but don’t let that hold you back.
One other thing to keep in mind is that creating the digital product is only part of the challenge. A major part is finding product market fit (i.e. creating a product that people want and are willing to purchase) and getting your product in front of the right audience.
The right audience can either be an audience that you have built up over time or you can rent the attention of an audience by running ads.
Here are some examples of websites selling digital products:
5. Affiliate Marketing
This model entails promoting someone else's product or service in exchange for a % commission for each sale that you generate.
Instead of spending their marketing budget on running ads and promotions, some companies offer an affiliate program where they will let anybody willing to promote their product sign up as an affiliate. After being accepted into the program, the affiliate will get their own unique affiliate link which they use when linking to the product online.
Any sales that are generated via that affiliate link will then get credited to the affiliate’s account and the company will pay the affiliate the agreed upon commission on the agreed upon payment schedule. The commission is paid out by the company selling the product at no additional expense to the customer making the purchase.
Affiliate marketing has a low barrier to entry, but generating enough traffic and sales to earn significant commissions takes time and effort and is something that most affiliates never achieve.
Most affiliate commissions are once off commissions, but some companies do offer recurring commissions for the lifetime of a customer that the affiliate referred. Recurring commissions are great for affiliates, as they will continue getting paid every month as long as the customer remains a customer.
Affiliate income can be a great stream of passive income, but it’s important to understand that you won’t generate any sales without putting in the work that is needed to build an audience and generate the traffic to the specific offer that you are trying to sell.
Example: Amazon Associates Program — affiliate-program.amazon.com
There are many different ways of driving traffic to your affiliate links. Many YouTubers add affiliate links to the description of their videos recommending their preferred gear. Other affiliate marketers will add their affiliate links to review videos and blog posts. Travel bloggers might recommend specific listings on a booking site by linking out via their affiliate links.
Here are some real world examples of well known affiliate programs:
And here are examples of some real world affiliate marketers:
Example: Smart Passive Income — smartpassiveincome.com
6. Advertising & Sponsorships / Influencer Marketing
This model entails building an audience and then selling their attention to advertisers.
The most most common examples of this model would be YouTubers, authority or news site owners, Social Media Influences (Instagram, TikTok, etc.), and podcast hosts.
A YouTuber will regularly publish videos to build grow their audience on the platform. As they increase their subscriber count, their views, and their engagement, so their channel will become more valuable in terms of displaying ads. In order to monetize their account (i.e. activate ads on their account) a YouTube account needs at least 1000 subscribers and have at least 4,000 hours of watch time within the past 12 months.
An authority or news site owner will create a website that focused on a very specific niche and contains valuable content about that niche. They will create content that ranks in search results and will therefore attract readers (i.e. traffic). They can then sign up with an ad network (for example Google AdSense) to place ads on the pages and blog posts on their site. Ad networks will either pay out CPM (cost per thousand impressions) or CPP (cost per click). In order to generate significant ad revenue a website will need a significant amount of traffic. Some authority sites will also charge advertisers for a sponsored post on their website.
A social influencer will spend their time regularly publishing new content to grow their following on the most popular social media channels including Instagram and TikTok. As their subscriber count and view count grows, so they will have more and more attention to sell to advertisers and so the cost of placing ads on their accounts will increase. Social influencers can charge per sponsored post or can sign endorsement deals in which they feature and promote a brand on their channels.
A podcast host will grow their audience and subscribers by regularly publishing new podcast episodes. As soon as their channel is large enough they can sign start incorporating ads or promotions as part of their episodes. If you become popular enough you could even license your podcast to Spotify for a sweet $100m — yip, I’m looking at you Joe Rogan.
Example: Armchair Expert Podcast — armchairexpertpod.com
With any of these examples, keep it mind that it takes consistent effort and determination and it can take a considerable amount of time to grow a channel to a significant size to make advertising a viable option.
7. Membership Sites, Events & Exclusive Communities
This model entails creating and selling access to a private membership and/or creating and selling tickets to in-person events, retreats and conferences.
Running a successful membership site can be a great source of recurring revenue, assuming that you can convince your members to keep paying their monthly membership.
Membership sites generally provide exclusive access to premium resources and can also include an online or in-person community that gives members the opportunity to expand their network by meeting like-minded individuals.
Example: The Dynamite Circle — tropicalmba.com/join-the-dynamite-circle
Events can be run virtually or in-person and can provide the attendees with a specific experience which might include an educational element, like training, presentations or workshops. Formats can include conferences, retreats and masterminds. Creating a monthly, quarterly or annual event can help solidify the experience as a recurring one in the minds of attendees. And it also lets you pre-sell tickets for upcoming events.
The Dynamite Circle is an example of an online community membership site that brings together business owners and location independent entrepreneurs.
DCBKK is the exclusive annual conference that is hosted by the Dynamite Circle, which is only available to DC Members.
And Lineage of Light is an example of online training and in-person educational retreats in an area of Ancient Wisdom Sciences, Core Cellular Healing & Ke Ala.
8. Software as a Service (SaaS)
This model entails creating and selling access to a software application that provides a valuable solution to a common and recurring problem.
The SaaS model is great for regenerating recurring revenue, assuming you can build up a loyal user base and customers that keep paying the monthly or annual renewal fee.
Developing a new piece of software is a challenging under taking, as you will need a to create a solution that users are willing to pay for on a recurring basis. You also need to either build it yourself or hire developers. You will most likely also need to keep improving your product in order to keep users from switching to a competitor. The development, marketing, maintenance and customer support will need to be financed and managed.
Example: Dropbox Business — dropbox.com
There are higher barriers to entry when it comes to developing software, but if you can create a valuable solution that is delivered in an efficient and enjoyable user experience, then you can create a business that can be scaled almost indefinitely. And because it’s a digital product, your team can work remotely and digitally.
Here are some real-world example of successful SaaS products:
9. Brokerage — Online Market Places
This model entails bringing together buyers and seller to facilitate some form of transaction. This could involve facilitating the sale of an online business, a website or a service.
Example: AppSumo — appsumo.com
Here are some real world example of online brokers and/or market places:
10. Or of course, a combination of the above.
Last but not least it is common for a business to use a more than one of the above business models. For example a brand selling online courses or books, might also offer done for you services. Or a YouTuber might include affiliate links in their video descriptions, but also monetises their channel with advertising.
Using more than one of the above models can work well, but trying to implement more than two or three will probably result in a dilution of your efforts. A strong recommendation would be to have a clear focus and stick with what works best for you. You can always expand at a later stage.
Thanks for taking the time to read this post. If you have any questions feel free to leave a comment or contact me here.