Summary Points:
- Confused about starting a business? Start by understanding powerful business models.
- Models like pay-as-you-go, freemium, and peer-to-peer have reshaped industries.
- Real examples like Netflix, Ola, and Salesforce show how these models work.
- Each model has unique revenue, scalability, and customer retention benefits.
- Choose based on your strengths, market needs, and how customers want to engage.
Starting a business without knowing what to build is completely okay—what matters is how you plan to deliver value. The business model is where it all starts.
These 10 proven business models have powered some of the most successful startups globally. They’re easy to understand, scalable, and adaptable across industries—from tech and education to retail and logistics.
Let’s break them down, with clear definitions, examples, and when to use them.
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1. Pay-As-You-Go Model
Think: Netflix, AWS
Customers pay for what they use—no more, no less. This model works great for utilities, digital tools, and subscription services.
Example:
Amazon Web Services (AWS) bills startups and enterprises based on how much storage, compute, or bandwidth they use.
Use it when:
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Your product has modular or time-based usage.
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Customers value cost flexibility.
2. Lock-In Model
Think: Apple Ecosystem
This model ties customers to a platform so they can’t easily switch. It increases retention and repeat purchases.
Example:
Apple locks users into its ecosystem with iCloud, AirDrop, and exclusive apps—switching becomes effort-heavy.
Use it when:
- You can create a closed loop of services/products.
- You want to maximize customer lifetime value.
3. Aggregator Model
Think: Ola, Zomato
You bring together providers under one brand and control the customer experience while others deliver the service.
Example:
Ola aggregates drivers; Zomato aggregates restaurants. The platform earns through commissions or delivery fees.
Use it when:
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There’s highly fragmented supply, like transport, food, or healthcare.
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You want to build a tech-first platform without owning inventory.
ALSO READ: 7 Big Mistakes Indian Startups Make—and How to Avoid Them
4. Franchise Model
Think: McDonald’s, KFC
Let others run your brand using your systems in exchange for upfront and recurring fees.
Example:
McDonald’s operates through thousands of local franchise partners following standard operating procedures.
Use it when:
- You’ve nailed a profitable, repeatable model.
- You want fast expansion with minimal capital.
5. Octopus Model (Multi-Brand Business)
Think: Tata, Aditya Birla Group
You run multiple related or unrelated businesses under a parent group to diversify risk and cross-leverage resources.
Example:
Tata Group owns Tata Steel, Tata Motors, Tata Digital, and more—each operating semi-independently.
Use it when:
- You want to build a conglomerate or incubator of startups.
- You have capital and strong leadership bandwidth.
6. Data-as-API (Licensing Data)
Think: OpenAI, Google Maps API
You generate or collect unique data and license it via APIs to other companies.
Example:
OpenAI offers GPT models via API; businesses build on top of it and pay per usage.
Use it when:
- You have proprietary data or insights.
- Your users are developers or tech startups.
7. Marketplace Model
Think: Amazon, Flipkart
A two-sided platform connecting buyers and sellers. You take a cut from each transaction.
Example:
Amazon earns via commissions, ads, and services offered to sellers.
Use it when:
- You can build trust and scale supply/demand.
- You want minimal inventory involvement.
8. Freemium Model
Think: Canva, Spotify
Offer a free basic version and charge for advanced features. It’s ideal for digital products.
Example:
Canva lets users design for free but charges for premium templates and collaboration tools.
Use it when:
- You want to attract users quickly and convert later.
- You can support free users at low cost.
9. Peer-to-Peer (P2P) Model
Think: Airbnb, BlaBlaCar
Users directly interact or transact with each other on your platform, and you earn a service fee.
Example:
Airbnb connects property owners with guests; BlaBlaCar connects drivers and passengers.
Use it when:
- You want to enable sharing or renting of existing assets.
- Your platform can handle trust, verification, and payments.
10. Razor and Blade Model
Think: HP Printers, Gillette
Sell the base product at a low cost, and earn profit from consumables or upgrades.
Example:
HP sells printers cheaply but makes money on expensive ink cartridges.
Use it when:
- Your product requires repeat purchases (blades, batteries, filters).
- You want to create long-term revenue per user.
Real Case Study: Netflix
Netflix started as a pay-as-you-go DVD rental, then evolved into a subscription model with digital streaming. Over time, it developed lock-in features like recommendation algorithms and original content.
It now operates a hybrid model, combining content licensing, production, and data-driven personalization.
