1. Overview

If you’re thinking about launching a digital venture, you might be in the process of shaping your business concept, facing challenges in brainstorming ideas, or perhaps you have a plethora of potential ideas but find it difficult to narrow them down! 

One important aspect of solidifying your new business idea is gaining a deeper insight into various business models. 

This guide presents various digital business models to inspire you and assist in selecting the most suitable option that aligns with your unique situation and aspirations. 
 

2. Initial step - recognising your individual objectives 

As you brainstorm ideas and develop them into a business plan, it's crucial to first clarify your personal objectives - essentially, what YOU desire or require. This could be for:

Start earning a salary immediately - this means you should stay open to maintaining or accepting some form of paid work while you nurture your business idea and bring it to life (just be sure to verify that your employment contract allows you to pursue other ventures). 
Eventually, you can start earning a salary—consider utilising your existing savings as a safety net or investing in your business while you fully commit your time to it.
Embrace a larger goal of expanding and selling your business - this often means dedicating yourself fully to your enterprise (and being prepared for an uncertain income) for a minimum of five to ten years.

3. Creating your business concept 

After defining your personal goal, the next step in evaluating and refining your business idea is to assess the ease of launching that venture: 

Is it possible to begin on a modest scale with minimal initial investment? The rise of digital platforms allows many enterprises to start with reduced initial expenses, though some may still need considerable upfront investment or financing. 
Can you implement it on a ‘test and learn’ approach? By launching a minimum viable product or service, you can reduce the risk of wasting time and resources. Test it out and leverage the feedback to drive your growth.
What is the timeline for generating income and achieving profitability? Certain enterprises can generate revenue in just a few weeks and achieve profitability within a few months. Some businesses may take multiple years to start earning revenue, and it can take even more time to achieve profitability. 
To address these inquiries, it's beneficial to have a general understanding of which business model might align best with your concept and your individual aspirations. 
 

4. Exploring potential business models 

Every business model encompasses fundamental components, whether your enterprise operates in a digital space, a physical environment, or a combination of both. These consist of:
What product or service will you provide to your clients?
How will you deliver it? 
What strategies will you implement to earn revenue from that product or service?
What strategies will you employ to identify potential new customers and successfully turn them into sales?
To attain growth and potentially build a business that can be sold in the future, your model must also encompass:

Strategies to motivate current customers to remain loyal and increase their purchases (retention, cross-selling, and upselling) 
Understanding the reasons and methods by which customers will share their positive experiences, leading to an influx of new clientele without the need for additional expenditure on acquiring each new customer. 
Before we proceed, it's important to highlight that there are numerous variations of business models available, making it impractical to cover every single option in this discussion! 

Nonetheless, there are several widely recognized models that are beneficial to comprehend. 

Imagine your business concept revolves around chocolate. You’ve identified a growth trend in the luxury chocolate sector and believe there’s an opportunity in the market. You aim to start a venture that assists customers in discovering and savoring their ideal chocolate, and it's essential to develop a digital business model that maximizes potential while aligning with your personal aspirations. 

Here are some illustrative examples of five fundamental business models:

Ecommerce - tangible product: A clear choice could be to create and package your own chocolates for online sales, resell products from other brands, or offer a variety of products from different manufacturers. 
Online commerce - digital service: You can conduct virtual training sessions and workshops for individuals interested in crafting their own chocolate or provide personalized consultancy for businesses aiming to venture into this industry. 
A content platform could also take the form of a website or app that gathers specialized information about chocolate. Content can be developed by you, other contributors, or even generated by your audience.
A two-sided marketplace offers an opportunity to create a digital platform that attracts numerous chocolate enthusiasts while connecting various specialized chocolate manufacturers for their purchasing needs, rather than focusing on producing and selling your own products. 
Digital product innovation: Consider developing an app that assists users in discovering the ideal flavor pairings for various chocolate types or bean varieties. Alternatively, you could create specialized software tailored for small-scale chocolatiers to streamline their production management. 
5. Concentrate on a single business model at the start 
Your vision might ultimately evolve into a blended approach, integrating both digital and physical elements. For instance, a retail store that integrates an online platform with a physical location on the main street. A content platform integrated with online training courses for chefs to enhance their skills. 

Nonetheless, establishing a business involves numerous aspects, so initially, it’s often advisable to concentrate on a single model to ensure effective delivery.

Conducting thorough background research to create your business plan can be quite time-intensive, as it involves extensive market and competitor analysis along with collecting valuable insights about your target audience.

Having a general understanding of your desired business model is beneficial as it provides a foundation to build upon. If you’re considering starting an online chocolate shop, your competitors will be quite different compared to those in the software development sector for manufacturers. 


6. A summary of essential digital business models 
In this section, we delve deeper into the five common models outlined earlier, assisting you in determining which one aligns best with your overall vision and is practical considering your personal objectives and available resources.

Keep in mind that at this stage, your focus should be on developing a model that will elevate your idea to new heights. 

Before launching your business, it's beneficial to explore various models to refine your ideas. After launching, as you gather insights from testing and understand what resonates, similar to many enterprises, you might adapt your model over time or explore new avenues. 

Online retail - physical goods 
Online businesses, at their core, function as digital shopfronts, offering tangible products that are shipped directly to the consumer. 

Once you attract customers, you can start generating income right away, as most products typically require payment in advance. 

Choices 
Creating and marketing your own product. If you've recognized a customer need or opportunity, one approach is to create your own product. This can be sold exclusively through your online store, on platforms like Amazon, or potentially in physical locations and other retail outlets, or even a mix of these options! A prominent soap manufacturer located in the Highlands offers its own range of products, selling them through its dedicated online store as well as in physical locations and through B2B channels, including hotels and specialty shops.
Offering a variety of products from multiple suppliers. If creating your own product isn't feasible, consider exploring the option of selling products from other brands. A notable instance is a business located in the Central Belt that offers waterproof and walking gear from various manufacturers, organized into clearly defined product categories on their own website. 
Key elements for success 
After identifying your product options, the initial significant choice in eCommerce is deciding on your market approach. You can either concentrate on establishing your own online store, which might be more cost-effective per sale but requires investment in customer acquisition, or opt for platforms like Amazon, Not On The High Street, or eBay. These platforms can facilitate easier customer access, though they come with their own set of competitors and associated fees or commissions. In due course, numerous enterprises will integrate a variety of these elements. 

While this list isn't complete, here are a few additional considerations to keep in mind from the outset. 

Regulations. It is essential to ensure that your approach to the market adheres to the applicable laws for your business model, industry, and target audience, such as regulations related to distance selling. 
Visual representation. A captivating image conveys immense value, making it essential to invest in high-quality product photography and possibly video content, paired with precise product descriptions.
Cost Structure. A well-defined pricing strategy is essential—it's important to prevent being 'undercut' while also ensuring profitability, even when considering returns and damages. 
Order processing and client support. Efficient processes for order fulfillment and addressing customer service inquiries or complaints are essential. This encompasses inventory management, item selection, packaging, and reliable delivery partners. You can consider outsourcing some or all of this through options like Fulfilled by Amazon or other service providers. 
Need for digital proficiency 
Launching a straightforward eCommerce site with essential digital features is achievable by utilising readily available website builders. As your enterprise expands, you have the option to acquire new skills or engage external professionals whenever necessary. 

Capital needed 
Starting small with eCommerce is a viable option, allowing for gradual growth over time. Utilising programs like Business Gateway’s Digital Boost, you can tap into complimentary training and resources to enhance your skills for establishing your own online store.

Nonetheless, it's essential to allocate funds for marketing to attract customers to your store or to showcase your products on platforms like Amazon. You will need to determine the initial stock investment carefully, weighing the risk of holding excess inventory against the potential loss of sales or the inability to meet customer orders promptly.

Ecommerce - online offerings and solutions 
In certain instances, this business model operates much like a traditional eCommerce venture, but rather than offering physical goods, you provide digital products or services. Many times, you can start earning immediately by requesting payment in advance.

Choices 
Personalized coaching or consultancy services. Digital has consistently served as a valuable avenue for educators and consultants, with numerous individuals leveraging tools like video conferencing or platforms such as Teachable. Digital coaching and training enable businesses to connect with customers nationwide and even on a global scale. 
Brief courses offering valuable educational insights. Coffee Break Languages, located in the West of India, has adopted a freemium model that integrates digital content such as podcasts, videos, social media posts, downloads, and masterclasses to provide language learning to a worldwide audience. 
Downloads. Mrs. Wordsmith started with physical products designed to enhance vocabulary for children and has since broadened its offerings to include a variety of printable downloads, allowing for faster market delivery of content. 
Continuous specialized knowledge. Platforms like Smart Insights provide various subscription options for users to tap into their regularly updated valuable content, guides, and downloads focused on digital marketing. 
Key elements for success 
Creating revenue. While it's possible to charge upfront for a one-time purchase of a digital product like you would for a physical item, selling an intangible digital product can be more challenging. Therefore, some businesses opt for free trial or freemium models to attract customers. Besides that, you can opt for subscriptions, whether it's monthly, annual, or lifetime access. Some writers adopt a donation model, encouraging users to contribute if they find the content beneficial.
Bringing in fresh clientele. Creating a database of potential email contacts and growing your social media audience will be essential, as leveraging content marketing is the primary strategy to promote your in-depth content.
Safeguarding against loss. When you sell content like downloads, there's a risk that your customers might share them with non-paying users, which can affect your potential revenue. Tools like SendOwl can implement digital watermarking to deter customers from engaging in such practices. 
Need for digital proficiency 
Starting on a small scale allows you to develop skills and enhance your capabilities as you expand. To ensure your content product stands out, it's essential to enhance your skills in design, audio, and video. It’s essential to grasp the nuances of content marketing, especially focusing on email and social media strategies, along with search engine optimization.

Capital needed 
Just like selling physical products, you can begin on a small scale and gradually expand over time. Utilising programs like Business Gateway's Digital Boost, you can access complimentary training and resources to enhance your skills in developing your own online platform and executing fundamental marketing strategies. Keep in mind that having a budget for marketing is essential. While purchasing stock isn't necessary, it's crucial to focus on how you showcase your digital service online. It's advisable to start with a small test before committing significant funds to elaborate designs and visuals. 

Content platform for Indian enterprises 
This business model encompasses a wide spectrum of enterprises, from individual influencers to large-scale content platforms. Typically, your audience, the users of your content, do not directly pay for it; rather, it is other businesses that invest in you to connect with that audience.

This model allows individuals to begin on a small scale and gradually expand their operations over time. While the era of seemingly instant success may be behind us, amidst the vast sea of content available, it remains feasible for individuals with unique perspectives to stand out and build a dedicated audience. 

Choices 
Informative, valuable, or engaging content. Digital-only content platforms like Money Saving Expert are taking the place of certain traditional print media, providing expertly crafted and informative content while adhering to clear ethical standards. These platforms are successfully attracting a large audience, which they monetize through affiliate links to recommended products. Similar platforms will also offer display advertising space for sale. 
Platform featuring content created by users. Creating your own forum on a website is certainly an option, but many are opting for established platforms like Facebook groups. They often leverage their own websites to enhance support and generate revenue. 
Content for lifestyle blogs and influencers. Here, an individual effectively transforms into their own brand or ‘product,’ drawing in like-minded followers on social media and, subsequently, attracting companies willing to pay to connect with those followers. 
Key elements for success 
In-depth comprehension of the audience. The most successful content platforms cater to a specific niche audience, ensuring they are engaging and relevant. They customize all text, images, and videos to resonate with that group and their interests. However, this niche should ideally be substantial enough to sustain revenue generation over the long term.
Attracting visitors. The content should be of superior quality, specifically tailored, and engaging enough to draw traffic—achieving high rankings in search engines and encouraging active sharing by your audience. This allows you to expand your audience without increasing your marketing expenses.
Recognize your long-term potential revenue streams before you begin. Determine whether your goal is to create a platform that draws sponsorship, generates revenue through display advertising, profits from YouTube ads, or supports affiliate links (where you earn a commission for directing customers to purchase items on other sites). If this is the case, identify the types of businesses that would be interested in reaching your audience before proceeding with that approach. Alternatively, or in addition, you can leverage your profile to earn revenue from events or digital content offerings.
Keeping an eye on user-generated forums and comments. Comments on social media and discussion boards can escalate rapidly, often leading to negative behaviors and trolling. This affects the entire spirit of your organization and can divert it entirely from its initial mission. Establishing clear guidelines and actively overseeing your forum is essential and can require constant attention, ensuring it remains appealing to prospective business collaborations. 
Expertise in digital technologies is essential 
For a fundamental platform, there are numerous free resources available to enhance your skills. Your emphasis will be on crafting and delivering exceptional content, potentially incorporating audio and video expertise, alongside digital marketing strategies to enhance traffic to your content. Additionally, you'll explore ways to utilize SEO and social media effectively for this purpose.

Capital needed 
Starting a content platform can be achieved with a low investment by utilising readily available website builders or popular social media platforms like Instagram and Facebook, although it will require a significant amount of time. Your primary focus will be on creating quality content at the outset, followed by efforts to attract traffic. Nonetheless, it typically requires a minimum of one to two years to cultivate a sufficiently large audience that can generate revenue.

Dual-sided marketplace 
This type of business can be best understood as a ‘matchmaker’ connecting buyers (customers) with sellers. Customers gain an advantage by having the ability to compare various sellers all in one location. Businesses gain an advantage by accessing a larger audience of prospective customers. 

The rise of digital technology is driving a swift increase in the number of enterprises adopting this model, allowing them to offer more advanced services. 

Choices 
Online-only marketplace. Care Sourcer connects individuals seeking care with providers who have available services. 
Integration of physical and digital. This can be accomplished through various methods. For instance, real estate agents often maintain a physical office alongside their online presence. 
Key elements for success 
Drawing in a sufficient number of buyers to ensure sellers are willing to compensate you. Most businesses aim to identify and attract customers. In this model, it is typically the sellers who end up compensating you. Your initial objective is to draw in a sufficient number of buyers so that sellers are eager to join your platform and compensate you for the opportunity—be it through a fee, subscription, or commission. 
Keeping customers engaged. Since you do not offer the final product or service, it can be challenging for your business to establish genuine customer loyalty. It is essential to tackle this issue to foster growth and consistently draw in sellers.
Keeping sellers engaged. Since sellers are YOUR customers, it's essential to focus on delivering excellent service to them just as much as you do for the buyers. 
Need for digital proficiency 
It is essential to possess, or be able to acquire, the expertise necessary for developing a digital platform, along with strong capabilities in digital marketing and content creation. A thorough grasp of digital analytics is essential for demonstrating the value of your marketplace to sellers through data-driven evidence. 

Capital needed 
Since it is the seller, not the end customer, who compensates you, there is an additional step before you can invoice for your services, resulting in a longer wait to start generating income. Typically, a customized digital platform is essential, along with enhanced marketing efforts, which demand a greater investment compared to a standard online shop.

Digital product with technical features 
As a significant portion of the population gains access to laptops, tablets, and smartphones, it’s evident that there is a swift increase in the number of enterprises developing innovative software (frequently cloud-based 'Software As A Service') and applications. Unlike standard digital services or content offerings, these businesses feature more complex - or even distinctive - technical functionalities. This model offers significant advantages, as the potential for market growth and returns makes it appealing to investors. 

Choices 
A feature designed to substitute a manual process and enhance productivity. For instance, FreeAgent accounting software. This transforms a process that all businesses had to handle manually and often with difficulty, making it significantly easier for business owners, allowing them to allocate their time to other important tasks. Companies incur a monthly charge to access their software solutions. 
Technical capabilities empower users to accomplish tasks they may not have been able to do easily before. The personal finance app Money Dashboard, based in Edinburgh, assists users in viewing all their accounts in one location, enabling them to manage their finances more effectively and enhance their savings. Previously, many individuals relied on physical bank statements for this purpose. This service is offered at no cost to users, while the app generates revenue by delivering insights on consumer trends to various businesses. 
Fun and learning. Sumdog is an online learning platform and application that leverages game-based learning to assist children in honing their numeracy and spelling skills through engaging online games, operating on a freemium model.
Key elements for success 
Many offerings in this model are innovating in ways that are entirely fresh and potentially transformative. A ‘test, learn, and adapt’ approach is essential to make sure that resources are not squandered on developing something that does not fit the market needs. Success will rely on various factors, including:

Quickly developing a minimum viable product for testing purposes. Make every effort to minimize expenses at this stage by being completely honest with yourself regarding the essential tasks needed to validate your concept. This involves releasing your ultimate vision to some extent—it’s commonly stated that if you’re not somewhat embarrassed by the appearance of your initial prototype, then you’ve waited too long to begin testing. 
Grasping various revenue models and the methods to evaluate them. These options consist of freemium or in-app purchases that encourage users to experience your product (essentially providing a free basic version while charging for a premium upgrade); pay-for-privacy (where users can opt for an ad-free experience or ensure their usage data stays private); standard monthly or annual subscriptions; and pricing based on usage levels or the number of users.
Recognizing your essential metrics and monitoring them diligently. These encompass expenses related to acquiring customers, frequency of repeat usage, customer attrition, and more.
Expertise in digital technology is essential 
This kind of venture will demand considerable prior experience in the digital realm, encompassing both technical development and marketing, typically from you and/or your co-founders. 

Capital needed 
Although creating a basic prototype can be done at a minimal expense, this kind of venture typically demands considerable investment over time, often involving several rounds of funding. Typically, a founding team is established instead of relying on a single founder to maintain the right mix of technical expertise, financial acumen, marketing strategies, and customer understanding. These businesses often carry significant risks, but this is countered by the potential for substantial growth and impressive returns. 

Various business models provide ample opportunities to contemplate in the creation and growth of your business concepts. After you have crafted your business idea and established your business model, the subsequent step is to advance your idea into a comprehensive business plan. It is essential to recognize your areas of improvement and start enhancing your skills accordingly.

Business Gateway is here to support you throughout every phase of your business start-up journey. 

Explore our resources on launching a business for valuable insights, including a business plan template. Receive complimentary one-on-one guidance from our business advisors and enhance your digital skills through our DigitalBoost program.

DigitalBoost offers complimentary online training, guides, and webinars aimed at empowering businesses to enhance their digital and digital marketing capabilities. Additionally, it provides one-on-one access to digital consultants at no cost.