Your business model determines how you generate revenue and deliver value to customers. Each model has different implications for startup costs, cash flow, scalability, and legal requirements.
- Service-based
- Selling expertise, time, and skills (consultancy, trades, professional services). Low startup costs, immediate income possible, limited by your time.
- Product-based
- Manufacturing or selling physical goods. Higher startup costs for inventory/equipment, longer time to market, potentially higher margins.
- Subscription
- Recurring revenue model (SaaS, memberships, box services). Predictable income, requires retention focus, upfront investment in platform/delivery.
- Franchise
- Licensed business model from franchisor. Proven system with support, high upfront fees (£10,000-£100,000+), ongoing royalties.
- Buying existing business
- Acquire established operations. Immediate revenue, existing customer base, requires due diligence and financing.
Key considerations for each model
Startup costs: Service businesses typically require minimal capital (£500-£5,000) while product-based and franchises need significant investment. Subscriptions fall in between depending on technology requirements.
Cash flow patterns: Service income is immediate but unpredictable. Products require upfront inventory investment. Subscriptions provide steady income but require customer acquisition upfront. Franchises have predictable revenue but fixed royalty obligations.
Scalability: Service businesses scale slowly (limited by time). Product and subscription models can scale significantly. Franchises scale through replication but require franchisor approval.
Legal requirements: All models need business registration and appropriate insurance. Franchises involve complex legal agreements. Product businesses may need product liability insurance and compliance testing. Service businesses may need professional indemnity insurance and sector-specific qualifications.