After you validate the market, the next step in the process of starting a company is to identify the business model. The business model in short answers the question: how do you make money? The following site outlines the nine business models:
Brokerage Model—bringing buyers/sellers together.
Advertising Model—promoting products/services to an audience
Infomediary Model—gathering information about an audience and monetizing it
Merchant Model—selling goods/service either wholesale or retail
Manufacturer (Direct) Model – selling goods/services directly to the user without an intermediary
Affiliate Model – providing purchase opportunities wherever people may be
Community Model – selling ancillary products/services in a community
Subscription Model – charging for ongoing usage of a product/service
Utility Model – charging based on how much of a product/service is used.
In today’s web-based world, it’s common to use two or more of these models in the same business. Before fund raising, it’s important to identify the business model. The business doesn’t have to generate a great deal of revenue but it needs to have a clearly defined business model that is scalable.