The Best Business Model as a service provider
In July, I am celebrating two years as a full-time self-employed Business Coach! As I reminisced about my journey of starting a side hustle and transitioning into full-time self-employment, I couldn't help but reflect on how crucial my chosen business model was to my success. It got me thinking about the unfortunate reality that many service providers struggle to sustain their businesses simply because they embark on the wrong path at the wrong time.
Let me explain.
First and foremost, let's establish that there is no such thing as a "wrong business model." All models have their validity and potential for success. However, the key lies in finding the one that aligns with your current stage and enables you to scale effectively.
What I've observed is that a significant factor contributing to the failure of numerous service providers (or the discouragement that leads people to give up on their business) is the tendency to focus on selling:
❌ an on-demand online course without validating the content or building an audience,
❌ an online membership without first cultivating a community,
❌ low-ticket mentorship or 1:1 sessions that don't generate meaningful revenue.
For a new business owner, the biggest challenge is filling your funnel:
1️⃣ Attract an audience of individuals who need what you have to offer.
2️⃣ Demonstrate why and how you can help them solve their problem/ achieve their goals.
3️⃣ Get on sales calls and close.
Considering that your funnel may be relatively dry during the early stages, the few individuals you manage to attract, nurture, and convert must generate sufficient income to sustain your progress. Therefore, at this stage, most service providers, coaches, and freelancers should consider charging higher ticket prices for the fewer sales they secure.
On-demand courses and memberships, which typically command lower prices and require a higher sales volume, can be pursued at a later stage.
Here are five factors that helped me in the early stages and allowed me to transition into full-time entrepreneurship:
Establishing authority: By engaging in public speaking opportunities, networking, and creating educational content, I positioned myself as an expert in my field.
Growing my audience: To showcase my offerings, I began hosting free and affordable events and webinars, providing people with a firsthand experience of what I bring to the table.
Crafting packages that made sense as a side-hustler: Instead of focusing on one-on-one coaching, I introduced a high-ticket group program that aligned better with my schedule and allowed for scalability, while delivering exceptional transformations to clients.
Validating my business model: Prior to bidding farewell to my corporate job, I dedicated over a year to growing my business and thoroughly assessing its model and income potential.
Setting boundaries: Having experienced burnout before, I approached this side hustle with a clear vision of how much energy I could invest without compromising my health and well-being.
What's the best business model as a service provider?
In the dynamic landscape of freelance work, service providers need to carefully consider their business models to maximize their chances of success. Choosing the right business model can have a profound impact on your income potential, client acquisition strategies, operational efficiency, and overall sustainability.
Here are seven business models that you should consider to help you navigate the freelance world with confidence and strategic foresight.
Hourly Rate Model:
The hourly rate model is a popular and straightforward approach for many service providers. It involves charging clients based on the number of hours spent on a project or task. This model works well when the scope of work is uncertain, or projects require a significant amount of collaboration or consultation. However, it's important to set a competitive rate that reflects your expertise and market value. While the hourly rate model provides immediate income, it may limit your earning potential if you are constrained by the number of billable hours.
Project-Based Model:
The project-based model revolves around charging clients a fixed fee for a specific project or deliverable. This model allows service providers to estimate the effort and cost involved accurately, providing clients with transparent pricing and delivering projects within a defined scope. Project-based pricing can be highly rewarding if you efficiently manage your time and deliver high-quality results. However, it requires careful project scoping and clear communication to avoid scope creep and potential conflicts.
Value-Based Model:
The value-based model focuses on the value and outcomes your service provides to the client rather than the time or effort invested. By understanding your clients' pain points and desired outcomes, you can price your services based on the value they bring. This model requires a deep understanding of your clients' needs and the ability to communicate the value proposition effectively. Adopting a value-based model can lead to higher profitability, as clients are often willing to pay a premium for services that generate substantial results.
Retainer Model:
The retainer model involves establishing an ongoing partnership with clients, where they pay a fixed fee on a recurring basis for a set number of hours or services each month. This model provides stability and predictable income, as it ensures a regular workflow and ongoing client commitment. Retainers are particularly beneficial for service providers with long-term clients who require continuous support or a specific set of services. However, it's crucial to define clear deliverables and terms to avoid scope creep and ensure a fair exchange of value.
Subscription Model:
The subscription model is gaining popularity in the freelance world, especially for digital services such as content creation, graphic design, or marketing support. With this model, clients pay a recurring fee for access to a predefined set of services or content on a regular basis. This approach provides a steady stream of income, allows for scalability, and fosters long-term client relationships. To succeed with a subscription model, you must consistently deliver high-quality content or services and continually add value to retain subscribers.
Productized Service Model:
The productized service model combines the benefits of a standardized product with the customization of service. It involves packaging your expertise and services into pre-defined offerings with fixed pricing and clear deliverables. This model simplifies the buying process for clients, enhances your efficiency by streamlining workflows, and allows for scalability. By productizing your services, you can cater to a broader audience, automate certain aspects of your work, and leverage technology to deliver consistent results.
Hybrid Model:
Service providers can also opt for a hybrid model, combining elements from multiple business models to suit their unique circumstances. For instance, you can offer project-based services along with retainer options, providing flexibility to clients while ensuring a steady income stream. By adopting a hybrid model, you can diversify your revenue streams, cater to different client preferences, and accommodate varying project scopes.
Selecting the right business model is a critical decision that shapes the trajectory of your freelance career. Each business model has its advantages and considerations, and it's essential to align your choice with your skills, market demand, and long-term goals. By exploring these business models - hourly rate, project-based, value-based, retainer, subscription, productized service, and hybrid - service providers can navigate the freelance landscape strategically, optimize their income potential, and build sustainable and fulfilling freelance businesses. Remember, adaptability and continuous evaluation of your chosen model will contribute to your long-term success in the dynamic world of freelancing.
Find the Best Business Model for You
Of course, there's so much more to this topic, and there is no one-size-fits-all approach. But I have seen this time and again - so I thought I'd share these thoughts with you.
If you're a side-hustler contemplating the transition to full-time entrepreneurship, I have a program tailored for you! The doors to my Business Builder Mastermind will open soon, offering a four-month journey in a small group setting, designed to guide you from zero to hero. Book a free discovery call to learn more about this program!
The Business Model Canvas
The Business Model Canvas is a strategic management tool that helps individuals and organizations visualize, analyze, and design business models. It provides a structured framework to understand the key components of a business and how they interact with each other.
Developed by Alexander Osterwalder and Yves Pigneur, the Business Model Canvas consists of nine essential building blocks:
Customer Segments: Identifying and understanding the different customer groups or segments that the business aims to target.
Value Proposition: Defining the unique value and benefits that the business offers to its customers. It explains why customers would choose the business over competitors.
Channels: Describing the distribution and communication channels used to reach and interact with customers. This includes both online and offline channels.
Customer Relationships: Defining the types of relationships the business establishes with different customer segments. It includes aspects like personal assistance, self-service, or automated interactions.
Revenue Streams: Identifying the sources of revenue for the business. This involves understanding how the business generates income from its products or services.
Key Activities: Listing the most crucial activities that the business needs to perform to create and deliver value to customers.
Key Resources: Identifying the essential resources required to operate the business successfully. This includes physical assets, intellectual property, human resources, etc.
Key Partnerships: Describing the external entities or organizations that the business collaborates with to enhance its operations or create value.
Cost Structure: Analyzing the costs associated with running the business, including fixed costs, variable costs, and economies of scale.
The Business Model Canvas is a dynamic tool that encourages iterative thinking and strategic planning. It helps businesses understand their current model, identify areas for improvement, and explore innovative ideas for future growth.
Although the canvas itself is fairly simple, it can be challenging to actually put it into practice if you don't have a background in marketing and business. Thinking about that, I created a template and guide to help you use this powerful tool to gain more clarity about your business and to support you in building growth strategies for your business.
You can download a free copy of the Business Model Canvas Guide & Template here.
If you still need support to use the Business Model Canvas template and find the best business model for you, I am here to support you! You can book a discovery call with me here to learn more.
