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Business model disadvantages

Which business model is best to choose for our online startup?

Choosing a business model that is best for your online startup is similar to choosing which girl to ask to your high-school prom. Any business model might work (i.e. she might say yes) and you can certainly try any of them (i.e. you can ask any girl), but finding the one that works best for you is a difficult task. What is right for you in the business model/prom date equation might not be what is right for similar businesses/your friends, so use the information below to determine the best business model for your company and then adapt this information to suit your companies’ specific needs.

Price per user or price per copy model

What is it? Users pay for a product or a lifetime subscription to your service.

Examples: Microsoft Office, Iphone premium apps

Advantages: This is a great way to bring in revenue if you are planning to access markets with large customer bases (i.e. if you want to sell subscriptions to businesses for each of their employees).

Disadvantages: It is hard to get a steady stream of revenue using a price per user/copy model unless your service has a large and constantly expanding user-base or unless you’re willing to keep developing new versions of your product to sell to repeat customers.

Tips:

  • Focus marketing on companies that are willing to buy your product for many of their employees.
  • Reaching unique users is often not cost-effective in a price per user/copy model, so determine a goal number of users and then pursue that number through B2B or large-scale marketing.

Ecommerce model

What is it? A site that facilitates the buying and selling of products and/or services. There are numerous different types of Ecommerce sites. Check some of them out here: TheMyndSet. The revenue of ecommerce sites generally comes from a share of the product/service being sold.

Examples: Amazon, Louis Vuitton, LegalZoom.com

Advantages: You can try to corner a marketplace (either vertically- like Zappos did with shoes or horizontally- like Ebay did with selling used goods) or you can provide a forum for selling your products/services.

Disadvantages: There is not much profitability information available online regarding ecommerce sites, so it is somewhat uncharted territory, but it is clear that without a large user-base it is tough to run an effective ecommerce site.

Wiley M-Commerce: Technologies, Services, and Business Models
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Pick up a copy of NOLO's Guide to

by ilima

Starting & Running a Small Business.
It discusses differences, advantages/disadvantages, and gives you some good ideas to keep the tax man happy.
And you're not locked in to one mode forever. You could start as a sole proprietorship at first, for example, and then change to another model.

Varies by state law.

by pbp

What you can do varies by state law. I am not in Reno so am not familar with your law. If you google "nonprofit association" and "Nevada" you will probably find articles on your sitution.
You are not a nonprofit at this point. In order to be a nonprofit you will need to register with your state and probably incorporate as a nonprofit business. In order for your donors to be able to deduct thier donations from their taxes you would need to register with the IRS.
The advantages for registering as a nonprofit: Donations to you are deductable. Most grant making organizations require you to be a nonprofit before they will allow you to apply for grants

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