How should you choose a high-ROI business model in today’s economy?
You could reinvent the wheel and innovate something disruptive. Or, you could follow a tried-and-true strategy.
Learning from those who have already succeeded is a nearly surefire way to reach the highest rates of returns–and to do it quickly.
In this post, we’ll demonstrate 4 examples of high revenue companies you can imitate today to win financial success.
As with any business model, we’ll need to understand how these companies deliver value to customers and resolve their pain points. So let’s discuss the overarching structures which are guiding these high returns.
1. Earn via subscriptions
Adobe didn’t need to overhaul their software programs to fit a SaaS business model. After all, Photoshop has been the industry-standard for creative professionals since 1986.
But they’re happy they did. Spending on SaaS reached $8 billion in 2015 and is expected to double to $16 billion by 2017.
After launching Adobe Creative Cloud in 2013, the company reported that 74% of its revenue now arrives from the subscription service. As of second quarter 2016, that’s a record $1.31 billion in revenue.
And a 20% revenue increase year over year.
Adobe’s total annual revenue? $4.8 billion.
Remember, Adobe previously sold costly software bundles. Customers paid an upfront cost between $1,200 and $2,500 for a fixed version of the software.
Today, subscribers needn’t shell out potentially prohibitive sums every few years. Customers now enjoy a continuously updated product, paying between $9.99 and $80 per month.
As a result, Adobe enjoys bigger margins, while customers are more satisfied with continuously improved products. It has been a win/win change.
If you can find a win/win option for your customers, a subscription model can work. And if your customers adopt this model in strong numbers, subscriptions can become a solid revenue driver that improves your P&L statements.
2. Be a David. Undo a Goliath.
In 2010, Warby Parker entered the optical industry to thunderous applause. The ecommerce retailer took a massive swipe into the market share, announcing itself an immediate contender.
Warby Parker first had to upset the luxury eyewear monopoly Luxottica. Value-driven pricing and vertical integration allowed the newcomer to undercut the competition and share savings with customers.
With good value instead of glitz, the brand positioned itself as the everyman’s eyewear choice for quality, convenience, and value. Consumers responded enthusiastically, helping the company achieve its first year sales mark after only three weeks at market.
Currently, Warby Parker is valued at $1.2 billion. According to a report in Fortune, the brand has doubled its valuation since 2013.
The moral of the story?
Many consumers would rather interact with a David than a Goliath.
Within the flat internet economy, asking buyers to reach for a higher price point is risky. Companies must meet consumers on their level with more value and greater integrity.
Disruptive mattress company, Casper, followed the same business model to $1 million in sales its first month. After just two years, Casper is a $100 million company.
3. Affiliate revenue models work
Buying happens more online these days, but the love of a good deal never changes.
And what better way to make a quality purchase than through a trusted advisor?
The affiliate marketing business model drives revenue through online networks of review and recommendation. That means blogs and influencers, mostly.
According to Nielsen, 92% of survey respondents trust referrals from people they knew. Affiliate companies earn revenues by observing the laws of social proof.
“US affiliate marketing spending will increase by a compounded annual growth rate of nearly 17% between 2011 and 2016, growing to $4.5 billion,” says Forrester Research.
Brad’s Deals started as a collegiate dream of never paying “the man” too much for a textbook but has evolved into a discount source that’s growing while Groupon and LivingSocial fade away.
The website is a “curated guide” to shopping deals with more than 10 million email subscribers. Between multiple affiliate networks including Amazon and Linkshare, the company partners with over 3,000 retailers.
This brand monetized the metamorphosis to online buyership, connecting the consumers who want to buy with the retailers who need to sell.
Since its outset, Brad’s Deals boasted a 444% three year growth rate. As of 2103, the company revenue was $17.5 million. Today, it’s larger and more trusted than ever.
4. Idle hands make new revenue streams
The “Uber for X” business model doesn’t fit for everything. (Just ask Wired.)
It does, however, work for jet airplanes.
Since 2006, ImagineAir has operated a fleet of 5-seater Cirrus SR22 aircrafts to provide one-way and return air taxi services. A surplus of airline pilots provide business and leisure travellers the on-demand experience they desire.
That is, the ability to charter a quick 1-2 hour flight in lieu of spending 3-8 hours in a car.
ImagineAir merged with Kavoo in 2014, allowing the company to offer travel across the entire Southern and Eastern US.
Though not comparable in cost to a car service, return flights do receive a discount. The company offers clients pre-purchased jet cards and loyalty programs as well as leaseback programs, same day courier services, and ground transport.
Over 3 years, ImagineAir has seen 979% increase in revenues. As of 2015, the brand posted a total revenue of $2.8 million.
They are the most notably successful iteration of the ‘Uber it’ business model.
If your business has unused capacity, this kind of approach can make you more efficient. By improving utitlization of resources, you can improve your profit.
Technology platforms dominate today’s landscape, cutting costs for companies and consumers alike. Business models that use technology platforms to embrace successful trends are among the most profitable.
Adobe’s SaaS-based business model simultaneously increases the quality of their product while cutting the price. Brad’s Deals uses the wide open market to wrangle affiliate dollars in a replicable, trustworthy fashion.
Warby Parker’s model demonstrates that aligning strategy with shifting trends in consumer spending and values is both viable and potent. Lastly, ImagineAir retools the on-demand business model to deliver niche value within an established, upwardly mobile demographic.
These business models are proven to work. The question is whether they fit your business model. If so, consider ways you can emulate these strategies to drive ROI for your company.
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