Startup Monetization

Every business irrespective of size or stage (whether an early-stage startup or SMB or enterprise giant) strives to maximize its profits. But how do you do this as a new founder? 

The answer is by finding the right monetization for your business idea.

What is Startup Monetization?

Startup monetization is the process of generating revenue from a startup business. Since you’re providing a solution to an existing problem, it’s expected that you get some kind of return.

This sounds straightforward, right? 

It should be noted though, that a flawed or non-existent monetization model can cause problems for your startup.

So, in this article, we will look at the different startup monetization options you can adopt for your business.

Subscription-based monetisation Model

A subscription-based monetisation model is employed when you charge customers a certain fee regularly for using your product, app or service.

This monetization model is commonly employed by SaaS, where customers can pay a monthly or annual fee. There is also the option to provide additional features when payment is upgraded.

The Subscription model is an excellent strategy to lock customers in for an extended period of time, ensuring a steady stream of income.

Freemium Model

A Harvard Business Review shows that while most businesses present about a 5% customer conversion rate, companies that use the freemium model, for instance, record a 43% conversion rate. So, how does this model work?

A freemium monetization strategy works by giving free partial access for a short period to your product or service.

The idea behind the strategy is to encourage people to sign in and try your product. If the users like it, they can then purchase full access or subscribe for longer usage. 

Transaction or Commission Model

Transaction/Commission-based models are commonly found in marketplaces or E-commerce.

Here, both sellers and buyers are allowed to sign-up on the platform for free, and then a commission or transaction fee is charged when a sale is made, which can either be a set amount or a percentage of the made sales.

For example, Jumia, an eCommerce platform charges a certain percentage as a commission on any sales made on the platform. 

Advertising and In-app advertising 

This is one of the most popular startup monetization strategies, especially for digital products/services. As the name suggests, this involves monetizing your product/service through ad revenue. 

According to Forbes as of the third quarter of  2020, people spend up to 1.6 trillion hours using their mobile devices collectively. So, if your startup plans to create a mobile app, then this in-app advertising monetization strategy is something you should consider for your startup.

In conclusion

Monetizing your startup is important for the long-term success of the business. Remember, there’s no ‘one-size-fits-all’ solution, so it’s okay to mix and match multiple monetization techniques to achieve optimum results.