Business Model : Revenues and costs
It’s a common statement to say that web 2.0 business models are unproven. I partially agree : many services are built to be sold before even being profitable. However, I am always “surprised” when people talk only about revenues : a business model is about revenues AND costs.
When you create a start-up, the objective is to create “value”, not only sales : it’s useless to generate millions of revenues if there is nothing in the bank at the end of the day! A business-model is about generating sales and “limiting” costs. Hence, you can create a service cheaper than its competitors and make more money if you’re able to provide it at a smaller cost!
Jobetudiant.net’s business model is such that it might never generate more than $2m in sales : you could really think that it’s little. If you look closer, you’ll happen to see that the cost structure is very light and efficient. In 2006 and 2007, we achieved roughly 80% of gross margin and 70% EBITDA margin, which makes a lot money for the shareholders. If you look closer, many web 2.0 start-ups are in similar situations : not generating millions, but with very high margins!
For my next venture, I know that I can setup a very “cheap” structure… but I still have to make up my mind on how to cash in -even though I have many different options-!
Related Articles
Trackbacks & Pingbacks
Comments
Leave a comment
Line and paragraph breaks automatic, e-mail address never displayed, HTML allowed: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>
Nice initiative Julien, I am myself building up a start up down here in Brazil and find it interesting to have you insights on the business model that works for small businesses that want to get bigger one day. Do you consider the “freemium” option as the best option, even when one is planning to offer a service that does not yet exist on the market?
Hi Kevin!
Brazil : ho… Internet is definetely a big village!
For me Freemium is not an option, when you’re a start-up and even when you’ll be successful and well-known, your customers wont trust you and your service, you need them to be actually convinced they need your service to pay for it. The only way is definetely freemium.
The most difficult thing is then to determine what functionnalities are free, and what’s a good price for your paying functionnalities.
Give a look at DHH’s presentation at Start-up School for these matters.
Thanks for sharing this link, very enlightening indeed. Yes Internet is a big village, and Brazil is about to become a big house inside the village.
By the way, you’ve been posting in french and english, do you have any preference for the comments?