My Top 5 Best Online Business Models

Posted on March 9, 2021March 21, 2021

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I’m not an online business guru, but you could call me an online business junkie. Ever since ten-years-old when I started looking for ways to make money online, the lifestyle of working anywhere anytime has been ingrained into my heart. In this article, I will go through my top 5 best online business models you can use to make a living online.

As a small disclosure, this list is not objective and is solely formed out of my opinion. Depending on your skills, hobbies, and other attributes, you may rank various business models higher than what I have. For example, if you hate writing but love talking to people, you may put service and freelancing higher than free content and media. I am also not an expert on all of these business models and may not be able to answer all of the industry-specific questions.

I base most of my ranking decisions on various factors. These factors include the level of entry barrier, scalability, profitability, and suitability for beginners.

Table of Contents

5. E-Commerce And Dropshipping

I used to rate e-commerce, specifically dropshipping, a lot higher. I’m going to focus on dropshipping first.

There are various models of dropshipping. The most prevalent version by far, however, is dropshipping from Aliexpress. The main issue with dropshipping is that anybody can sell what you are selling and copy you. If you’re a dropshipper, you may find many people selling Aliexpress products on Amazon for the same price as Aliexpress. Dropshipping used to be a business model that was easy to get into and make money with, but that’s no longer the case with the number of e-commerce stores online.

You’re also not providing much value as a dropshipper because all buyers can directly buy products from where you’re sourcing them. A business that doesn’t offer value will never last long. If you want a few more reasons on why dropshipping from Aliexpress is dying, check out this article: “Is Dropshipping From Aliexpress Dead?”

E-Commerce as a whole, however, is a great business model if you have your own product and/or have licenses to sell products from large brands. Additionally, if you’re running something like Print-On-Demand (POD), where you hold exclusive rights to the designs you’re printing on products such as t-shirts, you can succeed as well.

If you don’t have a product to sell, finding one can be a major headache. Dropshipping has problems where anybody can copy you, creating your own physical product is quite tricky, getting sales licenses often require large sums of money, and you’ll probably find that POD provides lower than expected profit margins.

If you do find or create a great quality product to sell, then e-commerce is the future. Selling online is pretty straightforward. All you have to do is set up a store using a platform such as Shopify. Or you can directly sell on online marketplaces such as Amazon. The critical factors to your success will rely on your marketing and sales prowess which will depend on your ability to advertise and provide quality customer service, including fast shipping, easy communication, and benefits for your customers.

4. Software Companies

Sellers on Amazon sometimes make money, and sometimes they don’t. It is the same with sellers using Shopify, Wix, Squarespace, Etsy, or other platforms out there. The thing we know for sure, though, is that Amazon makes a lot of money whether you make money selling on Amazon or not.

Software companies have some of the highest profit margins in the world. In e-commerce, for every product you sell, there’s a pretty high variable cost. If you sell $100,000 worth of products and your wholesale price eats up 50%, you’re only making $50,000, and that’s not counting the advertising costs, which has a high chance of putting you in the negatives.

Software companies are different in that for each piece of software they sell, there are hardly any variable prices. So if you sell $100,000 worth of software, you’re going to pocket pretty much everything after the advertising costs.

That being said, software companies are more complicated and can be more expensive to start-up. You cannot bank on someone else’s product to succeed. You have to make your own product, and that’s when it becomes difficult and potentially expensive.

Depending on your application’s scale and complexity, as well as your experience as a programmer, you may find the need to hire software developers to build your application. This can get very expensive.

The software business models I’ve liked, though, are subscription and software-as-a-service (SaaS) models. These generate the most profit because people are paying continuously month after month. This makes it so that you don’t need to always aggressively acquire new customers and can focus on your existing customer base instead.

3. Service And Freelancing

While software companies can get very expensive to create, servicing and freelancing is the lowest-cost online business model you can start provided you have a specific skill already.

One way to start freelancing for free is to go to websites such as Fiverr (affiliate link) and Upwork and create your profile. On these websites, you can post your specialties and your skills. People can look at your profile and the various services you provide and buy those services from you.

Admittedly, succeeding solely from freelancing websites is a pain. When you’re just starting and have no reviews or testimonials, nobody is going to buy from you. You’re going to have to work for very cheap costs (sometimes even for free) to get testimonials. It would help if you looked to connect with people both online and in-person and try to sell them your services.

If you have a little bit of money, you can also build your own portfolio website and have more control over your marketing campaigns. Then you don’t have to do as much connecting as other marketing strategies can often bring you clients.

The biggest problem with offering services is the scalability of the business. Suppose you’re a digital marketer. You have clients that pay you $5,000 per month for your services. At most, you can only have around five clients until it is way too much work. Then you have to start hiring people.

$25,000 per month sounds pretty amazing, though. And even if you’re hiring people, as long as you’re making a nice profit, everything is okay. Right?

Technically, you can hire people to work for you and make millions every month. But the main point to consider is if the people you are hiring can produce the same quality results you have doing the work yourself.

Let’s say you own a restaurant. You can hire other chefs, give them your recipes, and teach them how you cook. But realistically, how many of them are going to produce the exact same results you have? Is every chef trained by Gordon Ramsay capable of replicating the same results as Gordon Ramsay?

That’s the problem with service and freelancing-based jobs. Other than scalability, there’s still significant money to be made, though, and one of the best businesses to get into if you already have a skill.

2. Online Courses And Subscription Based Media

Most internet business gurus online make most of their money teaching you how to start an online business rather than their actual business. For example, most e-commerce gurus make more money teaching you how to create a dropshipping store than doing dropshipping themselves.

Similar to software companies, online course and subscription-based media businesses have significant profit margins. You can limit your expenses to a platform that hosts your online courses and advertising. Maybe you’ll pay for some design and video tools. However, the costs of selling your online courses and membership content are pretty much limited to your advertising expenses.

Before you create an online course or a membership website, you need to have valuable knowledge. You need to know something well enough to teach it to someone else and help them be successful.

The best-selling courses and membership websites are those that can help others become good at whatever you’re teaching. For example, if you want to build a course on making money online with dropshipping, you need to teach your students well enough that they can build a successful dropshipping store. That generally means you have created your own successful dropshipping store before.

If you do have something you’re comfortable teaching, then all you have to do is take a bunch of videos and/or write many articles teaching the skill you want to teach. Then you either chuck it into an online course platform or a membership site that you created.

1. Free Content And Media

My favorite online business model is the free content/media model. The free content model includes creating your a blog and/or YouTube channel and offering free content. This content either teaches people something, entertains them, or ideally, a mix of both.

Free content business models generally make their money from ads or affiliate commissions. Business owners will put up content with ads, affiliate links, or both and make money when people interact with the ad or buy a product through the affiliate link.

Again, blogging and vlogging are businesses you can start up without very many expenses. You also have the lowest variable expenses of any business model on this list. You can start a blog by buying a domain name and website hosting, which amounts to less than a few hundred dollars, depending on your service provider.

A YouTube channel is entirely free to start. To make videos, your smartphone camera is good enough as a beginner. If you want to go the screencast route, then you may need to pay for screencasting software.

You don’t have to spend any money on promoting your content either. By posting new content regularly and using free SEO and social media marketing strategies, you can build up a business that generates a ton of profit without incurring colossal advertising expenses.

It’s a myth that free content businesses take a long time to grow. You can accelerate the growth of your company by working harder or paying for growth. In fact, if you create a blog and it’s making you $10 or $20 per day, I highly recommend you use that money to buy ads and drive more people to your blog to snowball your growth.

The only real problem with the free content model is the competition you’re facing. There are a ton of unsuccessful blogs and YouTube channels because of the low barrier of entry. Everybody can start a YouTube channel, so everybody does it.

To become successful blogging or vlogging, you have to create very useful and entertaining content. Producing content that people like requires a significant amount of learning, experimenting, and practicing. Be prepared to put the work in.

Combine Multiple Business Models Together

One more thing that I love about the free content business model is that you can easily use it in combination with other business models. Instead of using Google Adsense or affiliate links, why not promote your own product?

I love the free content business model because if you don’t have a product yet, but want to start a business, you can start by blogging or vlogging. As you create an audience and get ideas for a product, you already have a list of people you can sell to. You can also work with your audience to create products that they would actually buy. Plus, if your blog or vlog is making money, you can use those funds to fund a new business venture.

An example is combining the free content model with a membership site by making some of your content free and other content locked. With this strategy, people can get a taste of what they would be paying for, which will help you get more customers in many situations.

You can also have a blog that promotes products from your e-commerce store or your software business. Or you can use your blog as a lead generation tool for your freelancing business.

You don’t have to always have a blog or vlog either. You can combine the software business model and the service model. An example would be making a website. You can build a website for someone and then get them to pay for the website hosting and other costs to keep their website online.

The only reason I’m talking about combining various business models is to tell you that business models are flexible, especially on the internet. The key is to find something that works well for you. Be as creative as you would like.