Business Models: Ways to Make Money
A business model is simply the answer to: who pays you, for what, and how often?
Common models: sell a product once (a muffin), sell a service by the hour (tutoring), charge a subscription (a club with monthly dues), or take a cut of a sale (helping someone sell their bike).
Subscriptions are powerful because revenue repeats. A $10/month customer who stays a year is worth $120 — not $10.
The best model for you depends on what you're good at, what people near you need, and how much time you have.
You, think about something you enjoy, like drawing or coding. You could sell your skill as a one-time service (a single custom drawing) or create a subscription (a monthly 'how-to-code' video lesson).
Learning objective
Compare business models using revenue, delivery costs, capacity and retention rather than revenue alone.
Understand the mechanism
A business model connects a customer problem to a way of getting paid. The person using a product is not always the payer: a tutoring student uses the service while a parent may pay. Identify both, because the student's learning needs and the parent's buying criteria can differ.
A product business buys or makes inventory before selling it. A service business sells time or expertise and can hit a capacity limit. A subscription offers ongoing value and requires customers to keep choosing it. A commission business earns a share of transactions but may depend on someone else's platform or rules.
Revenue is not profit. A recurring $10 payment also creates a recurring obligation to deliver, support and sometimes refund. Customer retention determines how long payments continue. Advertising costs and payment fees can consume an apparently attractive margin.
Put it to work
Map one customer journey: finding you, purchasing, receiving value, asking for support and deciding whether to return. Estimate the time and cash at every step. If each new customer needs two hours of support, growth changes your workload even if payment is automatic.
Test the smallest honest version of an offer. Ask customers what they already do to solve the problem, not just whether they like your idea. For a minor, involve a trusted adult in payment services, customer meetings and any permit requirements. Subscriptions must have clear renewal and cancellation terms.
Worked example
- 1
Tutoring: charge $20 for a session with $2 materials and travel costs. Contribution is $18 before the value of your time and other overhead.
- 2
A club charges $10 monthly and costs $4 per member to run. Ten members produce $100 revenue and $60 contribution each month.
- 3
If four members leave after month one, next month's revenue is $60, not $100. New customers are not a substitute for delivering value to existing ones.
- 4
Compare capacity: five tutoring sessions take five delivery hours; club time may be shared, but administration and support still count.
Choose the model that fits a real problem and a sustainable delivery system.
Your practice lab
You sell art prints for $12 with $5 direct cost, or a design service for $30 with $3 direct cost and two hours of work. Compare contribution per sale and per delivery hour. What information is missing?
Personal scratchpad · not graded or saved
Case Study: The Snack Box Subscription
Priya loved discovering unique and healthy snacks, and her friends were always asking her where she found them. At first, she tried just buying snacks for her friends and having them pay her back for the exact cost. This was a simple 'product sale' model, but she quickly realized it was a lot of work for no profit.
She decided to change her business model. Priya created the 'Snack Surprise Club,' a subscription service. Her friends now pay her a flat $20 a month. Priya uses that money to buy snacks in bulk, which costs her about $12 per box. She then curates and delivers a surprise box to each subscriber.
By switching to a subscription model, Priya created predictable monthly revenue for her business. She was no longer just reselling a product; she was selling the service of curation and the fun of a monthly surprise, which allowed her to earn a consistent profit for her time and effort.
Switching business models from a simple product sale to a subscription allowed Priya to capture the value of her work, create predictable revenue, and build a more sustainable business.
Illustrative example — names and figures are composites for teaching.
Brainstorm one or two potential business models for your venture. For each, answer the three key questions: Who pays you? What do they pay for? How often do they pay (one-time, hourly, monthly)?
Example: Model 1: One-time service. Homeowners pay me one time to wash their car. Model 2: Subscription. The same homeowners pay me a monthly fee for two car washes every month.
Go deeper — outside resources
- 10 Steps to Start Your Business · U.S. Small Business Administration
- What is an entrepreneur? · Khan Academy
Key ideas
- Who pays, for what, how often
- Products, services, subscriptions, commissions
- Repeating revenue compounds
Try it: Name the business model of three businesses you used this week.
Quick check
1. A $10/month subscriber who stays 12 months is worth…
2. Charging monthly dues is which model?
3. You help a friend sell their old video games online and they give you 20% of the final sale price. What business model is this?
4. Your dog-walking business charges $15 per walk. You spend $2 on treats and bags for each walk. What is the revenue per walk?
5. A service business, like tutoring, is often most limited by...
6. Leo has 8 hours a week for his business. He can spend that time detailing two cars for $100 each, or he can manage a Minecraft server for 25 subscribers who each pay $8/month. Which statement is most accurate?