Selling stuff online is easy. Getting started isn’t.
Are you ready to finally start?
Great, then this article is for you. And yes, these online business models are tested and proven to work.
Why this matters to you …
In the past 8 years, I’ve launched 13 businesses and products, helped 100s of people start, and interviewed 483 of the smartest entrepreneurs in the world.
In short, I know how to sell stuff online.
Maybe you’ve got a side hustle idea, or you just want to stop working for someone else and start working for yourself.
This article will show you six profitable online business models, how to choose one, and how to get your first customers.
We’ll take a look at good and bad examples, list pros and cons, and get you where you want to be: On your way to becoming an online entrepreneur.
What is an online business?
An online business is any commercial website – product or service based – that exchanges value for money. Unlike a traditional brick and mortar business, an online business uses the internet and a website as its storefront.
For an online business to be successful, it needs to accomplish two things:
- Choose the right business model for the market
- Find traffic sources of potential customers
In this article, we will provide you with six business models and six traffic generation methods.
It will be your job to mix and match the combination of online business models and traffic sources for your market.
Alright, let’s jump into it.
1. Make money with digital products
The best way to make money is by sharing your knowledge. Since we’re always online, we turn to Google whenever we need information – not the library.
You can profit off of this if you sell digital products like eBooks and courses. This is also called content production, and it’s a great online business model.
The main things you’ll need to make money with digital products are:
- A product that provides value and solves a real problem
- A website to sell digital products (but just a landing page works to get started)
- A roadmap to finding customers
When it comes to the product, it’s best to stick to a subject you understand well. You can create and sell online courses, or write eBooks and the best thing is: you only have to do it once.
A great example of digital products done right is Nathan Liao’s CMA Exam Academy. There’s a lot of content on becoming a Certified Management Accountant and passing the CMA exam.
What Nathan found was that the existing products in this market weren’t preparing students for the real world – and he wanted to solve this problem himself. In the process of solving this problem, he has created a successful online business that has enabled him to travel the world while building his business.
Pros of selling digital products:
- Low barrier to entry (Anyone can do it)
- You can start small
- It’s scalable (If your customers need more, you can always produce more)
- It’s passive (Create content once and get paid over and over)
Cons of selling digital products:
- One-time payments (You won’t be getting a steady stream of recurring revenue)
- It’s not an asset
However, don’t get discouraged! We’ll be covering ways to get traffic and clients later on. For now, we are focused on choosing one of these online business models to focus on.
2. Advertising or podcast sponsorship
If you want to make it on your own, this is a great online business model.
You can make money if you start your own blog and build enough traffic. Or, you can do it by starting a successful podcast.
This online business model allows you to do things at your own pace, but traffic is a big caveat. You need to be popular enough for advertisers and sponsors to want to promote on your site.
If you’ve got a hobby or a particular niche that interests you, you should definitely consider starting a WordPress blog or a podcast.
- Equipment (microphone, headphones, etc.)
- Skype or similar software for interviews
- Recording and editing software
- Podcast hosting like Libsyn
We’re going to be a bit biased, and mention Hack the Entrepreneur podcast. It started as a labor of love and turned into a podcast full of interviews with entrepreneurs, where everything from copywriting to Amazon FBA is covered. It’s a one-stop-shop for entrepreneurs, and people who’ve yet to join the party.
Doing what you love is always a good choice, and when a topic is high-profile enough to attract sponsors and advertisers, here are the pros and cons you could be looking at:
Pros of podcast sponsorship:
- It’s scalable
- It’s in high demand (good content never goes out of style)
- Relatively passive
- It has a huge growth potential
Cons of podcast sponsorship:
- There’s a high barrier to entry (you need a lot of traffic, which takes time and effort)
- Advertising and sponsorship are defined by contracts and one-time payments
- It’s not an asset
Another great reason to use this business model for online business is building authority. As your popularity and traffic grow, you’ll be building up your credibility and becoming a resource in your niche.
It’s easy to diversify your income by producing content or appearing as a guest speaker at events when people in your industry perceive you as an authority.
Additionally, as the demand for advertising on your blog or podcast increases, so will your ability to select sponsorships that fit your brand, and that could provide you with steady streams of revenue and good PR.
3. Make money with software or app business models
Software business models have become very popular lately with the rise of SaaS (software as a service) companies. Instead of paying for software license once, you can provide your future clients with a lot of value and charge them by the month.
Apps work very similarly to software. The main principle is providing a product that your target audience will use, and to maximize your online business’ profitability – charge them for a subscription.
There are three distinctive payment models when it comes to software and apps:
This means that customers get limited access to your software or app’s features. If they’d like to use more features, they can upgrade to a paid subscription.
- Free trial
Customers get the full software or app functionality for a set period of time, after which they’re charged if they want to keep using it.
- 3)Free software business model
Software or app is free for customers to use, but you earn revenue from advertising (see #2: Advertising and sponsors).
A great example of using software business models is Ahrefs, a tool for SEO. Ahrefs offers a variation of the free trial model, at $7 for 7 days of full access. During the trial, you can use all the features, including keyword research, competitive analysis, and content research. If you find it valuable, you can continue to use it starting at $99/month.
Pros of selling software:
- It’s scalable (add new features)
- It has huge potential
- Subscription-based recurring revenue
- It’s a saleable asset
Cons of selling software:
- You have to offer customer support
- There’s a high barrier to entry (you have to hire developers unless you know how to build software)
Software business models are one of the most innovative online business models, and for a good reason.
They provide a steady source of recurring revenue, and they’re also a saleable asset, which is especially useful if you’re in the mood for change.
4. Affiliate marketing
Passive income is the dream, and affiliate marketing is a great way to start. This online business model typically means you’ll be selling another brand’s products, and earning a commission from each sale.
Commissions are typically in the 5-10 percent range, and they benefit the brands because you’re doing their marketing for them. Usually, you want to rely on organic search engine traffic, to cut your overhead costs. This can be done with SEO techniques which we’ll cover later on in the post.
One of the most popular affiliate programs is Amazon Associates. It’s important to pick a good niche when you want to make money from affiliate marketing. However, a niche can be profitable even if there’s a lot of competition.
If you want to see a good example of an affiliate business model done right, you don’t have to look any further than Skyscanner. A flight search aggregator, this site advertises numerous airlines. They also show how you can scale up this business model and achieve the profitability dream.
Pros of affiliate marketing:
- It’s extremely scalable
- It has huge potential
- It’s easy to start
Cons of affiliate marketing:
- Non-recurring revenue
- It’s not an asset
- You don’t have active ownership over the products
The key to succeeding with affiliate marketing is to choose your niche carefully, produce great content, and become known for great product recommendations.
This can sound like a lot of work, so you can skip on to part 7, and we’ll show you how to streamline it!
5. Making money with membership sites
It takes a lot of time to wade through content online to find the golden resources you need. Membership sites remove this from the equation and provide customers with all the info they need in one place.
What is a membership site? Essentially, it’s a resource hub. Customers pay a subscription fee, and they’re guaranteed access.
Resources can be tutorials, videos, posts, and any other form of content that your target audience finds useful. We’re all using them one way or another, and you can easily create a membership area if you already have a website.
It’s even easier to use an all-in-one platform like Podia. You don’t have to worry about the headaches of setting up a website, and you can sell memberships, courses, and digital downloads all in one place.
A great example of the membership site online business model is The Showrunner Community. It’s a paid community where podcasters get access to valuable resources like webinars and professional advice. Not only do members learn from the content, but they also benefit from a supportive and engaged community.
Pros of membership sites:
- They provide recurring revenue (subscription-based)
- They’re scalable
- They have decent potential
Cons of membership sites:
- Membership sites are not an asset
- You don’t have active ownership
Membership sites are a great option if you’re ready to produce content, and you’re sure that people will find it useful. Make sure you stake out the competition and find a way to differentiate yourself from them – especially if they’re offering your premium content free.
6. Coaching and consulting
If you’re an expert on a topic, you can achieve the dream by actively coaching and consulting others. Coaching and consulting mean selling your expertise to your clients.
Unlike other online business methods, coaching and consulting rely on personal relationships. It’s in your best interest to work based on referrals, and become the authority in your industry.
A great example of the coaching model done right is Beverly Burgess. She’s a homeschooling coach and consultant helping parents navigate the muddy waters of educating their children at home.
Pros of coaching and consulting:
- Possible recurring revenue
- High demand
- Low startup cost
Cons of coaching and consulting:
- It’s not a saleable asset
- You don’t have active ownership
If you’re an expert at something, it’s time to get to work and build up your credibility. Help yourself by helping others resolve their problems with your expertise!
How to get traffic to a website (and build an audience)
You can have a great business idea, but it’s important to find the audience for your product or service.
Most online businesses use a combination of these methods to get traffic to their website and grow an audience they’ll convert into paying customers.
1) Content marketing: blogging and guest blogging
Blogging and guest blogging consists of creating content for an audience. You can have your own blog and optimize it for keyword and SEO (later on in this post), and also generate leads by guest blogging on other relevant blogs in your industry.
- You can use other people’s network
- Builds authority
- Low cost
- Production time can be huge and it’s a lot of work
Podcasts are a great way to reach your audience and get in touch with significant people in your industry. Your focus should be on providing unique commentary, and value to your listeners.
The goal here is to convert your leads to customers by showing them that your product or service is useful because you’re an authority.
- Builds authority in your market
- Relatively low cost to get started with a podcast
- Opens up alternative sources of income (e.g., advertising and sponsorship)
- High time commitment
- Interviewees can be hard to reach when you are getting started
- Most podcasts fail
3) Start a YouTube channel
Having a YouTube channel is another way of promoting your online business through content. This is great if you’re selling a visual product/service, but keep in mind that there’s a lot of competition and you need to stand out with useful videos (if your target audience likes them).
- Builds brand awareness
- Expands social reach
- Production time to do it right
- Massively competitive in most markets
4) Forums and social media
There’s no better way of reaching your audience than reaching them where they are. Sites like Reddit and social media can help you get to them directly while also improving your brand awareness and learning more about your market.
- Expands your social reach
- Builds brand awareness
- Low cost
- Low time commitment
5) SEO – organic search traffic
SEO means that your business will be displayed in the Google search network. Essentially, it’s all about providing useful content to your audience. Then you have to make sure the right people find it when they search for information on your topics.
We’ve spoken a lot about SEO techniques with Brian Dean of Backlinko. Check out his tips on getting to the first page of Google in this step-by-step guide.
- Low cost
- High impact
- Reach your audience when they’re ready to buy
6) Paid traffic
Finally, if you want to get your business in front of your target audience, you can always use paid traffic. This means advertising, and it can come in the form of Google AdWords PPC campaigns or social media ads.
- Great reach
- The fastest way to test an offer
- Relatively low cost (depending on the platform)
- Conversion depends on targeting
- Steep learning curve
Which online business model is right for you?
You now have six potential business models and six potential traffic sources for your online business.
Now, you must make a choice. Which business model you are going to execute on and what traffic source you are going to use to find your first customers.
If you want to sell digital courses and start a podcast to drive traffic and find customers – great, get started. There is no right or wrong combination. The important thing is that you choose just one online business model and one traffic source. Then stay focused and don’t get distracted.
Ready to start your entrepreneurial journey?
Check out the Roadmap to Freedom for proven ways to get unstuck and start creating passive income today.