MBA2511 The Best Business Models to Start With

Summary

Podcast Summary: The $100 MBA Show – Episode MBA2511 "The Best Business Models to Start With"

Introduction

In Episode MBA2511 of The $100 MBA Show, host Omar Zenhom delves into one of the most critical decisions aspiring entrepreneurs face: selecting the optimal business model to launch their ventures. Drawing from his extensive 20+ years of entrepreneurial experience, including bootstrapping multiple multi-million dollar businesses, Omar provides actionable insights to help listeners navigate this pivotal choice. The episode emphasizes practical, real-world strategies aimed at maximizing success while minimizing risks.

Understanding Business Models

Omar begins by defining a business model as the framework through which a company generates revenue by offering products or services in exchange for money. He underscores the importance of this decision, noting that "90% of startups fail in the first five years," with an incorrect business model being a primary culprit (02:09).

1. Service-Based Business

Omar introduces the first recommended business model: the Service-Based Business. This approach leverages existing skills and experience to provide value without significant upfront investment.

• Low Startup Costs: "You don't actually need to spend any money to start offering a service" (03:20). Entrepreneurs can begin with services like consulting, coaching, or specialized skills such as accounting or video editing.

• Immediate Launch: Utilizing current expertise allows for an immediate start. For example, Omar shares his initial venture into creating websites for independent creators, charging $500 per project to gain experience and build credibility (04:10).

• Competition on Experience: Unlike commodity-based businesses (e.g., selling T-shirts), service-based businesses compete on the quality and uniqueness of the experience provided. Omar highlights this by stating, "as long as you provide a great service, you can really get the ball rolling and create a great reputation for yourself" (05:00).

• Getting First Clients: Omar advises using platforms like Upwork or Fiverr to secure initial clients, despite the fees, as they offer exposure and valuable testimonials essential for establishing the business (07:30).

2. Digital Products

The second business model discussed is Digital Products, encompassing items sold and consumed online, such as online courses, eBooks, templates, and more.

• Scalability and Profit Margins: Omar emphasizes the scalability of digital products, noting that "you create the product once and you sell it multiple times" (09:15). This results in high profit margins since there are no recurring production costs.

• Flexibility Based on Expertise: Digital products can be tailored to the creator's expertise. For instance, Omar and his co-founder launched an online course, the $100 MBA, which allowed them to share their business-building knowledge efficiently (10:45).

• Quality and Referrals: The success of digital products relies heavily on quality. Omar advises, "make sure it's high quality so that people are impressed with what they bought and they tell other people" (11:00). Positive referrals can significantly enhance business growth.

3. Affiliate Marketing

The third recommended model is Affiliate Marketing, where entrepreneurs earn commissions by promoting other companies' products.

• No Product Creation Needed: Affiliate marketing allows individuals to earn without creating their own products. Omar explains, "you're selling a product that already exists in the market and getting commission for it" (13:30).

• Building an Audience: Success in affiliate marketing hinges on building a niche audience. Omar suggests niching down to specific areas, such as "how to create a cooking business," and promoting relevant products within that niche (14:20).

• Content Creation and Traffic: Generating consistent, high-quality content is crucial. Omar notes, "you need to be in the content business, creating a lot of great content, whether it's blog posts or videos or a podcast" (15:00). Increased traffic leads to more affiliate sales over time.

• Selling with Personal Touch: Omar advises treating affiliate products as if they were your own, utilizing strategies like webinars and sales calls to drive conversions (16:00).

Considerations for Other Business Models

While service-based businesses, digital products, and affiliate marketing are highlighted as ideal starting points, Omar also briefly addresses other models like E-commerce and SaaS (Software as a Service).

• E-commerce Challenges: Omar points out the high overhead costs associated with E-commerce, including product inventory and shipping logistics. He contrasts this with the lower barriers to entry of the previously mentioned models (16:30).

• SaaS Complexity: Developing SaaS products requires significant technical expertise and investment, making it a more challenging route for beginners (16:45).

Omar encourages new entrepreneurs to begin with models that offer higher chances of success and lower initial risks before venturing into more complex businesses.

Conclusion

Omar Zenhom wraps up the episode by reinforcing the importance of selecting a business model that aligns with one's skills, interests, and market demands. He urges listeners to take decisive action, emphasizing that the journey of building a successful business begins with making informed choices and executing them effectively. As he aptly puts it, "this podcast, this show is all about action. It's time for you to take action, choose a business model, and let's get started. Let's make it happen." (16:50)

Omar congratulates listeners who have engaged with the episode, acknowledging their commitment to serious entrepreneurial endeavors and encouraging them to continue progressing toward their business goals (17:00).

Key Takeaways

1. Start with What You Know: Leveraging existing skills reduces initial costs and risks.
2. Focus on Value and Quality: High-quality offerings foster positive referrals and sustainable growth.
3. Build an Audience: Whether through services, digital products, or affiliate marketing, a dedicated audience is essential.
4. Scalability is Crucial: Opt for models that allow easy scaling to maximize profit potential.
5. Take Action: The most successful entrepreneurs are those who move beyond planning to execution.

Notable Quotes

• Omar Zenhom (02:09): "Choosing this model, choosing how you make money is actually really important so that you can maximize your ability to succeed."
• Omar Zenhom (04:10): "I was willing to get some experience, get some testimonials so that I can prove this business model works even for just $500."
• Omar Zenhom (11:00): "Make sure it's high quality so that people are impressed with what they bought and they tell other people."
• Omar Zenhom (16:00): "Sell the product like it's your own."

For more insights and resources, visit The $100 MBA Show.

Transcript

[Ryan Reynolds]

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[Mint Mobile]

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[Ramp]

See full [e-mail] got a 7am meeting on a Monday expensing breakfast because it's in policy wasting all afternoon submitting an expense report for that breakfast. If your company used Ramp, you could submit expenses with just a text.

[Ryan Reynolds]

Yay.

[Omar Zenhom]

Free your team from expense reports today. Switch your business to ramp.com hey there. Just a quick heads up. We mentioned this in our last few episodes, but I want to just say it one more time. We are excited to announce some big improvements to the show. One of them being that we've streamlined our format to get straight into the lesson faster, even faster than before. I know crazy. We want to make sure you get the maximum value from every second of each episode. And this is also because every episode is now available on video. You can go to YouTube and check us out. You can subscribe to the channel over at 1 0. That will take you straight to our YouTube channel where you could subscribe. And to mark 10 wonderful years of the $100 MBA, we have revamped our website with a fresh new design look and a bunch of really cool features for you to check out. Find the podcast episodes that are specific to your needs. You can go ahead and Explore [e-mail]. Thanks for being with us on this incredible journey of 10 years. My mission is to continue to work hard to help you start, grow and scale your business.

[Ryan Reynolds]

Foreign.

[Omar Zenhom]

Hey everyone. Welcome back to the Hundred Dollar MBA show. I'm your host Omar Zenholm and in today's lesson you will learn about the most crucial decision you may need to make as an entrepreneur. And that's choosing the best business model to start with. What's a business model? Well, it's a fancy way to say how are you making money with your business, right? What are you offering in exchange for the money that your customers are gonna be giving you? Very simple. But choosing this model, choosing how you make money is actually really important so that you can maximize your ability to succeed. Did you know that 90% of startups fail in the first five years. And one of the main reasons why they fail is because they choose the wrong business model. But don't worry, today you will learn about the best business models to start with and how to choose the one that's perfect for you. When I was first starting out, I had no idea which business model to choose. My first venture was a full time agency creating websites for independent creators and bloggers. This is back in 2012. I had seven years experience before that building websites on WordPress. So I felt confident. I knew that I can fill a need in the market and I could provide a good service for a decent amount of money. So key takeaway here from the story is I used my experience, I used what I knew already and I leveraged that into a service. Now funny side story, I actually charged $500 for my first website. Pretty, pretty low cost for a website build even for 2012. That's just chump change. Just to put things in perspective, we just spent over $25,000 on our latest website for the $100 MBA. So yes, you know, I am in the position to do that now in the business. But I was just starting out before, so I was willing get some experience, get some testimonials so that I can prove this business model works even for just $500. So let's dive into which business models I recommend when you're starting out in business. The first one is one I just mentioned, a service based business. A service based business has a lot of benefits. The first big benefit is that it has low startup costs. You don't actually need to spend any money to start offering a service. This could be consulting, this be coaching, this could be any kind of service, accounting, editing videos, whatever it might be. And you don't need to spend any money before you get a client. You get the client, they can pay you a deposit, pay you upfront for a portion of the agreement, and then you can start working on the project. The second benefit is that you can start immediately with your existing skills, look at where you have experience, what you can actually provide the world for some value in exchange for money. Okay, so if you have experience in engineering, in coding and development, you can use your skills there. If you have experience in public speaking, you can show people how to be better public speaker as a coach. The point here is that you don't need to reinvent yourself. You can use what you already have to start building your business. Another thing I love about service based businesses is that you're not in the commodities business. Meaning let's say I'm selling a T shirt, okay? If I create a T shirt and sell it, I'm competing with every other T shirt in the market. So many different brands, so many different qualities of T shirts. A lot of different big companies are competing with me, small companies, so it's very hard to get traction. But with a service based business, you are competing on experiences which is not objective, it's very subjective. So as long as you provide a great service, you can really get the ball rolling and create a great reputation for yourself. Again, my first full time business was a service based business involving creating websites and blogs for creators. It was low risk and it was a way for me to start and allow me to build a client base and learn the ropes of running a business. Paying bills, hiring people, you know, making sure that I have a handle on being an independent creator and independent entrepreneur. Now if you're not sure about how to get your first clients, I would recommend you use a platform like Upwork or Fiverr to get your first few clients. I'm saying only your first few because these platforms do take a big chunk of the money that you earn in order for you to get clients, in order for you to get exposure. But this is a good way to quickly get a few testimonials, a few case studies, some work that you can display on your website to say, hey, I can do this, whatever it is for you, and you're learning along the way how to deal with your first few clients. So it's a good way just to get started and get some work. The second business model I recommend is digital products. Digital products are exactly what they sound like. Products that you sell online, things that people buy and consume online. This could be online memberships, this could be an online course, this could be a book that people download, it could be a template, it could be icons that people download, emojis, whatever. The point here is that people are buying this online and consuming it. And there's a lot of benefits to digital products. Number one being that it's easy to scale. You can scale this business very quickly. You create the product once and you sell it multiple times. Also because of that, there are high profit margins. You create again the product once. It's not like when I'm selling again a T shirt where there's a fixed cost to creating each product I sell. So it costs me X amount of dollars for each T shirt to be created and to be shipped out to the customer. With a digital product, I create something once and I can sell it Multiple times. I create that book once and then I can sell it multiple times. So high profit margins. And also there's a flexibility to creating products based on your expertise. Meaning I can create an online course on an area I know. Say, for example, I know how to play the piano and I want to teach people how to start playing the piano. I can create an online course with videos, but I also can create a book out of that online course and sell that. I also can do coaching, like we mentioned before. So there's a lot of ways I can package my expertise with the digital product. When Nicole and I launched $100 MBA, we started with creating an online course, the $100 MBA. It allowed us to share our knowledge, our expertise, how we built our business with our audience so they can do the same. And we were able to largely scale our business very quickly because we created it once. And we're able to kind of just market that product over and over and over to many, many people. So as a quick tip, just choose a product that you can create around your expertise and make sure it's high quality. So impressed with what they bought and they tell other people. All these business models really shine when people tell other people referrals. When people say, wow, I can't wait to tell you about what I just bought. You know the company that we use to build our website, APX Studios, they came from referrals. Somebody told us, you gotta use these people. They're the best. That's usually what it sounds like when they say they're the best. You want people to say that you're the best. So as long as you put out high quality work, whatever it is, whatever business model you choose, make sure it's amazing. The third and final business model I recommend is affiliate marketing. What's affiliate marketing? Well, basically you are selling a product on behalf of a company and getting commission for each sale. So when we ran our software company for 10 years, webinar ninja, we had an affiliate program. We had affiliates selling Webinar Ninja to their audience, to the people they know. And then they would get a commission 30% for every sale that they made. So this is a great way for you to make money without creating a product. Okay, but how are you going to get the audience? Well, you need to build an audience, a brand around the products that you promote. This really works great. Affiliate marketers really succeed when they really niche down. So say, for example, they niche down to the topic of how to create a cooking business or a baking business. And they are affiliates of all the products that deal with how to build that business. So for example, how to set up your cameras, which cameras to buy, so that you're doing cooking shows on your YouTube channel, or how do you publish a book? Maybe you're an affiliate of a publisher. The point here is, is that you are niching down and then you're creating content on how to build that type of business and then offering great products to help them along the way. And those products are affiliate products, products that you promote and you get a commission for. Affiliate marketing is great because there's really no overhead. You're not actually buying any product. You're selling a product that already exists in the market and getting commission for it. It's also great because you can scale this very, very well if you create great content around your niche, around your area of expertise. Every time someone comes to your website and clicks on a link and buys something from you via affiliate link, you make money. So this happens kind of organically and over time this scale as you build more traffic. That's the key with an affiliate marketing type of business model. You need the traffic. So this means you need to be in the content business, creating a lot of great content, whether it's blog posts or videos or a podcast or whatever it might be. So the point here is that you want to create a lot of buzz around this area of expertise. You want to become the expert in this area expertise so you're the go to person where people learn from you and then when they want to buy something that relates to this idea, this market, they are going to buy through your affiliate links.

[Ryan Reynolds]

Ryan Reynolds here from Mint Mobile with a message for everyone Paying big wireless way too much. Please, for the love of everything good in this world, stop with Mint. You can get premium wireless for just $15 a month. Of course, if you enjoy overpaying, no judgments, but that's weird. Okay, one judgment. Anyway, give it a try.

[Mint Mobile]

@Mintmobile.Com Switch upfront payment of $45 for three month plan equivalent to $15 per month required. Intro rate first three months only, then full price plan options available, taxes and fees extra. See full [e-mail] and we're back folks.

[Jim]

It looks like Jim from sales just got in from his client lunch and he's got receipts.

[Team Member 1]

His next meeting is in two minutes. The team is asking, can he get through his expenses in that time?

[Jim]

He's going for it.

[Team Member 2]

Is that his phone?

[Jim]

He's snapping a pic. He's texting around.

[Team Member 1]

Jim is fast, but this is unheard of.

[Team Member 2]

That's it. He's done it. It's unbelievable.

[Ramp]

On ramp expenses are faster than ever. Just submit them with a text. Switch your business to ramp.com.

[Omar Zenhom]

A tip I have for you when it comes to affiliate marketing as a business model is sell the product like it's your own. So if you had your own product, you would be running webinars to sell this product. You'd be doing sales calls. And the best affiliates do this for their affiliate products because they want to have a predictable way to make money. And I just hope that people click on links on their website, they want to run regular types of sales campaigns so that they can be able to earn that commission over and over and over. The best affiliate marketers I've seen, they run regular webinars, they do sales calls, they do extra content, they do bonuses so that they're always, you know, getting new sales through their affiliate commission. So those are the three business models I recommend when you're getting started. Number one, a service based business. Number two, digital products and number three, affiliate marketing. Now you might be saying, Omar, what about E commerce? What about software or SaaS? Well, I've had both of those businesses, right? I've had an E Commerce brand. I sold custom tailored clothing for men. That was a business I had over 14, 15 years ago. I had a software company, highly successful software company that I grew for 10 years and got acquired by Proprofs. So I know the ins and outs of these businesses. These are tough businesses to start with. E Commerce has a lot of overhead because you gotta buy product. Even if you do drop shipping, there's a lot of overhead that you're gonna have to spend to be able sell an E commerce product like T shirts or physical products that you're going to be shipping out. And usually E commerce is what people think about when they think about online business. But there's a lot of easier ways, easier business models out there. Like I mentioned today, software is a beast. There's a lot of moving parts, there's a lot of overhead, there's a lot of development that needs to be made for you to be able to do that. Engineers are not cheap. I know this firsthand, so I didn't mention these because these are kind of like second tier or second level types of businesses. I really want to see you succeed and I want you to start out with something that gives you the highest level or highest chance of success. Make some money, have some wins under your belt. Build a business that actually allows you to quit your job. And have a lifestyle that you've dreamt about. Once you've established that, then you can go on to another mountain, another challenge, E commerce SaaS, whatever it might be. So, like I mentioned, choosing the right business model is important, but you got to choose, get started. Okay, which one of these do you feel most comfortable with? Which one of these fit your lifestyle, your ambition, or the way you want to kind of start out in business? Whether it's creating a digital product, whether it's, you know, service based business, affiliate marketing, you tell me. Okay? Put it in the comments or you can email me anytime at Omar MBA Net. Now, before I wrap up, know that each of these models will have their own set of benefits, but also challenges. But the key is to find one that aligns with your skills, your interests, and the market that you want to get into. Okay? Remember, the best business models are the ones that allow to provide value and leverage your strengths so that you can grow as a person, as a business simultaneously. This is really what we want to do here. Okay? So it's time for you to make a decision. This podcast, this show is all about action. It's time for you to take action, choose a business model, and let's get started. Let's make it happen. Now. You made it to the end of this episode means that you're pretty serious about building a business. I want to congratulate you because that means you're not playing business. You're actually doing business. You're actually looking to take a step forward and change things in your life. So congrats on that. Keep moving forward, Keep doing it and I'll check you in the next episode.

[Jim]

And we're back, folks. It looks like Jim from Snails just got in from his client lunch and he's got receipts.

[Team Member 1]

His next meeting is in two minutes. The team is asking, can he get through his expenses in that time?

[Jim]

He's going for it.

[Team Member 2]

Is that his phone?

[Jim]

He's snapping a pick. He's texting.

[Omar Zenhom]

Ramp.

[Team Member 1]

Jim is fast, but this is unheard of.

[Team Member 2]

That's it. He's done it. It's unbelievable.

[Ramp]

On ramp, expenses are faster than ever. Just submit them with a text. Switch your business to ramp.