Choosing the right business model

How your non-profit organizes, creates and delivers value is your business model.  They can be focused on products, services, subscriptions, licensing, advertising and hybrids.  While determining your strategic position as it relates to your solution, consider your business model too.

Selling products is well-defined and easy to price, produce, and distribute.  The risks can are unsold inventory and liability for flaws and defects.  Products can be standardized for mass production, or customized with higher margins. Is your product a one-time sale or recurring purchase and how long is its useful life?

Selling services benefit with low start up costs, and greater flexibility to respond to the needs of the target market. It is also produces a recurring source of income.  Services can be difficult to price and is easily copied, limiting competitive advantage.

With both subscription and licensing, you receive recurring fees and can benefit from the sales of upgrades. This model is useful for technology-based solutions.  Also, the risk is lower because your non-profit could focus solely on the development of intellectual property without pursuing the distribution and manufacturing.  That being said, the rewards are lower as well.

The web advertising model is an extension of the traditional media broadcast model.  Your website provides content and services mixed with advertising messages. Thos ads become the only source of revenue for the broadcaster. This only works well with high viewer traffic (in the millions).

Hybrids can be companies that offer products and services together.

When considering your business model, be mindful of sustainability.  Especially as a non-profit, you still need a return on investment in order to impact your mission for years to come. If you choose a product model, will customers keep buying? If you choose a service model, will customers seek a replacement? You can grow your non-profit through recurring revenue like upgrades, service contracts and subscriptions.  Keep in mind, “one-hit wonders” are not sustainable.