Top Business Models

DISCLAIMER: This article was written in 2021 and has not been updated. For more up to date information on economic impacts to small business funding, please read this recent article Top 10 Industries Experiencing Growth

Through the disruption to the United States economy due to the COVID-19 pandemic, scrappy entrepreneurs and business veterans are still looking for their next opportunity. People are still looking for investment opportunities or chances to set-up shop despite the harsh business climate. Guidant Financial, a small business financing firm, found that more and more people are looking to open their own small businesses, even if they are approaching the choice with more caution than usual.

What does this mean for you? There’s an opportunity out there for those willing to invest the time and energy to find it. We surveyed the current landscape and spoke with some recently minted small business owners and investors to give you a head start in scoping out the most successful business models for your new venture or expansion.

1. E-Commerce

E-commerce has been exploding over the past 6 years. More and more business owners are leveraging online platforms and turn-key distribution networks and supply chain solutions from firms like Amazon to boost sales and expand their footprint. During COVID, this trend has only accelerated.

According to a report from Adobe Analytics, e-commerce has been growing at a blistering pace during the pandemic. To give some highlights from the report, sales grew 77% year-over-year in May of 2020 and gross sales have jumped by $52 billion. To put that number in context, the report’s authors said that it would’ve taken 4 to 6 years of normal growth to achieve what has happened in just a few months.

The best thing about e-commerce is that it’s broadly applicable and is equally situated for both a whole new business and adding a revenue stream to an existing business. This aspect of small business digital transformation can be a huge business model innovation.

Expanding Your Business with E-Commerce

Small business owners struggling with decreased sales due to low foot traffic from COVID-19 who haven’t already invested in e-commerce solutions should do so ASAP. It’s easy to set up online payments and inventory management through tools like Shopify or get started on platforms like Facebook Marketplace or eBay. Ambitious expansions into e-commerce might require a significant upfront investment, but small business investors are keen to support those businesses that haven’t already reaped the benefits of sophisticated e-commerce adoption.

“When I find a small business that hasn’t adapted to the e-commerce revolution, I feel like I’ve found a gold mine,” one small business investor told us. “The growth potential, if executed correctly, is substantial.”

New E-Commerce Ventures

For those looking to launch an e-commerce start-up, the same type of value is there. E-commerce start-ups can launch with very little overhead since they don’t need a brick-and-mortar location and are quite resilient to COVID-19 since they never need to physically interact with customers! Though the market is quite saturated, a high-quality and unique new product or value proposition can help carve out a loyal customer base.

One of the most common profitable new business models in e-commerce, according to our conversations with new entrepreneurs, are subscription models.

“With a subscription model, you can lock-in a stable revenue model with little liability. Just look at Harry’s and Dollar Shave Club! Who knew razor blades could be so profitable? The service is very easy to use, and the up-sell potential is massive. I’ve built a hybrid e-commerce business that has both subscription services and one-time purchase options and have found moderate success, I think in part because people are looking for convenience through all this uncertainty,” a new small business owner told us.

2. Small Business Professional Services

Small businesses can almost never afford support from the big-name professional services brands, but that doesn’t mean that there isn’t a need. Seasoned professionals can make a very healthy living by providing accounting, IT, consulting, social media marketing, or other services to local small businesses.

For example, as businesses struggle to make their way through the pandemic, they’re in more need than ever for professional help with things like accounting as it relates to government relief loans. Better yet, accounting firms are slammed with requests for help from previous clients. Qualified professionals have an opportunity to capitalize on the increase in demand and build a client portfolio.

As another example, small businesses that have been doing well despite the economic disruption are looking for growth opportunities and ways to innovate. One small business veteran told us about their recent launch of a consulting service that helps existing businesses launch into new markets.

“Small business owners who did a good job managing the crisis are now looking towards the future, but often come up short in developing and implementing their ideas. I’ve been able to offer my services to these businesses by leveraging my previous experience when I was in their shoes to help them develop solid plans for expansion and provide data-driven decision-making best practices.”

In summary, providing professional services is a hot market right now, and there’s plenty of demand. The target audience is in need of help, and flexible pricing models allow professionals to help a large range of clients while making a pretty penny. All it takes is a high level of professional experience and, hopefully, a Rolodex of connections to leverage.

With low start-up costs, this is a great opportunity for a new business venture during COVID-19.

3. Foodservice with a Tech Twist

While all businesses have felt the heat from the COVID-19 pandemic, restaurants have been taken on an especially bumpy ride. From forced closures to density restrictions, restaurant owners have seen their business models torn to shreds. Expensive real estate and tied up inventory/equipment have put small business owners between a rock and a hard place.

Smart restaurant owners, however, have been leveraging the power of food distribution platforms like Door Dash and Uber Eats to close revenue gaps. Some entrepreneurs have built entire foodservice businesses through these apps! These are hardly new technologies, but COVID-19 has clearly demonstrated their value.

To give you some context, Uber Eats’ business has nearly doubled in 2020’s second quarter. Door Dash has also grown aggressively. What’s the point? People still want restaurant food, and if they can’t get it by going out, they’re more than willing to order in.

“Since we set ourselves up on Uber Eats, our kitchen has been busier than ever, and that includes pre-COVID levels of service. I was ready to close up shop due to the pandemic, but using this service has allowed us to connect with our regulars and add new customers without having to scale-up our own delivery service,” a sports bar owner told us. “Our revenue growth helped us secure some investment to expand our kitchen and upgrade some super old equipment.”

There’s a huge opportunity for existing restaurateurs and investors looking to share in potential revenue gains from implementing these solutions.

4. Software-as-a-Service (SAAS)

The last business model we’ll discuss is the fast-growing software-as-a-service (SAAS) space. SAAS business models, on the surface, are quite simple. You probably use them every day. SAAS is a method of software delivery that allows customers to access software applications and data over the internet without having to download it themselves. Customer relationship management (CRM) software is a super popular type of SAAS business.

Let’s walk through an example. Tons of small businesses struggle with the management of their social media presence and don’t want to shell out a ton of cash to hire a full-time social media professional or hire a digital marketing firm. If you are able to provide a platform that allows them to craft social media posts from popular templates and schedule those posts across the major social media platforms, you’ve solved a MASSIVE problem. Throw in a subscription-based pricing model and you’ve got a solid stream of stable revenues.

SAAS as an industry has been growing quickly for years, even through COVID-19. Demand for these products has also grown as businesses look for affordable solutions to automate things like digital marketing, customer service, and inventory management.

There are many possible SAAS ideas, but the gist of it is that these solutions can help solve crucial customer problems at a lower price than they would pay to have it done by hiring a professional.

The caveat with SAAS businesses is that it takes a high level of technical expertise to build and operate the product. But, if this describes you or a business partner, SAAS businesses that solve a crucial customer problem are highly scalable and can be quite profitable.

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