If you’re re-thinking how your business turns a profit after the pandemic’s impact on the past year and a half, you’re far from alone. According to the recent global survey on digital strategy by McKinsey Digital, almost 90% of respondents said their business models need to change (or have already changed) to remain economically viable through 2023.
The majority believe those changes should involve embedding digital technology in their current businesses (21%) or building new digital businesses (64%). But how can you adjust your small business model so it will succeed in the years to come?
Here’s a look at some of the trending small business models of 2021 — all of which involve a digital component. But first, let’s take a quick look at the accelerated virtualization of businesses that occurred due to the coronavirus.
The pandemic accelerated business virtualization
One of the key steps to success in 2020 and 2021 was learning how to effectively use technology to a business’s advantage as most companies were forced to close their physical doors, limit business, and/or work from home. Covid-19 fundamentally changed the pace of business, and companies with superior technology capabilities came out ahead, said McKinsey Digital.
When looking at the top 10 companies in the world as of September 1, 2021, you’ll find Apple, Microsoft, Google, Amazon, and Facebook all made the list. Further, video conferencing software company, Zoom, grew from a $623 million company in 2019 to a $2.65 billion company in 2020. But what do they all have in common? Digital-friendly business models.
While these companies are operating at a much larger scale than small businesses, they demonstrate an important factor that’s important for the survival of any business of any size. Embracing technology is the road forward.
Business virtualization was required to survive and is now more widely expected by consumers, even as the pandemic shock and threats have receded to some degree. Being so, a variety of digital-friendly business models are leading the way.
What are the best performing small business models of 2021?
Definition: A business model describes how a business goes about creating, delivering, and capturing value. In short, it’s how a business plans to make money.
Over the past year and a half, many had to rethink their business models in response to the Covid-19 pandemic. What had previously worked for years and even decades was no longer functional. For example, personal trainers who were booked with clients at their local gym, now faced gym closures, and their businesses came to a screeching halt. However, many began offering virtual coaching sessions where they shared at-home workouts.
With no clear end in sight for the pandemic, and a new perspective on the importance of a versatile and resilient business model, many have adapted in one way or another. Here’s a look at some of the most popular small business models of 2021.
The subscription business model requires customers to sign up and pay a fee on a recurring basis. In return, they receive a product or service at regular intervals.
Many big-name businesses have adopted this model, such as Amazon with Amazon Prime, Walmart with Walmart+, DoorDash, and Netflix, but small businesses also did so during the pandemic as a way to pivot and survive.
For example, The Four Horseman, a restaurant and wine bar in Brooklyn, began offering a wine share subscription ranging from $115 to $180. You can get three to five bottles of wine each month along with a treat from the restaurant’s kitchen or pantry and educational content about the month’s selections.
While the subscription economy is already estimated to be worth about $650 billion, it’s predicted to grow to $1.5 trillion by 2025, according to financial services firm UBS.
Why is the subscription model so helpful for businesses? It encourages recurring revenue rather than a one-time purchase. Further, it brings upfront revenue to businesses and strengthens relationships with customers over time.
Consumers also reap the benefits of the subscription model as they can receive a product or service that they want on an ongoing basis without the hassle of reordering it. Plus, in many cases, subscriptions involve delivery to the consumer rather than requiring them to go out and get it — a huge benefit during a pandemic. A recent poll by West Monroe found that Americans are spending an average of $273 per month on subscription services in 2021.
Subscriptions can work well for both products and services and can be managed online through your website or app for easy enrollment and management. The business model can be a way to get customers and keep them coming back.
Next, the Freemium business model works by offering customers initial access to a service at no cost. The free access attracts users and builds a relationship with them. However, the free offering is limited, so if customers want more features and benefits, they’ll have to pay.
To see the Freemium business model in action, you can look to Zoom. The company offers four different plans. The first is free, comes with one license, and allows for endless meetings of up to 100 people. However, if the meeting has more than two participants, it’s limited to 40 minutes.
But what if you need more than one license, longer meetings, or the ability to add more participants? And, what if you want premium features like live transcriptions, branding, user management, reporting, or live chat support? You guessed it — you’ll have to pay.
Zoom offers paid subscription plans that range from $14.99 to $19.99 per month, per license. These have enabled it to achieve massive revenue growth, particularly since the pandemic started. And Zoom is not the only success story. Many other companies that offer online services have adopted this model including Dropbox, Mailchimp, Pandora, LinkedIn, Skype, and Evernote. A popular trend is to use the freemium and subscription models in tandem.
This approach works well for big companies and small businesses alike. However, it lends itself to digital products and services which are easily delivered without incurring the costs of a physical product or service.
The dropshipping model involves you selling products and having a third party fulfill the orders for you. They source or produce the products, pack them, and send them to your customers. That means no storage space or packing by hand is required. The profit is made on the difference between the initial item plus the fulfillment costs, and the price you sell it at.
Dropshipping is a low-risk business model as it often has low overhead costs because you’re not storing or shipping the products. It also enables you to fulfill orders from anywhere regardless of your operating location.
Some of the biggest players enabling business owners to easily dropship include drop-ship service providers like Shopify Inc, AliDropship, Doba, DropShip, Oberlo, Salehoo, Spocket, Wholesale B2B, Inventory Source, and Dropified.
Fulfillment by Amazon offers half of this solution. It doesn’t source your products, you have to send them in, but it will store them and ship them to customers. Plus, Amazon also manages customer service and returns for you.
Global dropshipping is expected to rise at a considerable rate between 2021 and 2026, according to Market Watch. With e-commerce steadily gaining more consumer dollars, this type of business model offers owners an “in” with a low barrier to entry.
Another popular business model in 2021 is using revenue earned through advertising as the lifeblood of a company. While television, radio, and newspapers have relied on this model for decades, it’s now very popular in the digital world.
We see this being used by media giants like Facebook, Google, and TikTok, but it’s also the primary way many smaller businesses are supporting themselves from influencers to app creators to owners of blogs and websites.
The way it works is you create a presence that attracts an audience. You can do so through the content you create or by creating a platform where users can create content (e.g. social media platforms). As your audience grows, you can get paid by advertisers for placing their ads. Additionally, you can get paid by placing affiliate links that lead your audience to make purchases (aka affiliate marketing).
Examples of businesses using this model are those influencers making a living off of their YouTube or Instagram followings, mobile apps and games, and bloggers like Cookie and Kate who create content on their websites as their full-time job.
These four business models have been helpful for entrepreneurs in 2021 as they are digital-friendly. For success now and going forward, the focus needs to be on resilience which means reaching customers despite the various scenarios that could happen — like a pandemic. Going online and creating revenue streams that don’t rely on in-store experiences helps to create that redundancy.
What are some examples of profitable small businesses in 2021?
Now that we’ve covered some of the most popular business models, what types of small businesses have still been profitable in 2021?
Here are some successful business ideas for those wanting to impart on the journey of entrepreneurship, many of which have low startup costs to boot!
As more and more companies focused on digitizing their business over the last year, they all needed content and copy from social media posts and profiles to websites and blogs to emails and ads. As a result, business is booming for companies offering copywriting services. Plus, it’s a service that can be handled remotely so it’s not impacted by disruptions to in-person business like stay-at-home orders. Plus, income is not restricted to just writing. You could also write for yourself, creating online courses and guides, or creating your own website which opens up multiple revenue sources.
In what’s being called, “The Great Consumer Shift,” many consumers shifted to online shopping in place of visiting their local brick-and-mortar stores during the pandemic. There was a 15% to 30% growth in consumers who purchase online across a wide range of categories, according to McKinsey & Company.
Further, the majority said they intend to continue their new shopping behavior post-pandemic. Being so, one of the best small business ideas is to open or transition to an e-commerce shop and cater to the growing base of online shoppers. Platforms are available to make the process easier such as Shopify, Weebly, and WooCommerce.
Graphic design is another one of the pandemic-friendly online business ideas. Like copywriting, graphic design is in high demand due to many businesses ramping up their online presence and digital marketing efforts. Further, it’s a job that can be done remotely, so doesn’t require in-person interactions. You could run a business as a solopreneur or could build an agency providing designs on a larger scale.
Have a property or space you aren’t using? Airbnb can help you create a new source of income. The company saw a 300% year-over-year revenue increase in Q2 of 2021 and surpassed 2019 numbers by 10%. You’ll need to create a profile, add your listing to the site, and begin renting it out to Airbnb users.
Real estate continues to be in demand as homeowners will always need to buy and sell their properties. However, the pandemic and low interest rates have sent the industry into a frenzy. Prices are inflated 15% to 20%, inventory is low, and competition is fierce.
While not ideal for buyers, it’s a great time to be a real estate agent. However, in-person interactions alone will no longer cut it. To be competitive, you’ll need an online presence across real estate platforms like Trulia and Zillow, along with a website and social media profiles.
Social media manager
With the shift towards digital marketing, a key part of the puzzle is a successful social media presence. However, creating and managing social media is a full-time job — one that many companies are happy to outsource to someone with the right “know-how.”
If you know social media, you could start a small business helping other companies to build a successful presence. This can involve optimizing profiles on various platforms, creating content, posting content, running ad campaigns, tracking results, and providing progress reports.
Influencers build audiences in a niche in order to get paid to advertise to them. For example, a person who shares high-quality makeup tutorials on their YouTube channel, home improvement shorts on TikTok, or wellness information on their Instagram profile. This kind of business will take an upfront investment of time to gain a following. However, once built, you have an ongoing stream of income from ads or affiliate marketing.
SEO content marketing services
SEO content marketing falls under the digital marketing umbrella. It’s a service you can provide to help a business use content to drive new business to their company. It involves creating a strategy across various channels (web, social media, email, etc.) for clients, implementing it, and tracking the results.
Bookkeeping and accounting
One business opportunity that will likely always be present is the need for bookkeeping and accounting services. Most everyone needs to pay taxes, and many don’t like to manage the ins and outs alone. By shifting your business online and utilizing software to your advantage, you can help your clients virtually or in person.
With many offices closing down and businesses moving online, a new demand has been created. Many professionals need help managing all of their administrative tasks each day so they can focus on their primary profit-driving activities, which is where a virtual assistant can come in. You can create a business where you help clients by handling their administrative tasks remotely.
Wholesalers plug into the other side of the dropshipping business model. You buy large quantities of products at a low cost, like liquor, for example, and then sell them for a higher amount to retailers.
With more than 39% of internet sites being built on WordPress, there is a massive demand for WordPress experts who can build and manage websites.
Always wanted to design a line of t-shirts or another type of clothing? The dropshipping model makes it easier than ever. Plus, there are platforms like Printful that help you to design your clothes, put them up for sale, and fulfill orders.
Get funding to pivot your small business!
Have an idea for a new business direction?
The pandemic had a huge impact on our economy and consumer buying behaviors while highlighting the importance of resilience. It’s no wonder most small business owners are feeling the need to update their business models to survive and thrive.
If you’d like to make some changes but need capital to do so, Biz2Credit might be able to help. We offer term loans and working capital from $25k up to $6m that can be used to fund business projects and expenses. Plus, you can get an approval decision within 24 hours and funding within three days.
Want to see what you qualify for? Apply now!