4.2 Common Business Models (with Examples)

Startups often follow one of several tried-and-true models. Each model describes a different way of creating and capturing value:

• B2C (Business-to-Consumer): Companies sell products or services directly to end consumers. For example, Nike sells shoes directly to runners and shoppers in retail stores or online. In B2C, the customer is an individual using the product for personal use.
  
  

• B2B (Business-to-Business): Businesses sell to other businesses, not to individual consumers. For example, Slack provides team-chat software sold to companies. Here the customer is a company or professional organization. B2B models often involve larger orders and longer sales cycles (e.g. software licenses sold to firms).
  
  

• C2C (Consumer-to-Consumer): A platform connects consumers who sell to each other. Think of eBay or OLX: one person lists a used item and another buys it. The company running the platform (eBay) earns fees or commissions, but the actual trade is between consumers.
  
  

• D2C (Direct-to-Consumer): A brand sells directly to consumers, cutting out middlemen. For instance, Mamaearth (an Indian skincare brand) sells products on its own website rather than through retail stores. D2C companies often rely on online marketing and may offer better value by avoiding retail markups.
  
  

• Subscription: Customers pay a recurring fee (monthly, yearly) to access a product or service. Popular examples are Netflix (video streaming) and Spotify (music streaming). Instead of one-time purchases, these businesses earn a steady stream of income from subscriptions. This model builds predictable revenue and encourages long-term customer relationships.
  
  

• Freemium: The product has a free basic version and offers premium paid features. For example, Zoom lets anyone video-chat for free (with limits on meeting length), but charges for advanced features or larger meetings. Canva offers basic graphic design tools free and charges for premium templates. Freemium attracts users easily, then upsells a small fraction to paid plans.
  
  

• Marketplace: A platform that connects multiple sellers and buyers. Amazon or Swiggy (food delivery) are classic marketplace examples. On Amazon, many third-party sellers list products and consumers browse them in one place. The marketplace operator earns money from commissions, fees, or ads. In a marketplace, the company itself does not make the product – it just facilitates transactions between others.
  
  

• Franchise: An entrepreneur (franchisee) buys rights to run a store using a well-known brand and business system. McDonald’s and Subway use the franchise model: the franchisee pays fees (often a share of sales) and follows the chain’s menu, recipes, and marketing. Franchising scales a proven model quickly without the parent company building each new location itself.
  
  

Each model has real-world success stories (and failures). For example, Apple mostly operates B2C (selling iPhones to people) but also has B2B deals (selling Macs to companies). Netflix and Spotify use subscription models, while Amazon started as a B2C retailer and grew into a huge marketplace. Comparing models can inspire ideas: why not combine features (e.g. a freemium subscription, or a D2C marketplace)? Understanding these categories helps entrepreneurs pick the right approach.