Over the past five years or so I’ve been testing out different online business models to learn which one is the best fit for me based on my personality, skillset, and interests.
I remember how confusing it was in the beginning so, in this short guide, I’m comparing the typical online business models, so you can get a better understanding of which one you prefer.
I made the mistake of not clarifying this upfront and that could probably cut a few years off of my learning curve as I realized there were better business models for what I was trying to achieve.
I’m looking at them through the following lens:
- What the key tasks are and what it looks like day to day (when starting out), so you can get a better understanding of if you like those tasks because you’ll be doing them A LOT!
- Timeline to results, so you can better decide which one is a fit for you depending on your goals. As a rule of thumb, the business models that allow you to earn money faster generally is a tradeoff between speed and scale.
- Budget/resources, so you’ll get an idea of how much to invest upfront (if any)
- Results/scale, so you’ll know which one fits you better depending on your short- and long-term dreams
- Introvert/extrovert, so you’ll get a better understanding of how much you have to be working as a lone wolf vs. working with people, so you can pick something that fits your personality the best.
Within these areas, we’ll look at the following online business models:
- Info products/coaching
- Sell ads or affiliate
There are many other business models online such as flipping things on eBay, flipping websites and traffic arbitrage.
I have deliberately not included these as they are either not fully online, requires unethical tactics or are simply unnecessarily challenging to get started with if you want to earn money on the side while working at your day job.
Freelancing is the first online business model that comes to mind. As you know, it’s pretty straightforward. You simply need to help someone with a skill you know and get paid for it.
The key tasks, particularly in the beginning, are finding leads, understanding their needs, pitching them and doing the work they buy from you.
In the simplest example, you email a business, agree on the work, you do it and get paid. That also means the timeline to getting paid can be very short. Of course, it’ll vary project by project but usually, this is the fastest way to start earning money online when you have a full-time job.
Starting out, your day to day work is finding and pitching clients. That is all that matters. Not your website, business cards or networking events. Pick one way to find potential clients and focus on learning only that one.
With an online freelancing business, you only need your laptop, internet and the skill you’d like to help people with. It is a low risk-business as you don’t need to spend any money or have any setup in place to start earning money.
In my experience, the opportunity is particularly great if you are looking to earn your first money via the internet.
It is fairly simple (not to mistake for easy) to earn a consistent $2000/month on the side freelancing while having your day job. Here’s a guide to earning your first $500 freelancing on the side (without being a sleazy salesperson).
For many people, it is possible to replace a good full-time salary with freelancing. It is certainly possible to earn six figures and beyond as you get better and better at each of the skills needed to land clients.
As a fairly introverted person, I’ve found freelancing to be a pretty good fit. I have had the opportunity to work solo as much as I like except for the occasional phone call with clients which I prefer because it makes my life easier in the long run.
Depending on the skill and niche you choose, you can certainly avoid the phone calls as well.
As I started earning money online I discovered that I had a lot of ‘blocks’ that held me back (e.g. ‘who’s gonna pay for this!?’).
If you don’t have any experience working online, this is probably the best place to start as you can often use what you’ve learned at work, repackage it, and sell it to other businesses while working through your own ‘blocks’.
This category is about earning money building and selling digital software. Most commonly it comes as mobile or desktop apps and a popular way of earning money are selling software as a service (SAAS).
The key tasks going into a project like this is building or buying the software you are going to sell, maintain it by fixing bugs and adding new features, and getting new users and customers.
I have it from valid sources that particularly the part about maintaining and updating software is what people typically underestimate when they take on a project like this.
Unless you are buying a project that already has users and customers, you’ll probably want to spend most of your time getting customers to get feedback on your project.
So, if you at the same time either have to build the product or hire someone to build it, you’ll be spending a lot of time – or money if you decide to outsource it instead.
That means the timeline to having an online side business that can support your lifestyle takes much longer than with some of the other examples. Personally, I would imagine you are looking at several more years- Ahref’s is a great example as a case study.
It is a story of how a market leading business was built without the need for crazy hours as many of the popular stories online lead us to believe is necessary.
As the cost is higher than in our first example, the risk is also much higher. On the contrary, the potential for earning more money is also better. While it certainly takes longer to get off the ground, the upside can be in the millions as these types of projects are much more scalable.
Some people like this model because it allows them to be a fully lone wolf only working with a few online freelancers at best. As I am aware, it can be done either like that but also with a team (or contractors) for those who are more interested in engaging with people.
I’ve decided to group online coaching and info products together as they are similar business-wise and often overlap.
Often you will be doing the same, or at least very similar work when helping clients. The major difference is in whether that is automated via e.g. a video product that typically sells cheaper and has slightly more mass appeal.
Compare that to coaching where you typically get on calls and are present during the training while also charging a much higher fee.
Most often you’ll see people using the same platform and sometimes you’ll even see them selling both an info product and a more premium coaching package.
Although you don’t necessarily have to do it this way, the platform used is typically a website where they have attracted an audience and now are selling either of the two options.
You can expect to spend most of your time creating content. As you build an audience, you’ll want to build a product or service and learn how to sell that.
Though I feel like I have to emphasize, you will spend the vast majority of your time during the first one-two years creating and promoting your content.
You can use ads to fast-forward quicker in the beginning but if you go down that road you’ll need to have another traffic solution in place, so you’ll continue to get traffic even when you turn off the ads. And that takes a long time to build.
The timeline to earning a meaningful amount of money can be short if you are able to quickly find a way to get clients and you coach them live.
More likely, you’ll have to build a base audience that you sell to as described above. That takes a significantly longer time, however, I consider that of lower risk as that can be a very stable business with high retention.
Not to mention the opportunity to expand into software, an agency or other services when you already have an audience built up.
Generally, it doesn’t cost that much to do – it doesn’t need to. However, some people prefer to spend money on ads to build an audience faster- or add extra things to their services which cost money. None of these are necessary.
So the budget needed could be very little if you focus on free traffic methods and it can increase in cost much as you like it to.
The results at scale go into the multi-millions of dollars. The upside is huge- just look at blogs like Ramit Sethi’s I Will Teach You To Be Rich earning more than $5 million dollars in a week.
Whether you feel more like coaching one-on-one or creating products, with this type of business you can pretty much select how much you want to involve other people.
You could hire contractors or a team to help you create content or build products but you don’t need to at all.
You will most likely see a benefit in using your own personal brand as part of this business model, so feeling comfortable recording videos or other types of content with yourself in it is a benefit.
The risk is not high generally, however, you will be spending a lot of time on this project, so making sure you reach the right people somewhat from the start, is a huge benefit.
Sell ads or earn affiliate commissions
I’ll keep this section short as the process is generally the same as you’ve seen above. You build an audience by creating content.
However, in this scenario, you either earn money by showing ads to people or place affiliate links so you can earn a small commission if someone buys something (at no extra cost to the customer usually).
A lot of people like this option because it is a great fit if you are particularly introverted or don’t want to work with other people. If that’s you, this will probably be a good business model to pursue.
It is a trade-off as you in many cases will earn more by creating online products. However, there are some markets and niches where that simply won’t work because the market doesn’t have enough money or they don’t want to pay for the solution.
In that case, you can monetize with ads. This often works particularly well in third world countries with large populations as you can have huge traffic numbers but the value of each visitor is much lower because they just don’t earn much money.
In this scenario, you’ll actually start earning money as soon as you get visitors but it won’t be much, and it’ll probably take you at least a year from scratch before you start seeing any amount of money that will be meaningful for you.
Adding the ad units to your website is easy, and so is signing up for, and placing, the affiliate links on your website. You will definitely be spending most of your time creating content and promoting it.
I don’t see much risk in this business model except your time.
The final business model is using Patreon or Kickstarter to monetize. Basically, your audience ‘donates’ or supports your project with a single number or a recurring payment monthly.
Contrary to what many people believe, these platforms do not give you an audience. In most cases, as with many of the other options, you’ll have to spend most of your time creating content and building an audience.
To monetize you’ll have to create a product and different tiers of products depending on how much money your contributors want to give you.
Just like with many of the option business models, the timeline you are looking at to making any meaningful money is quite long. When the risk is low as you can spend your time creating the content so it won’t cost you much to get started.
I like this type of business because you can make certain topics profitable that wouldn’t generally be with other business models. One example I haven’t seen work well with other business models is content related to maps and fans of geography.
I haven’t built a business like this before but my impression is that you’ll have to be ok being on camera one way or the other. So, it’ll most likely not be a good fit if you are very introverted I imagine.
Which one suits you better?
Now the big question is, which one suits you better? Personally, I think freelancing is the best option to start with, as you can earn your first money online pretty quickly. That’ll help you mentally feel used to it while also helping you actually finding a niche that can pay you.
I’ve often seen people build a website only for no one to want what they sell because they haven’t figured out what people want to pay.
Not only does it feel shitty to have done all that hard work but it also feels difficult to abandon it because you might not feel like throwing away all that work you have done.