The world is full of inefficient industries, ripe with opportunity for those who connect Problem A with Solution B. But how do you make money from that?
This depends on whether you view yourself as a Marketplace or an Advisory business.
Monetizing a Marketplace
As a ‘marketplace’, you essentially connect a purchaser and a supplier. This business model has the option to charge either party, or both.
- You could charge the Purchaser an upfront fee. For example, they contact you via a premium SMS number, or you could take a membership fee.
- You could charge the Purchaser a success-based fee. For example, if you take the payments, you can add a simple surcharge to the Supplier’s cost when quoting / charging the Purchaser.
- You can charge the Supplier an upfront fee. This could be the form of monthly access to your purchasers (not recommended for early-stage businesses, since you’re likely still building that side of the marketplace) or a fixed ‘lead generation’ fee for every Purchaser you connect.
- You can charge the Supplier a success fee. This would be a percent or fixed amount of every success transaction you introduce.
Most new companies in this connection / marketplace space have good relationships with Suppliers and are working to build their database of Purchasers. As such, I recommend charging the Suppliers to prevent any friction on the Purchaser end. Managing the transaction and taking a success fee is the easiest model to promote – there’s little risk for everyone, because you only get paid if everyone is happy.
Monetizing an Advisory
An evolution of the first item in that list is charging Purchasers a more direct fee-for-service.
This is more inline with an Advisory business – ie, you are paid to give advice, and connection with Suppliers is an occasional by-product of that.
To successfully build an Advisory business, you may need to ramp up your expertise rather than the Suppliers you know. You’ll also need to understand the Product Architecture you want to bring, and in particular the Gifts and Pre-Products you can offer to attract clients into your sales journey. Giving away too much for free makes it challenging to convert anyone to paying client; not giving away enough makes it hard for them to gauge your expertise.
But why not both!
This is a real option BUT one fraught with danger, because it creates a lack of focus.
Choosing to be a marketplace (albeit personalised) encourages you to develop those supplier relationships and convert purchasers from free advice to a transaction as quickly (and often) as reasonable.
Choosing to be an advisory business encourages you to develop in-house expertise, though your sales copy and sales funnel will need to be stronger as well.
Choosing to be both could mean giving away a lot of expertise and not actually providing your suppliers with much volume – the worst of both worlds.
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What is your experience?