5 Proven Online Business Models for 2020

open for business sign for online business models

So you want to make money from an online business? Join the club.

Making money online has come a long way since author Tim Ferriss released his pivotal book The Four Hour Work Week and convinced readers that they could escape the 9-5 by following their passions, teaching others through a website, and capitalizing on some international arbitrage by hiring a remote assistant to do your dirty work for a low price.

Online business models have continued to explode in popularity, and just as one method becomes saturated with aspiring millionaires, another pops up in its place.

If you want to get involved in this space, you may have realized that it seems like everyone out there is making money online. This is what you see in the blogs you read, and especially the annoying YouTube ads that you get served.

So how do you know what to believe, and which models are best suited for you?

This is the question that we will answer in this article. Read on to discover where your skills are best suited – and how you can leverage online resources best to grow your business over time!

A Word on Methodology

We stacked these business models against each other based on metrics that we consider important for an aspiring “solopreneur.”

Here they are:

  • Startup costs
  • Startup difficulty
  • Time to results
  • Ownership
  • Profile

The reason chose to break them down this way was because many articles about this topic make loose statements saying that you “could” give their model a try, but few go into detail about whether or not you “should.” This is especially true when it comes to the potential roadblocks or pitfalls in the model.

We think that when someone is getting involved in an endeavor like online business, they should be aware of exactly what kind of an undertaking it can be – not just the potential rewards!

Startup Costs and Startup Difficulty are important metrics to consider. This is the stage where most people quit their online businesses, so it’s best to know how much time and money it will take to begin, and how long it will be until they see their first stable income (Time to Results).

Costs and difficulty are based on averages from what people report online, so be prepared to do more research do determine if your niche actually fits these numbers.

Ownership is a bit of a difficult thing to quantify, but it is essentially a measure of security and how much control you have over your business.

We boil these down into a Profile of who we think is best suited for the method.

So let’s get to our favorite online business models.

1) Affiliate Marketing

We might as well start with the online business model that keeps BrandBuilders running: Affiliate Marketing.

Before we get carried away talking about this topic, we recommend reading our Affiliate Marketing for Beginners article if you are still unsure about what this model is, or the basics of how it works.

If you are familiar with the concept, then great! Read on as we explain why we think it is one of the best models out there.

Affiliate Marketing Models

There are many ways to make money through affiliate marketing. In some ways, it can be considered the gateway drug of online business – but it all starts from the core model for promoting products and services with a blog.

affiliate marketing online business model

An affiliate owns a website in a specific niche and strikes a deal with a merchant to promote their product through their site. When a site visitor/customer wants to make a purchase, they click through a link on the affiliate’s site and make the purchase on the merchant’s site. The affiliate receives a percentage of this purchase.

Of course, we would be remiss if we did not mention that there are other ways to make money as an affiliate without a site (we wrote an article about that too). This model can be done in several different ways.

But how does it compare to other models?

Tale of the Tape

Affiliate marketing is a great business model that is so popular online because of ownership, earnings potential, and compatibility with other business models.

First of all, ownership is important for ensuring income stability in the long run. With affiliate marketing, you own your website, the content on it and (to an extent) the loyal visitors who come back to your site when they want to solve a problem.

If one of your high-performing affiliate partners decides to kick you out of their program, you can still reach out to a different business with a similar product to recoup these losses. This is something that affiliates should be prepared for, as it does happen often!

In fact, Amazon Associates (one of the largest programs on the internet) made headlines by slashing their affiliate rates in April of 2020.

The earnings potential for this online business model is limited by the amount of traffic that you can drive to your site, the quality of your content, and your overall conversion rate (ie whether or not site visitors trust you enough to take your advice when making purchasing decisions). These are factors that are within your control, even if they can take time and expertise to execute.

Last but not least, a successful affiliate website can be utilized to make money in several ways.

As an example, a mature site in the hiking equipment niche can make money through display ads, selling exclusive content like holiday gear guides, and selling your own product like branded apparel.

Most successful affiliate marketers – like Spencer Haws from Niche Pursuits – post extensively about how their model is meant to include these other income methods, as it adds diversification and security to their monthly payouts.

Be Prepared to Fail

With all this in mind, we can’t lead you down the affiliate rabbit hole without some disclaimers.

  • This will take time. Most first-time affiliates report first seeing consistent revenues after six months or longer.
  • Prepare for a steep learning curve. You’ll need a great deal of hands-on learning about WordPress, SEO, content marketing, and your niche. If you aren’t a self-motivated learner, this may not be the right online business model for you.
  • You will fail. It’s inevitable that you’ll encounter hurdles and face stiff competition from competing sites.

Sorry, not sorry. We had to say it! Affiliate marketing is tough, but it also can be incredibly rewarding!

Our recommendation is to use the sources we mention under the Amazon FBA section to find accurate information, and to find a mentor in the field if possible. This is the best way to ensure that you can learn from the mistakes of others and follow a predefined plan as you grow your site.

Who is Affiliate Marketing Best For?

Affiliate marketing faces a bit of an identity crisis at times.

It often gets lumped in with other online business models that do not require as much work or rely on a much narrower set of skills. Most importantly, it should not be considered a passive income model because of how much work goes into continually growing your model.

However, it is a combination of all of these things that make it so much more rewarding when things go right.

We recommend this business model for aspiring online business owners who:

  • Have an understanding of how to drive traffic to a site from multiple sources (social media, paid advertising, organic traffic).
  • Are able to identify good content online, and find ways to emulate it.
  • Have a willingness to keep up with the constantly changing world of SEO.

We hope this doesn’t seem like a tall order. Of course, we also support affiliate marketers who are actively learning about these concepts as they grow their site. Just because you aren’t a master of all of these concepts doesn’t mean that you shouldn’t start – but you should always be willing to learn.

Final Verdict

Business Startup Costs – $2,000 (Website startup & hosting, content sourcing, SEO research)

Business Startup Difficulty – 8/10

Time to Results – 6 months

Ownership – Medium

Profile – Self-motivated jack-of-all-trades. Possesses a eye for good content. Excellent delegator.

2) Amazon FBA

This is an online business model that really came into vogue in the past few years. With anything that reaches a certain level of popularity online, we want you to keep a few things in mind before you get started.

Whenever an online business model becomes super popular, you have to deal with these two factors:

  • A lot of competition, imitation, and just plain copying of good niches or strategies
  • A lot of bad or unhelpful information is often used to sell informational products, like courses that are “guaranteed” to help you drive traffic and make more money.

The first point we make here isn’t the issue. Competition is a given with methods like affiliate marketing and FBA, which is why we recommend tools that you can use to find the most promising niches that you can monetize.

Finding the Right Information

The tough thing is the constant flow of unhelpful information out there online about these topics. The main reason that a lot of these how-to guides and courses aren’t great is because they are being created purely for SEO value, or purely as a lead magnet to convince you to buy something from the same author.

So, what can be done about this? Our best advice is not to get dismayed if you have difficulty getting started with Amazon FBA, or have a tough time getting your questions answered.

Instead, keep a list of trusted sites to review for content that can help you along your journey. Here are our favorite sources for Amazon FBA and all things online business.

And now back to the main event: filling you in about Amazon FBA!

Fulfilled by Amazon, Sold by You

First of all, FBA stands for Fulfillment by Amazon.

delivery truck full of packages

Your responsibility with FBA is to sell a physical product online. From here, you can choose to utilize Amazon’s extensive empire of distribution centers to store the inventory of the product and package and ship it to your customer’s address once it is sold.

This is a solution that Amazon has created to take care of the most tiresome part of e-commerce: getting your product to the customer. Amazon takes a fee for providing this service, which is relatively small and leaves plenty of room for you to make a decent amount from the sale.

Here’s what you need to get started with your Amazon FBA business:

  • A product idea in a profitable and uncompetitive niche
  • Startup funds to build inventory, start a sellers account and buy your FBA membership

How FBA Works for You

Choosing the correct product(s) is essential to being able to make money using Amazon FBA. This isn’t a business model where you can sell something because you use it yourself and think you can do a good enough job of selling it to others.

Usually, with Amazon FBA, there is some element of arbitrage (defined as taking advantage of a price difference between two markets).

Some ways that Amazon FBA sellers have had success in the past includes:

Retail Arbitrage

  • This might be the most common FBA tactic. You can buy large amounts of low-priced items and then sell your products at a marked up “retail price.” Often, this is done by buying products from overseas, or from the clearance section of retailers like Walmart.

Wholesale

  • Much like retail arbitrage, this involves buying low-priced goods. However, you will need to buy large amounts of these goods to qualify for the bulk (wholesale) price.

Amazon FBA is relatively beginner-friendly because it doesn’t depend on you having to create a website.

Also, when FBA performs well, it gets very close to achieving the “pie-in-the-sky” goal of online passive income. Many FBA business owners only have to put in a few hours per week to ensure that they have good stock in their product, and that ensures that traffic is being driven to the site.

However, the drawbacks are that your success depends on your supplier. This is an issue of ownership, where your money-earning method is not actually in your hands and can disappear due to events out of your control.

Suppliers are businesses too, and it is common to see them change their policies and cut into your profit margins, or go out of business themselves.

In addition, you are completely at the mercy of Amazon, and whether their policies result in your product being ranked well on their site.

Verdict

Business Startup Costs – $1,000 (Startup fees, inventory, marketing costs)

Business Startup Difficulty – 5/10

Time to Results – 3 months

Ownership – Low

Profile – “Numbers-driven” person who can find small price advantages to make money. Skilled at negotiation. Comfortable with uncertainty and risk; happy to move on from a business idea that becomes unfeasible due to outsider factors.

3) Starting an E-commerce Store

The World is Shopping Online

E-commerce was already on quite the roll when the COVID-19 pandemic struck the world, and since then it has accelerated the global shift away from physical stores by 5 years. This is a big cause for concern for brick and mortar retailers who have a subpar online retail presence.

ecommerce online business model

But it is an incredible opportunity or those who are familiar with making money online!

E-commerce has a relatively low barrier to entry, several options for how to sell products, and a high sense of ownership

The E-commerce Business Model

That introduction may have left you thinking, “Wow, sounds like a great option, but how can I know what I should be selling?”

This is completely understandable. Although some aspiring e-commerce masters might have a supplier and product in mind that they can sell, for many that idea might not come quite as easily.

Luckily, there is a way to find the ideal product.

This Niche Pursuits article by BrandBuilders team member Daniel Thrasher goes into plenty of detail about how to find the best e-commerce strategy based on a given niche. We recommend digging into this guide if you are interested in this business model, and here are the main points that he made:

  • Determine your ideal niche using keyword a research tool like Long Tail Pro.
  • Find an ideal product or service in this niche that you can sell.
  • Plan the setup of a Shopify or standard WordPress website to host your product or service.

The thing about the e-commerce model is that, on the surface, it doesn’t really seem that hard. Startup costs are low compared to other models on this list, and you can start making your first money much earlier than a content-based business.

Ownership is a big advantage as well, especially if you are selling physical products. Once you have sourced these products from a supplier, you have full control over what to do with them. If your supplier goes out of business or increases its price, no problem – just find another supplier!

However, the real difficulty with selling physical products comes from immediately before and after the sale.

After the sale is difficult, because you need to take care of fulfillment and customer reviews, which can add up the more that you sell.

Before the sale is even tougher, because you need to find ways to promote your products. This can be expensive but hasn’t been included in the startup cost because it is highly subjective, depending on what you are selling.

Here are some common methods of promoting products online. Some cost significantly more than others.

  • Advertising on Social Media: This offers enhanced targeting capabilities, but advertising costs for Facebook, YouTube, Instagram, and Google Ads are increasing.
  • Product Reviews: You can try to get your product reviewed by popular publications or blogs in your niche, but this requires you to send free samples, or even pay for the exposure.
  • Content: This involves using content on your e-commerce site to try to rank organically in your niche and hope that visitors will buy something when they arrive. Getting content written costs money too, and often the site visitors from this method aren’t in the buying mindset when they arrive.

Even though e-commerce sites are touted as being far better than having physical products on the shelf, it can still be difficult being one of dozens of different sites in your niche online – especially compared to being the only one on Main Street.

This business model still works great as an add-on element to an affiliate or membership site when an audience already exists, but it can be a real battle to start from scratch and see sustainable success with this business model.

Verdict

Business Startup Costs – $1,500 (e-commerce website design/hosting, inventory, payment processing)

Business Startup Difficulty – 4/10

Time to Results – 12 months

Ownership – High

Profile – Sales and digital marketing mavens. Skilled in finding unique ways to sell to the world, and testing the effectiveness of these methods against each other. Has a good sense of design and how to make a product look attractive to customers.

4) Selling Ebooks or Courses

This is often referred to as info products (or informational products), and is often cited as one of the most profitable methods of making money online. This is due to the high level of ownership: the product that you create is uniquely yours, meaning that you get to set your own price and reap the full benefits of any sales made.

The other key difference with info products is that the work is mostly front-loaded. It takes time and/or money to write an e-book or make a vide course from scratch – however, once the product is created, it can be scaled upwards as much as you want.

You will still need to worry about promoting and selling your informational product (which is no small matter), but the point is that your startup costs are virtually the same for selling 10 units as they are for selling 1,000.

The Info Products Business Model

As an online business model, ebooks and courses make the most sense when you already have an online presence that you can leverage to sell. To put it simply, it is hard to convince people online that you are an expert in a topic unless you can back it up.

ebook as an online business model

This business model is best for people in the following situations:

  • You have a blog, affiliate site, or authority site in a profitable niche.
  • You have a strong YouTube channel, social media profile, or other online presence in a niche.
  • You have an existing online or offline network of people who you can pitch your info product to.

The point we are making here is that you can’t really start this business from scratch. You will need to build an audience before you start thinking about how to sell. If you put an eBook on Amazon and expect people will read it and share it with all their friends, you might be better off trying to win your local lottery!

Another important aspect of an online course or ebook business building to remember is that it doesn’t have to be a one-person show. Although the core learnings of the course should be your own, be prepared to pay for freelancers from a site like UpWork to complete tasks like proofreading, layout, and graphics to ensure that your online products look legit.

Nothing will damage your reputation online more than a shoddy info product that makes your customer immediately regret their decision.

Creating a High-Quality Product

The key advantage of the info products business model, as we mentioned earlier, is its scalability. Take the online course, for example. With a video course, you have the option to get started by opening it up to as many students as you would like (as long as you can handle the questions from students and administrative work), or exclude all but a limited number and charge a higher price.

Making money online is about making the best use of the limited resource of time, and this is a great method for stretching your earnings per hour figure sky-high. However, there is one key thing standing in the way of this:

There is already plenty of FREE content online!

And a lot of this free content is very informative and useful.

Because of this fact, you will need to ensure that you create content that is good enough that customers won’t seek it out for free AND you need to convince them of this through your sales process.

So how exactly can you accomplish this?

  • Find a niche where good information is hard to come by. By putting the best of it in one place, you are saving people time, which customers will pay for.
  • Convince customers that your course will help them make money. This usually involves showing them how you have been able to do the same thing in the past.

Like several other online business models on this list, info products work well in tandem with affiliate sites. The element of trust is important here, as is imparting your unique voice into your products.

Info products can also be used as a part of a membership site, where you have high-quality content “gated” behind a paywall. This is a concept that is popular with many other online business models.

Most major media sites (including the New York Times) now limit visitors to a few articles at a time. Patreon has created another valuable way for creatives to give their fans access to exclusive content and community for small fees. You can also make a private Facebook group part of the value proposition when someone buys information from you.

The point is, truly good content is becoming harder to come by, and the people who create it are asking for modest fees so they can spend more time creating and less time chasing checks. So, why can’t you do the same thing with your content?

Keeping info products behind the paywall of a membership site is a great option for those with a strong online presence, and it can be a great source of recurring income if you charge a flat monthly fee.

Overall, info products should be recognized as one of the more profitable online business models out there. Sure, it’s no the easiest to get started – but the work that you put in can pay itself off exceptionally well.

Verdict

Business Startup Costs – $2,000 (info product design, outsourcing)

Business Startup Difficulty – 7/10

Time to Results – 3 months

Ownership – High

Profile – Great teacher who enjoys sharing knowledge with others. Strong communicator who can delegate tasks to others effectively.

 

5) Online Freelancing

As an online freelancer, I can confidently say that, on the surface, it cannot compete with any of the other online business models on this list.

Online freelancing does not jive with the concept of “passive income.” You are restricted to what you can produce in a given hour and can only negotiate your rate so high!

You will constantly need to sell yourself (“you” are the business), and convince customers why they should keep you around – because there is plenty of competition out there that can be reached on the internet.

You’ll need to have a diverse skill set to be able to make yourself available for gigs, but customers are often looking for that “expert” in their niche who they will pay the highest rate. It can be difficult to decide what to specialize in, and often you are simply forced to take what you can get.

Are you still reading? Well, good! Because there are decent ways to build an online freelancing based business out there. All you need to do is find the right niche and work your butt off.

The Niche is Chosen for You

Niche selection for online freelancing is much simpler than other online business models. Either you have a skill that isn’t too competitive for you to make a living in, or you don’t. It’s as simple as that!

freelancing online business model

Upwork releases their top 100 list of in-demand skills every year, which shows which freelancers are likely making the most money. The most recent iteration featured high-ranking technical programming and software skills like .NET Core, TypeScript and Android, but also Landing Pages and Bank Reconciliation.

You can research whether your skill can earn you enough money to be worth it using Google to search “how to make money freelancing with X.” There will be plenty of firsthand accounts going over the trials and tribulations of the business.

If you think that you have a chance, startup costs are relatively low, as all you should need to do is set up a website to showcase your skillset and portfolio and pay for the membership fee for a site like Upwork. Then you are off to the races, and your success is fully in your hands!

The Freelance Business Model

The key difference between being a freelancer and having a freelance business is a matter of scalability. You need to maximize the earnings that you get from your time and establish some recurring cash flow so that you aren’t constantly chasing around new clients.

One way to do this is to establish yourself with key clients in high-paying niches, and have them sign you on to a retainer or other long-term contract. This ensures that you will have a base amount of earnings every month.

Once you have done a few month’s worth of work for this client, you should be putting the following business model into action.

  • Establish yourself as an expert in this field. Create a new portfolio or website (or a page on your website) based on the niche, and seek out new clients at an increased rate from your previous work.
  • Develop new promotion channels. Find new clients through your existing ones, and establish a process for cold-emailing prospective leads.

The end goal is to have a constantly-growing project-based rate, and a steady stream of leads so that even when you lose clients, you will not have to scramble to find new ones so that you can pay rent.

Essentially, you need to treat the freelancing business model like other methods on this list (think: e-commerce or affiliate marketing). It is essential to constantly be scaling upwards, establishing processes, and building trust.

Verdict

Business Startup Costs – $500

Business Startup Difficulty – 3/10

Time to Results – 3 Months

Ownership – High

Conclusion

Congrats! You made it all the way to the end of our rankings for online business models. Before you pat yourself on the back, let’s remember that this hardly scratches the surface of the many ways people make money with business models online.

This field is constantly changing, and you need to stay aware of upstart business methods, or ways that certain popular online models are becoming obsolete.

To find out more, I strongly recommend watching our recent video with serial online business creator Jon Gillham from Authority Website Income. This is part of a series that Brady from BrandBuilders is releasing that highlights top entrepreneurs.

Put this on the next time you are working out or cleaning the house and you can learn from one of the best online business people out there.

Still have questions about affiliate, Amazon FBA, or e-commerce sites? Lucky for you, BrandBuilders has a team of experts on these topics. Take advantage of our Coaching Calls to make sure that you are on the right track.

Thanks for checking in with the BrandBuilders blog! We hope to see you again soon.