Embarking on the entrepreneurial journey is an exciting step towards creating a legacy. However, the stakes are high – it's almost a given that 90% of startups fail. A recent survey by Failory looked at the reason behind this number in 2024. Over half of failed businesses cited marketing failures. Specifically, 34% cited poor market fit as a critical factor.

This makes the right choice business model in 2024 more important than ever to ensure you are positioned correctly in the market. Aligning your business model with market demands and personal values ​​is key to avoiding these statistics.

By exploring the advantages and challenges of different models, from the structured support of franchisees to the flexible fit of lean startups, it's important to evaluate how each fits with your long-term goals and immediate needs.

Related: 7 elements of a strong business model

1. Structured franchise approach

Franchising offers a structured path to business ownership that combines the security of a proven system with the excitement of entrepreneurship. One of the main benefits of franchising is that turnkey operation. Franchisors are provided with a ready-made business plan, significantly reducing the failure rate of startups compared to independent ventures. This model comes with established brand recognition and customer loyalty, which can be invaluable assets from day one.

Take McDonald's, for example. With over 38,000 locations worldwide, McDonald's franchisees benefit from the power of a globally recognized brand and a loyal customer base, reducing much of the risk that comes with starting a new business. McDonald's provides its franchisees with extensive training and support, covering everything from store operations to financial management and marketing campaigns. This ensures that franchisees can focus on growing their individual outlets without the burden of building these systems from scratch.

McDonald's has perfected this model by streamlining processes and leveraging its extensive supply chain. Franchisees benefit from bulk purchases, established suppliers and powerful advertising campaigns. This support structure helps new owners avoid many of the pitfalls that independent businesses face, such as inconsistent quality or costly marketing efforts.

However, exclusivity comes with challenges. In the case of McDonald's, initial investment is significant, often ranging from $1.3 million to $2.3 million. Franchisors must also pay ongoing royalties, typically 4-5% of gross sales, which can affect long-term profitability. Furthermore, while franchisees benefit from McDonald's global reputation, they must adhere to strict operational guidelines, leaving little room for creativity or local adaptation. McDonald's maintains tight control over everything from the menu to the structure of the stores, which limits the freedom of enterprise.

For entrepreneurs attracted to the structure and support of a well-established brand, franchising can be a less risky path to success. However, it is important to weigh the financial commitments and lack of operational flexibility when considering this model.

2. Subscription-based model

Compliance-based models offer some compelling advantages to businesses looking to create a stable and predictable revenue stream. This model significantly reduces the unpredictability associated with one-time sales, ensuring that revenue is generated on a regular basis through monthly or annual subscriptions. For example, Dollar Shave Club revolutionized the razor industry by offering affordable razors and grooming products directly to consumers via subscription. This not only created a steady stream of revenue but also built strong customer loyalty by offering products on a repeat basis.

One of the main benefits of this model is its scalability. Dollar Shave Club demonstrated this by expanding its offerings based on customer feedback, moving from simple razors to a wider range of grooming products. The subscription model allowed the company to scale quickly and efficiently, as it could customize its services without significant incremental costs. This adaptability helps businesses respond to market demands and maintain operational efficiency as they grow.

However, while subscription models like Dollar Shave Club have thrived, maintaining customer retention it is a constant challenge. To prevent churn, companies must constantly innovate and provide exceptional customer service. In the case of Dollar Shave Club, they constantly updated their product line and used smart, engaging marketing to keep customers interested and subscribed. This approach helped them avoid high churn rates, but it also required significant investment in product development and customer engagement strategies.

While the subscription model offers businesses steady revenue and growth opportunities, it also requires constant attention customer satisfaction. Companies must focus on innovation and customer service to retain subscribers, making the model profitable and resource intensive.

Related: 4 Effective Business Models That Built Billion Dollar Companies

3. The lean startup model

of the lean startup model it is highly valued for its flexibility and cost-effectiveness, making it an attractive option for entrepreneurs looking to minimize risk while maximizing adaptability. A prime example of this is Dropbox, which used the simple startup approach to become a multi-billion dollar company. Instead of creating a full product from scratch, Dropbox launched a minimum viable product (MVP)—a simple video demonstration of its concept. This allowed the founders to gather feedback and gauge interest before committing to full-scale development. The overwhelming response validated the demand for a simple file sharing solution, and Dropbox quickly grew from a startup to an industry leader.

By following this lean methodology, Dropbox was able to iterate rapidly, constantly improving its service based on real-time user feedback. This approach minimized upfront investment while ensuring their product met market needs. Since 2023 income ratioDropbox has reached over 700 million registered users and its annual revenue was $2.5 billion, demonstrating the power of scaling efficiently using lean principles.

However, the lean startup model is not without its challenges. Its iterative nature requires constant adjustments, which can lead to uncertainty and the risk of over-rotation. While Dropbox managed to scale effectively, frequent product changes can confuse stakeholders or destabilize business strategy if not managed carefully. Despite these risks, for entrepreneurs who prioritize flexibility and responsiveness, the lean startup model offers a path to success with minimal initial investment.

4. Cooperative business model

of collaborative business model emphasizes shared ownership and decision-making, fostering a democratic approach to running a business. Each member has a voice in key decisions, promoting transparency and engagement. This model often leads to a strong sense of community and prioritizes long-term value over short-term profits. A prime example is REI (Recreational Equipment, Inc.), a consumer cooperative that has operated successfully under this model for more than 80 years. REI's profits are either reinvested in the business or returned to its members through annual dividends. Only in 2022, REI returned $234 million to its 23 million cooperative members in the form of dividends and exclusive member discounts.

One of the main advantages of the cooperative model is the alignment between the business and the community it serves. REI, for example, focuses on environmental sustainability and local development, ensuring that its values ​​align with those of its members. It not only creates brand loyalty but also strengthens the long-term sustainability of the cooperative.

However, there are challenges inherent in the cooperative model. Since profits are distributed among all members, individual financial returns may be lower compared to other business structures. Additionally, decision making may be slower due to the need for consensus among many members. For REI, balancing its cooperative ideals with financial growth has been crucial to maintaining its success while supporting both the environment and its community.

Related: How to navigate today's complex entrepreneurial landscape – 4 strategies for success

Choosing the right business model is a fundamental decision for everyone the aspiring entrepreneur. By considering the advantages and limitations of each model, entrepreneurs can align their business strategies with their personal values, market conditions, and long-term goals, creating a path to success that is both fulfilling and sustainable.