---
title: "When to Identify Your Business Model"
section: "Choosing a Business Model"
sectionId: "business-models"
date: "2026-05"
---

## Start With a View — and Commit to It

Most great companies know how they will make money from the start. This is not optional. Founders who have no theory of monetisation are not thinking hard enough about the business.

That said, your business model can and should evolve as new opportunities appear.

## Keep It Elegant and Simple

Your business model must be **effortless for your customers** — elegant and simple. If customers have to work to understand how to pay you, or the pricing structure creates friction, you will lose them before they convert.

The same principle applies internally: **focus on a single business model**. One of the most common mistakes founders make — besides picking the wrong model — is trying to do too much. Multiple monetisation strategies at an early stage usually means none of them is done well. Pick one, execute it properly, and only layer in complexity once the first model is working.

## Business Models Can Change — Netflix

Some of the greatest modern tech companies have made fundamental shifts in how they make money. Netflix is the clearest example — it went through **two major business model changes**:

**Change 1: DVDs to streaming.** Netflix began by mailing physical DVDs for a monthly fee, then pivoted to selling streaming software. Margins and user base increased dramatically.

**Change 2: Licensing to originals.** When Netflix's streaming platform first launched, they licensed 100% of their content — signing deals with rights holders to list content on the platform. In January 2013, CEO Reed Hastings released a memo committing to producing original content:

> "We don't and can't compete on breadth with Comcast, Sky, Amazon, Apple, Microsoft, Sony, or Google. For us to be hugely successful we have to be a focused passion brand. Starbucks, not 7-Eleven. Southwest, not United. HBO, not Dish."

Netflix's first original, *House of Cards*, launched in February 2013 — one month later.

## The Results

| Period | Revenue | Net Income |
|---|---|---|
| Q1 2013 (memo quarter) | $1.0B | $3M |
| Q2 2021 (eight years later) | $7.3B | $1.3B |

In eight years, Netflix grew revenue ~7x and profit ~433x — largely driven by the shift to original content. The business model change didn't just improve margins; it redefined the company's competitive position entirely.

## The Takeaway

Have a clear model from day one, but hold it loosely. The ability to recognise when a new model fits your market better — and the conviction to execute the shift — is one of the most valuable things a founder can develop.