The game has changed.
Today it’s no longer about owning the “factory”.
This makes starting a business much easier.
Today, it’s all about being the go-to place for customers.
I founded and operate a middleman business since 2014. We manage the end-to-end customer experience, while relying on our partners for inventory and logistics.
Our client portfolio includes NASA, SpaceX, Anheuser-Busch, the U.S. Navy and Procter & Gamble.
It’s possible to create a business where you are the middle man in the 7 to 9 figure revenues.
The success of a business that uses this business model requires:
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Strong vendor relationships. (this is your moat)
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End to end customer service. (owning the customer journey)
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Software & Tech. (Ready to buy platforms are available without having to build custom)
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Online marketing & sales to acquire customers. (Proficiency is key here)
Here’s what you need to focus on in a business where you facilitate transactions:
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Owning customers: Obsessing over customer service is key. The first company to do this was Zappos.
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Building partnerships: Treat your suppliers and vendors like partners because in this type of business, they are your key to success. For example, Amazon serves their suppliers due to their reliance on them to serve customers.
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Become proficient online: Getting customers through SEO, social media content or paid ads is your responsibility. A middleman type business requires you to manage the transactions between buyers and sellers.
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Get friendly with software and tech: Most of the marketplaces are run on software platforms that remove friction for the customers. Good news is that you no longer have to build from scratch, many existing platforms are available to buy.
Read about how even top companies like Uber and Lyft have evolved their businesses to include food delivery and bike-sharing.
Credit: eqroy – stock.adobe.com
Let’s talk about using marketplace models.
These platforms are more than middlemen; they completely change how buying and selling happens.
They connect people who need things with those who have them, without needing to store any products themselves.
Pro’s:
→ Low overhead costs = lower risk.
→ Nimble business models innovate.
→ Scalability without need for capital.
Cons:
→ Lower margins.
→ Need high volume.
→ Serve both buyers and suppliers.
Skills needed in this new era:
• Leveraging software and digital tools.
• Mastering online marketing, content, and sales.
• Customer service – own the customer experience.
When planning your business, ask 5 questions:
1. What can I sell without holding inventory?
2. Where is there friction I can remove?
3. Where are unorganized data sets?
4. Where’s fragmentation of supply?
5. Opportunities for consolidation?
Businesses facilitating transactions between parties:
• Westfield shopping malls
• Recruiting
• Amazon
• Fiverr
• Zillow
Bonus tip:
Go for opportunities with recurring revenue streams.
Examples:
1. Sell a home as a broker – get one-time fee
2. Match a candidate – get monthly fees
3. Sell subscription products that need replacement
Read how marketplace models really began to take off during the pandemic, and how this trend has continued since.
Credit: jetcityimage – stock.adobe.com
Questions to think about when starting up:
Before diving in, think about how you can smartly use resources you don’t own for:
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Inventory: Can someone else hold your stock to cut costs?
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Content: Is there existing content that needs a platform?
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Service: Are there service providers to connect to customers?
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Data: What disorganized data sets can I consolidate?
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Suppliers: Is there a fragmentation of supply to aggregate?
Reflect on how business is evolving:
Nowadays, we are seeing billion dollar companies operate with less and less employees.
With all these changes, ask yourself:
Are you ready to adapt and lead in this new way of doing business?
Till next week,
Noemi
P.S. My first marketplace business was a matchmaking business. I loved being the middleman between potential couples. But the scalable way for matchmaking are online dating apps, which were saturated so I got out of the game altogether.
PS. Here is this week’s book recommendation:
“The Cold Start Problem” by Andrew Chen is a favorite on my shelf. I’ve always been obsessed with marketplace business models. This book dives into the nitty gritty of marketplaces. Highly recommend.
The Cold Start Problem by Andrew Chen
