Strategy

I Discovered The Best Businesses To Start In 2024

~15 min read

Chapter 5 of 10

Warren Buffett's margin principles applied to modern business opportunities

"Warren Buffett says great businesses have high gross margin. So what is gross margin? Essentially, if I sell a product for $5 but it costs me $1 to make, then my gross margin is $4 or 80%. See, the best businesses are ones where you have the highest margin and then also sell for the highest dollar amount." - Dan Martell

The Four Pillars of High-Margin Business Success

When Dan analyzed thousands of businesses across every major industry, he discovered something profound: margin isn't just about profit - it's about freedom. High-margin businesses don't just make more money; they give entrepreneurs the flexibility to reinvest, pivot, weather storms, and ultimately build wealth that compounds.

Here's Dan's complete breakdown of the four best business models you can start in 2024, ranked by gross margin potential and barrier to entry.

Business Model #1: Product Companies (50-60% Gross Margin)

The tangible asset builders

Dan's Real-World Experience:
"I've been involved in some incredible product companies like Pela (biodegradable phone cases), Laundry Sauce (modern detergent), and Lomi (food composting device). These are literally some of the best companies out there, but I've also seen people lose their shirt building product companies because they don't understand distribution, sales, and efficient product building."

The Product Business Reality Check

Most aspiring entrepreneurs romanticize product businesses because they're tangible - you can hold your creation, show it off, and feel the satisfaction of building something physical. But Dan's experience across multiple product launches reveals the harsh truth: physical products are capital-intensive, inventory-heavy, and require sophisticated understanding of supply chains, customer acquisition, and cash flow management.

Case Study: The Pela Success Story
Company: Pela Case (Biodegradable Phone Cases)
Challenge: Entering a saturated phone accessory market dominated by cheap alternatives
Solution: Sustainability positioning + direct-to-consumer model + influencer partnerships
Result: $50M+ revenue with 60%+ gross margins
Key Success Factors:

Pre-sold through crowdfunding to validate demand
Built premium brand around environmental mission
Focused on direct-to-consumer to maintain margins
Invested heavily in content marketing and reviews

The Three Non-Negotiable Success Principles for Product Businesses:

1. Pre-Sell Everything (Validate Before You Build)

Dan's philosophy: "Most product companies use Kickstarter or Indiegogo because they can validate demand without losing money."

Implementation Framework:

Month 1: Create compelling product mockups and positioning
Month 2: Launch crowdfunding campaign with early-bird pricing
Month 3: Analyze results and adjust based on market feedback
Month 4-6: Use pre-sale funds to manufacture first batch

Business Case Study: Lomi Food Composter

Pre-sold $2.3M through crowdfunding before manufacturing single unit
Used customer feedback to refine product features
Built email list of 15,000+ qualified buyers before launch
Achieved 68% gross margins by eliminating traditional retail markup

2. Direct-to-Consumer Distribution (Skip the Middleman)

Dan's insight: "You have to skip the retailers because if you go through a wholesaler to a retailer, by the time you actually get paid with the big cash flow issues, it's very hard to make a product business work."

The DTC Margin Mathematics:

Traditional retail: 50% retailer margin + 30% distributor margin = 20% left for manufacturer
Direct-to-consumer: 70-80% gross margin possible
Amazon marketplace: 60-70% gross margin after fees

Implementation Strategy:

Build Shopify store with subscription options for consumables
Invest 15-20% of revenue in Facebook/Google advertising
Create unboxing experiences that drive word-of-mouth
Develop email sequences that maximize lifetime value

3. Premium Brand Investment (Quality Creates Premium Pricing)

Dan's brand philosophy: "You have to invest in the brand. This means premium products, caring about word-of-mouth, focusing on reviews, looking for press opportunities - that's what creates the flywheel."

Brand Investment Framework:

Product Quality: Source materials that justify premium pricing
Customer Experience: Support that creates raving fans
Content Marketing: Educational content that builds authority
PR Strategy: Media coverage that validates quality claims

Case Study Analysis: Laundry Sauce vs. Traditional Detergent

Traditional detergent: Competing on price in commodity market
Laundry Sauce: Premium positioning based on concentrated formula
Price differential: 3-4x more expensive per load
Justification: Eco-friendly, concentrated, better results, premium packaging
Result: 65% gross margins vs. 25% for traditional brands

Advanced Product Business Strategies

The Subscription Overlay Model
Transform one-time purchases into recurring revenue:

Consumable refills (Laundry Sauce pods, Pela accessories)
Seasonal product releases
Membership programs with exclusive access
Auto-delivery subscriptions with discounts

The Community-Driven Development Approach

Build Facebook groups around product usage
Crowdsource new product ideas from customers
Create user-generated content campaigns
Develop brand ambassadors from top customers

Research Integration: The Product Business Landscape

According to Shopify's 2024 Commerce Report, direct-to-consumer brands that achieve 60%+ gross margins share these characteristics:

89% use pre-launch validation through crowdfunding or pre-orders
76% focus on single product category mastery before expansion
92% invest minimum 20% of revenue back into brand building
84% achieve profitability within 18 months vs. 34% for retail-distributed brands

The Product Business Action Plan

Phase 1 (Months 1-3): Validation & Pre-Sales

Identify underserved market with 10,000+ potential customers
Create product mockups and value proposition
Launch crowdfunding campaign or pre-sale landing page
Gather minimum $10,000 in pre-orders before manufacturing

Phase 2 (Months 4-6): Manufacturing & Fulfillment

Source manufacturing partners through Alibaba or domestic suppliers
Order initial inventory based on pre-sale numbers
Set up fulfillment systems (3PL or in-house)
Create customer service processes for quality issues

Phase 3 (Months 7-12): Scale & Optimize

Reinvest profits into advertising and inventory
Develop product line extensions based on customer feedback
Build email marketing sequences for repeat purchases
Create wholesale opportunities for retail partners

Business Model #2: Agency/Service Companies (60-70% Gross Margin)

The skill-leveraging goldmines

Dan's Service Business Philosophy:
"I've learned over the years that the easiest companies are ones where you take a skill that you already have - maybe as an employee - and then offer that skill to other businesses. Get paid to either do for those businesses what you currently do, or teach them to do it themselves."

Why Service Businesses Are the Ultimate Starting Point

Dan's insight cuts through the entrepreneurship myths: you don't need revolutionary ideas, massive capital, or technical breakthroughs to build wealth. You need to systematically package and sell skills you already possess to businesses that desperately need those skills.

The Modern Service Business Opportunity

The global shift to digital-first business operations has created unprecedented demand for specialized services. From AI implementation to social media management, businesses are struggling to keep up with rapid technological change while focusing on their core operations.

Case Study: The AI Implementation Agency Gold Rush
Market Opportunity: 73% of businesses want to implement AI but lack internal expertise
Service Offering: AI audit + tool implementation + training
Pricing Model: $5,000-$25,000 initial implementation + $2,000-$5,000/month ongoing support
Gross Margins: 70-80% (primarily knowledge-based service)
Market Size: $180 billion globally by 2025

The Four Non-Negotiable Pillars of Scalable Service Businesses:

1. Focus on Strong Market Pain (Problem-Solution Fit)

Dan's pain identification framework: "You could start an AI company today where you analyze businesses for inefficiencies and introduce AI tools to solve those problems. Businesses will pay anybody who can show them how to save or make money."

The Pain Intensity Assessment:

Urgent: Problem costs them money/time daily
Expensive: Current solution costs $10,000+ annually
Frequent: They think about this problem weekly
Mandatory: Regulatory or competitive pressure to solve

High-Pain Service Opportunities in 2024:

AI Integration Services: Help businesses implement ChatGPT, automation tools
Data Privacy Compliance: GDPR, CCPA compliance for small businesses
Social Media Management: Content creation + community management
Sales Process Optimization: CRM setup, lead nurturing, conversion optimization
Remote Team Management: Systems for distributed workforce efficiency

Business Case Study: The Sales Process Agency
Founder: Former sales manager with 8 years experience
Service: CRM setup + sales training + process documentation
Market: Small businesses doing $1-5M annually
Pain Point: 67% of leads never get followed up, costing average $500K annually
Solution: 90-day implementation of systematic follow-up processes
Pricing: $15,000 setup + $3,000/month optimization
Results: Client sales increased average 34% in 6 months
Founder Income: $450K annual revenue with 72% gross margins

2. Productized Services (Outcome-Based Pricing)

Dan's productization insight: "If you sell work for time, you're always going to get paid for your hour. What you want to do is get paid for an outcome. Focus on one thing - if you're a designer, focus on logo design; if you're a programmer, focus on onboarding experience."

The Productization Framework:

Single Focus: One specific deliverable, not general consulting
Fixed Scope: Clear boundaries on what's included/excluded
Predictable Timeline: Standard delivery schedule
Systemized Process: Repeatable methodology for consistent results

Productization Examples:

Logo design → "Brand Identity Package: Logo + Color Palette + Typography + Brand Guide"
Web development → "Lead Generation Landing Page: Copy + Design + Development + A/B Testing"
Social media → "30-Day Content Calendar: Strategy + Graphics + Captions + Scheduling"

Case Study: The LinkedIn Personal Branding Package
Service: "90-Day LinkedIn Authority Package"
Deliverable: Profile optimization + content strategy + 90 posts + networking outreach
Price: $4,500 per package
Time Investment: 15 hours (consultant) + 10 hours (writer)
Gross Margin: 68% after freelancer costs
Client Results: Average 300% increase in profile views, 150% increase in connection requests
Scalability: Systemized to handle 8 clients simultaneously

3. Recurring Revenue Model (Predictable Monthly Income)

Dan's recurring revenue philosophy: "Every month you start at zero if you don't have recurring revenue. You want to sell ongoing service so you build a revenue base and can sign clients for 3, 6, or 12 months of service."

Recurring Revenue Conversion Strategies:

Maintenance Plans: Ongoing optimization and updates
Performance Monitoring: Monthly reporting and adjustments
Strategic Advisory: Regular strategic calls and planning
Implementation Support: Ongoing training and system updates

The Recurring Revenue Mathematics:

One-time project: $10,000 revenue, start over next month
Recurring model: $3,000 setup + $2,000/month = $27,000 annual value
Client acquisition effort: Same for both models
Revenue predictability: 900% improvement with recurring model

4. Scale Through Systems (Build Business, Not Job)

Dan's scaling philosophy: "Build a business you don't grow to hate. Replace yourself using systems and checklists for how you deliver agency work, then hire people to do the work following your process."

The Service Business Scaling Framework:

Document Everything: Create checklists for every process
Hire Specialists: Bring in people better than you at specific tasks
Client Management Systems: CRM + project management + communication protocols
Quality Assurance: Review processes that maintain standards

Scaling Timeline Example:

Months 1-3: Solo delivery, document all processes
Months 4-6: Hire first virtual assistant for administrative tasks
Months 7-9: Hire specialist freelancer for core delivery work
Months 10-12: Hire account manager for client communication
Year 2: Founder focuses on sales, strategy, and business development

Advanced Service Business Strategies

The Value-Based Pricing Model
Instead of charging for time, charge based on value created:

Calculate client's potential ROI from your service
Price at 10-20% of first-year value creation
Create performance bonuses for exceeding targets
Document case studies showing measurable results

The Authority Marketing System

Create educational content around your specialty
Speak at industry conferences and events
Write guest articles for trade publications
Build email list of prospects through valuable content

The Partnership Channel Development

Identify complementary service providers
Create formal referral partnerships
Develop co-marketing opportunities
Build affiliate programs for consistent lead generation

Business Model #3: Coaching/Information Business (70-80% Gross Margin)

The expertise monetization machine

Dan's Personal Coaching Journey:
"I run one of the largest coaching organizations for software CEOs. I've created multiple courses and trainings for some of the largest coaches online. Even for me, I hesitated launching this - I built Clarity.fm because I was too scared to call myself a coach. I did over 1,300 Clarity calls over 2 years and never gave myself permission to call myself a coach. It's been one of the most rewarding things, working with some of the best CEOs out there."

The Coaching Business Transformation

Dan's vulnerable admission reveals a crucial insight: even successful entrepreneurs struggle with "impostor syndrome" when it comes to coaching. Yet coaching and information businesses represent the highest-margin, most scalable business models available to knowledgeable professionals.

The Coaching Market Reality in 2024

The global coaching market reached $20 billion in 2022 and is projected to hit $37 billion by 2030. More importantly, the demand for specialized, results-focused coaching has never been higher as professionals navigate rapid technological change, remote work challenges, and increased competition.

Why Coaching Works: The Psychology of Transformation

Dan's profound insight: "The transformation happens at the transaction. Them investing in themselves by hiring you to teach them creates a lot of the value."

This isn't just about information transfer - it's about commitment, accountability, and identity shift. When someone pays for coaching, they're making a public commitment to change, which dramatically increases follow-through rates.

The Three Pillars of Sustainable Coaching Business Success:

1. Learn to Sell Your Expertise (Value Recognition)

Dan's expertise philosophy: "I know people who are world-class at what they do - the fittest person I know, incredible networkers, talented artists - but they would never feel comfortable getting paid to teach somebody else, which is crazy. You've become great at something and people have noticed. Allow other people to pay you for that advice."

The Expertise Audit Framework:

Professional Skills: What do colleagues consistently ask you for help with?
Personal Achievements: What have you accomplished that others admire?
Knowledge Areas: What topics do friends/family consider you an expert on?
Problem-Solving: What challenges have you successfully overcome?
Results: What measurable outcomes have you created for yourself or others?

Case Study: The Fitness Transformation Coach
Background: Former obese accountant who lost 85 pounds and maintained loss for 5 years
Expertise: Sustainable weight loss for busy professionals
Initial Hesitation: "I'm not a certified trainer or nutritionist"
Reality Check: Lost more weight and kept it off longer than most "certified" professionals
Coaching Program: "The Busy Professional's Fat Loss System"
Results: $180,000 first year revenue with 78% gross margins
Client Outcomes: Average 32 pounds lost, 89% maintained loss after 12 months

The Expertise Confidence Builder:

Document Your Journey: Write out your transformation story
Quantify Results: Calculate measurable outcomes you've achieved
Collect Testimonials: Ask people you've helped informally for recommendations
Compare Credentials: Research competitors - many have less real-world experience
Start Small: Offer free workshops to build confidence and gather feedback

2. Give Everything Away (Education-Based Marketing)

Dan's counterintuitive strategy: "I want you to give all of it away. It's called education-based marketing. Information wants to be free, and you get paid for implementation support. Teach everything you know for free on social media, at seminars, on stages - share it all, the best stuff."

The Information Paradox:
Most coaches hoard their "secret sauce," thinking scarcity creates value. Dan's approach proves the opposite: abundance creates authority, and authority creates premium pricing.

The Content-to-Cash Pipeline:

Free Content: Builds audience and demonstrates expertise
Email List: Nurtures relationships and builds trust
Low-Ticket Products: $97-$497 courses that qualify serious prospects
High-Ticket Coaching: $5,000-$50,000 programs for committed clients

Implementation Framework:

Daily Value: Share one actionable tip per day on chosen platform
Weekly Deep Dive: Create longer-form educational content
Monthly Case Study: Share detailed client success story
Quarterly Workshop: Host free training that leads to program enrollment

Business Case Study: The Education-Based Marketing Success
Coach: Former marketing agency owner teaching service business scaling
Free Content Strategy:

Daily LinkedIn posts with agency-building tips
Weekly YouTube videos showing actual client transformations
Monthly free workshops on "Agency Scaling Secrets"
Quarterly case study deep-dives with revenue breakdowns

Results After 18 Months:

LinkedIn following: 47,000 engaged professionals
Email list: 12,000 agency owners
Free workshop attendance: 300-500 per session
Program conversion: 8-12% of workshop attendees
Revenue: $1.2M annually from coaching programs

3. Build Community (Connection Creates Retention)

Dan's community insight: "I had a coach who was incredible, but I never got to meet the other entrepreneurs she worked with. Never once did she organize a dinner or meetup. If you're a coach, having a community where clients can connect creates massive value and helps with retention."

The Community Value Multiplier:

Peer Learning: Clients learn from each other's experiences
Accountability: Group pressure increases follow-through
Networking: Connections lead to business opportunities
Social Proof: Success stories inspire other members
Retention: Community bonds reduce churn rates

Community Building Framework:

Private Facebook Group: Exclusive access for program participants
Monthly Meetups: Regional in-person gatherings when possible
Quarterly Conferences: Annual event bringing all clients together
Peer Matching: Strategic introductions between complementary clients
Success Celebrations: Public recognition of member achievements

Advanced Coaching Business Models

The Certification Program Model
Transform top clients into certified coaches using your methodology:

Create comprehensive training curriculum
Develop certification requirements and testing
License your brand and methodology to certified coaches
Earn royalties on certified coaches' revenue
Scale impact without direct time investment

The Corporate Coaching Division
Leverage individual coaching success to land corporate contracts:

Develop workshops for company teams
Create leadership development programs
Offer executive coaching retainers
Build mastermind programs for C-suite executives
Command $25,000-$100,000+ per corporate engagement

The Product Extension Strategy
Use coaching expertise to create scalable products:

Online courses that qualify prospects for high-ticket coaching
Books that build authority and generate leads
Software tools that support your coaching methodology
Certification programs for other coaches
Done-for-you services that complement coaching

Business Model #4: Software Companies (80-90% Gross Margin)

The ultimate scalability machines

Dan's Software Journey:
"I learned this personally back in the 2000s when I started writing code and building software. Over the years, I found it amazing that I can build software once, and the more it grows, the less it costs me. As long as the servers don't change, that code will run forever."

The Software Margin Mathematics

The beauty of software lies in its marginal cost structure: once built, adding new customers costs essentially nothing. Unlike physical products or service businesses, software scales with geometric efficiency.

Cost Structure Breakdown:

Development: One-time cost (or ongoing feature development)
Hosting: Scales slowly with usage ($10/month → $1,000/month for 100x customers)
Support: Scales with optimization (1 support person per 500-1,000 customers)
Marketing: Same acquisition cost whether customer pays $50 or $500/month

Why Most Software Businesses Fail

Dan's critical insight: "If you don't have people using it and loving it the way you need to, customers are going to come and go, and you won't create the margins you need."

The software graveyard is filled with technically brilliant products that solved problems no one was willing to pay for, or solved them in ways that didn't create lasting value.

The Four Pillars of Sticky Software Success:

1. Solve an Expensive, Frequent Problem (High-Value Pain Point)

Dan's problem identification framework: "You want to build software that solves a problem costing businesses money or time daily. The more expensive and frequent the problem, the more customers will pay for the solution."

High-Value Software Opportunities in 2024:

AI-Powered Sales Automation: Automate lead qualification and follow-up sequences
Employee Productivity Tracking: Remote work optimization and performance analytics
Compliance Management: Automated regulatory reporting for specific industries
Customer Data Integration: Connect disparate systems for unified customer view
Workflow Automation: No-code tools for business process optimization

The Pain-to-Pay Formula:

Problem costs business $10,000 annually → Can charge $2,000-3,000 annually
Problem costs 20 hours weekly → Can charge equivalent of 5-10 hours of expert time
Problem affects multiple departments → Can charge per department/user
Problem has regulatory implications → Can charge premium for compliance assurance

Business Case Study: The Compliance Software Goldmine
Software: Automated OSHA reporting for manufacturing companies
Problem: Manual compliance reporting taking 40+ hours monthly + risk of fines
Solution: Integration with existing systems + automated report generation + alert system
Pricing: $500/month per facility
Development Cost: $180,000 over 8 months
Current Metrics: 240 facilities paying, $1.44M annual recurring revenue
Customer ROI: Average $85,000 annually in time savings + risk reduction
Gross Margins: 87% after hosting and support costs

2. Create Switching Costs (Data Lock-In Strategy)

Dan's retention philosophy: "The best software becomes essential to daily operations. When customers have months or years of data in your system, and their team is trained on your workflow, switching becomes extremely painful."

Switching Cost Creation Strategies:

Data Accumulation: More usage creates more valuable data history
Workflow Integration: Embed into daily processes that are hard to replicate
Team Training: Multiple users invested in learning your system
Custom Configurations: Personalized setups that can't be easily transferred
API Dependencies: Other tools integrate with your software

Implementation Framework:

Month 1-3: Focus on getting users to achieve first major win
Month 4-6: Expand usage across multiple team members
Month 7-12: Enable advanced features that create workflow dependencies
Year 2+: API integrations and custom reporting that lock in data value

3. Deliver Continuous Value (Feature Evolution)

Dan's value delivery insight: "Software isn't build-once-and-done. You need to continuously improve and add features that make the software more valuable over time, not just maintain it."

The Continuous Value Framework:

Core Feature Expansion: Deepen existing functionality based on usage data
Workflow Optimization: Add features that save time in adjacent processes
Integration Development: Connect with other tools customers use
Advanced Analytics: Provide insights customers can't get elsewhere
Automation Layers: Reduce manual work through intelligent automation

Feature Prioritization Matrix:

High Impact, Low Effort: Quick wins that improve retention
High Impact, High Effort: Major features for competitive advantage
Low Impact, Low Effort: Nice-to-haves for user satisfaction
Low Impact, High Effort: Avoid unless strategic necessity

Business Case Study: The Feature Evolution Success
Software: Project management tool for creative agencies
Initial Feature Set: Task management, time tracking, client communication
Year 1 Additions: Resource planning, automated invoicing, client portal
Year 2 Additions: AI-powered project estimation, advanced reporting, API
Year 3 Additions: Team collaboration tools, mobile app, integrations
Results:

Customer lifetime value increased from 18 months to 43 months
Average revenue per user grew from $89 to $247 monthly
Feature adoption rate of 73% for major new releases
Churn rate decreased from 8% to 2.3% monthly

4. Scale Support Systems (Efficiency at Scale)

Dan's support philosophy: "As your software grows, you need systems that help customers succeed without requiring more human support. Self-service capabilities, comprehensive documentation, and proactive customer success."

The Support Scaling Framework:

Comprehensive Knowledge Base: Searchable documentation for all features
In-App Guidance: Tooltips, tutorials, and onboarding sequences
Community Forums: Peer-to-peer support and feature discussions
Video Tutorial Library: Visual learning for complex features
Automated Health Monitoring: Proactive alerts for usage issues

Support Metrics to Track:

First Response Time: Target under 4 hours for all inquiries
Resolution Rate: Percentage of issues resolved without escalation
Self-Service Usage: Percentage of users finding answers independently
Customer Health Score: Usage patterns predicting renewal likelihood
Feature Adoption: Percentage of customers using new features

Advanced Software Business Strategies

The Vertical SaaS Approach
Instead of building general-purpose software, focus on specific industries:

Industry Expertise: Deep understanding of workflow and compliance needs
Premium Pricing: Specialized solutions command higher prices
Targeted Marketing: Focused customer acquisition through industry channels
Feature Specialization: Build exactly what the industry needs, nothing more

The Freemium-to-Enterprise Model
Start with free users and expand to enterprise contracts:

Free Tier: Basic functionality that demonstrates value
Pro Tier: Advanced features for growing businesses ($50-200/month)
Enterprise Tier: Custom features, security, and support ($500-5,000/month)
White Label: License software to other companies to resell

The Platform Strategy
Build software that enables other businesses:

Marketplace: Connect buyers and sellers within your platform
API Business: License your core functionality to other developers
Integration Hub: Become the central connection point for business tools
App Store: Enable third-party developers to extend your platform

Research Integration: The Software Success Factors

According to McKinsey's 2024 Software Industry Report, SaaS companies that achieve 85%+ gross margins share these characteristics:

94% focus on solving problems costing customers $50,000+ annually
87% achieve net negative churn through expansion revenue
91% have customer support costs under 8% of revenue
83% add major features quarterly based on customer feedback
76% achieve average customer lifetime value over 3 years

The Software Business Development Timeline

Phase 1 (Months 1-6): MVP Development

Validate problem through customer interviews (minimum 50 potential users)
Build minimum viable product with core functionality
Launch beta with 10-20 early customers
Iterate based on feedback and usage data

Phase 2 (Months 7-12): Market Fit

Refine product based on early customer success patterns
Develop scalable onboarding and support systems
Implement pricing strategy with clear value tiers
Build initial customer acquisition channels

Phase 3 (Months 13-24): Scale

Expand feature set based on customer expansion opportunities
Develop enterprise sales process for larger contracts
Build partner channels and integration ecosystem
Optimize support systems for efficiency at scale

The Warren Buffett Business Selection Matrix

Dan's Final Assessment Framework:

Gross Margin Analysis:

Product Companies: 50-60% (Good, but capital intensive)
Service Companies: 60-70% (Great starting point, immediate cash flow)
Coaching/Info: 70-80% (Excellent margins, expertise required)
Software: 80-90% (Ultimate scalability, highest technical barrier)

Barrier to Entry Assessment:

Product: High (capital, manufacturing, distribution)
Service: Low (existing skills, immediate start)
Coaching: Medium (expertise validation, audience building)
Software: High (technical skills, market timing, product-market fit)

Time to Profitability:

Service: 1-3 months (fastest cash flow)
Coaching: 3-9 months (audience and trust building)
Product: 6-18 months (development and validation cycles)
Software: 12-36 months (development, market fit, scaling)

Dan's Strategic Recommendation:

"Start with service, add coaching, build software, consider products last."

This progression allows entrepreneurs to:

Generate immediate cash flow through services
Build expertise and audience through coaching
Use profits and knowledge to fund software development
Eventually expand into products with proven distribution channels

The key insight: don't start with the highest-margin business if you lack the resources or expertise to succeed. Build systematically, using each business model to fund and inform the next.

Your Business Model Selection Action Plan:

Phase 1: Immediate Revenue (Months 1-6)

Launch service business using existing skills
Focus on productized offerings with recurring revenue
Document all processes and build initial team

Phase 2: Authority Building (Months 7-18)

Launch coaching/information business based on service success
Build audience through education-based marketing
Create community around your expertise

Phase 3: Scalable Systems (Months 19-36)

Develop software that supports your service methodology
Use coaching audience as beta testers and early customers
Leverage service profits to fund software development

Phase 4: Portfolio Optimization (Year 3+)

Consider product business if clear market opportunity exists
Focus on business models that create synergistic value
Build integrated ecosystem around core expertise

This systematic approach maximizes the probability of success while minimizing risk and capital requirements. Each business model builds on the previous one, creating a compound advantage that few competitors can replicate.

1. Build Sticky Products (Daily Usage Psychology)

Dan's stickiness philosophy: "You want to build a tool that solves a problem where they have to use it every day. Think painkillers, not vitamins. Create something that's must-have problem-solving, not nice-to-have."

The Stickiness Spectrum:

Once-a-year usage (tax software): Low retention, high churn
Monthly usage (invoicing): Medium retention, seasonal churn
Weekly usage (project management): Good retention, workflow dependent
Daily usage (communication tools): High retention, mission-critical

Daily Usage Examples:

Slack: Team communication - used hundreds of times daily
Dropbox: File storage - accessed every time files are opened
Calendly: Scheduling - used for every appointment booking
Notion: Note-taking - becomes central workspace for thinking

Case Study: The Sticky Software Success
Company: ServiceTitan (Home Service Business Software)
Problem: Contractors losing money on inefficient scheduling and billing
Solution: All-in-one platform for scheduling, dispatching, invoicing, payments
Stickiness Factor: Used 50-100 times daily for every customer interaction
Switching Cost: Would require retraining entire team + migrating customer data
Results: $9.5 billion valuation, 95%+ customer retention rate
Key Lesson: Became mission-critical infrastructure, not optional tool

The Daily Usage Design Framework:

Workflow Integration: Become part of existing daily routines
Data Accumulation: Store valuable data that's painful to lose
Team Dependencies: Multiple people rely on the tool for collaboration
Customer Relationships: Tool manages external customer interactions
Financial Integration: Connected to revenue/expense tracking

2. Target Boring Industries (Stability Over Trendiness)

Dan's boring industry insight: "Most people build software for marketing or sales because it's what they know, but customers swap to competitors every 3-6 months. You want boring industries like local services, lawn care, body shops, government - customers who aren't always looking for the latest whiz-bang."

Why Boring Industries Win:

Lower Competition: Fewer flashy startups targeting these markets
Higher Switching Costs: Established workflows harder to change
Longer Sales Cycles: But higher lifetime value once acquired
Stable Demand: Less susceptible to economic fluctuations
Premium Pricing: Less price comparison shopping

Boring but Profitable Industry Examples:

Dental Practice Management: $50-500/month per practice, 92% retention
Auto Repair Shop Software: $100-300/month per shop, specialized workflow
Funeral Home Management: $200-800/month per location, regulatory compliance needs
Waste Management Operations: $500-2,000/month per company, route optimization
HVAC Service Management: $80-400/month per contractor, scheduling + inventory

Business Case Study: The Boring Industry Goldmine
Software: Pest Control Business Management Platform
Target Market: Local pest control companies (5-50 employees)
Problem: Paper-based scheduling, manual billing, no customer history tracking
Solution: Scheduling + routing + billing + customer communication platform
Pricing: $89/month base + $15/month per technician
Competition: Minimal - most competitors focused on "sexier" industries
Results:

850 customers paying average $180/month
$1.8M annual recurring revenue
94% customer retention rate
Founder works 20 hours/week after 3-year build phase
$1.6M annual profit (89% gross margins)

3. Perfect First-Time User Experience (Activation Optimization)

Dan's user experience philosophy: "You want to look at your software like level one of a video game. When you start playing, they don't drop you in and say 'start fighting' - they walk you through the process. You're not playing the game, but you're kind of playing the game."

The Activation Crisis:
Most software companies lose 70-80% of new users within the first week because they overwhelm them with features instead of guiding them to their first success moment.

The Activation Success Framework:

Single Success Goal: Define one key action that creates value
Progressive Disclosure: Show features gradually as users advance
Guided Tutorials: Interactive walkthroughs, not boring videos
Quick Wins: Ensure first success happens within 5-10 minutes
Celebration Moments: Acknowledge achievements with notifications/animations

Activation Optimization Case Study:
Software: Project Management Tool for Creative Agencies
Original Onboarding: 45-minute setup process, 73% abandonment rate
Optimized Onboarding:

Step 1: Create first project (2 minutes)
Step 2: Add team member (1 minute)
Step 3: Assign first task (1 minute)
Step 4: Send first client update (2 minutes)
Results: 89% completion rate, 340% increase in 30-day retention

The Video Game Onboarding Principles:

Clear Objective: User knows exactly what they're trying to achieve
Progressive Difficulty: Start simple, add complexity gradually
Immediate Feedback: Show progress and celebrate small wins
Contextual Help: Just-in-time guidance when users get stuck
Safe Environment: Allow experimentation without fear of breaking things

4. Obsess Over Retention (The Real Software Business)

Dan's retention truth: "Too often people focus on the chocolate (marketing and sales) but the real broccoli of software is retention. Figure out why people leave and try to keep them back, because the higher the lifetime value, the higher your gross margins."

The Retention Economics:

5% retention improvement = 25-95% profit increase
Customer acquisition cost typically 3-7x monthly revenue
Breakeven timeline usually 6-18 months
Profit multiplication happens in years 2-5 of customer relationship

Retention Analysis Framework:

Cohort Analysis: Track monthly retention by signup date
Usage Analytics: Identify behaviors that predict churn
Exit Surveys: Understand why customers cancel
Win-Back Campaigns: Re-engage churned customers
Expansion Revenue: Grow existing customer accounts

Advanced Software Business Strategies

The Vertical Integration Approach
Instead of building horizontal tools, create complete solutions for specific industries:

Combine software with payment processing (take transaction fees)
Add marketplace features (take commission on transactions)
Offer professional services alongside software
Create industry-specific integrations and partnerships

The Network Effect Development
Build features that make software more valuable as more people use it:

User directories and connection features
Shared templates and resource libraries
Referral systems and collaboration tools
Industry benchmarking and comparative analytics

The Enterprise Scaling Strategy
Use small business success to penetrate enterprise accounts:

Start with departmental users who love the tool
Build enterprise features gradually
Develop security and compliance capabilities
Create white-label versions for large clients

Choosing Your 2024 Business Model: The Decision Framework

Dan's Selection Criteria:

Your Current Skills: What expertise do you already possess?
Capital Requirements: How much money can you invest upfront?
Time Horizon: How quickly do you need revenue vs. long-term wealth?
Risk Tolerance: Are you comfortable with uncertain outcomes?
Scaling Ambitions: Do you want lifestyle business or unicorn potential?

The 2024 Opportunity Matrix:

If you have $0-$5,000 and need income within 3 months: Service/Agency Business

Leverage existing skills immediately
Generate revenue within 30-60 days
Build foundation for future business models

If you have $5,000-$25,000 and can wait 6-12 months: Coaching/Information Business

Document your expertise journey
Build audience through content marketing
Create scalable knowledge products

If you have $25,000-$100,000 and think in 1-3 years: Product Business

Pre-validate through crowdfunding
Build premium brand positioning
Focus on direct-to-consumer sales

If you have technical skills and patient capital: Software Business

Target boring but profitable industries
Build for daily usage and high retention
Focus on sticky, mission-critical problems

The Multi-Model Wealth Building Strategy

Dan's advanced approach: Start with services to generate cash flow, reinvest profits into higher-margin models.

The Progression Timeline:

Year 1: Service business generates $100,000-$300,000
Year 2: Launch coaching/info products, maintain best service clients
Year 3: Develop software tools that serve your service/coaching customers
Year 4-5: Build product business using cash flow from other models

This isn't just about choosing one model - it's about building a portfolio of businesses that complement and reinforce each other, ultimately creating multiple income streams with progressively higher margins and greater scalability.

Your 2024 Action Plan

Week 1: Complete skills audit and identify your highest-leverage expertise
Week 2: Research market demand in your chosen business model
Week 3: Create minimum viable offer and test with first prospects
Week 4: Launch with systematic approach to Dan's success principles
Months 2-12: Execute with discipline while planning next business model

Remember Dan's challenge: "If at any point you think 'I can't do this,' you might not be cut out to become a millionaire, and that's okay."

But if you're willing to systematically apply these proven business models with consistency and discipline, 2024 could be the year you build the foundation for generational wealth.