Choosing Your Business Model
SaaS, marketplace, hardware, services, or ecommerce — pick the structure that matches how you make money.
Five Business Types, Five Purpose-Built Models
When you create a new model, the first question after choosing your purpose is "What kind of business are you modelling?" Radley Finance builds models for five business types, and all five are available today:
- SaaS - subscription software
- Marketplace - two-sided platforms
- Hardware - physical products
- Services - agencies, consultancies, and professional services
- Ecommerce - online retail
Your choice matters because each business type gets a genuinely different model - different questions, different revenue engine, different key metrics, and different worksheets in your Excel export. All five share the same accounting chassis underneath (P&L, Balance Sheet, Cash Flow, Cap Table, Exit Valuation), so whichever you choose, the statements are built the same rigorous way.
Every business type is available in both tiers: a Planning model and an Investment model (see the next article).
SaaS
What is SaaS?
SaaS (Software as a Service) refers to subscription-based software businesses where customers pay recurring fees to access your product. Examples: Asana, Salesforce, Xero, Slack, Mailchimp.
What the Model is Built Around
The SaaS model is built around an ARR engine: customers acquired, customers churned, and expansion within existing accounts, compounding month over month into recurring revenue.
Key Metrics
| Metric | Description |
|---|---|
| MRR/ARR | Monthly/Annual Recurring Revenue |
| Churn Rate | Percentage of customers who cancel |
| Net Revenue Retention (NRR) | Revenue kept and expanded from existing customers |
| LTV | Lifetime value of a customer |
| CAC | Customer acquisition cost |
| LTV:CAC Ratio | Value generated vs. cost to acquire |
SaaS Fits If Your Business
- Charges monthly or annual subscription fees
- Has recurring revenue from the same customers
- Lives or dies by retention and churn
Services
What is a Services Business?
Businesses that sell people's time and expertise: agencies, consultancies, dev shops, accounting and law firms, managed service providers.
What the Model is Built Around
The services model is built around capacity and utilization: how many billable people you have, how much of their time you can actually bill, and how project pipeline and retainers convert that capacity into revenue. The wizard walks through your delivery capacity, your pipeline and retainers, and your cost economics; the Excel export includes dedicated Capacity Model and Client Revenue sheets.
Key Metrics
| Metric | Description |
|---|---|
| Billable Headcount | People whose time you sell |
| Utilization | Share of available hours actually billed |
| Billable Rate | What an hour (or day) of work sells for |
| Retainer vs Project Mix | Recurring engagements vs one-off projects |
| Revenue per Employee | Overall efficiency of the team |
Services Fits If Your Business
- Sells time, projects, or retainers rather than a product
- Grows primarily by hiring and filling billable capacity
- Manages a pipeline of client engagements
Ecommerce
What is Ecommerce?
Businesses that sell products online direct to customers: DTC brands, online stores, subscription boxes.
What the Model is Built Around
The ecommerce model is built around orders: new and repeat customers, average order value, and the inventory you must buy ahead of demand. The wizard walks through your orders and customers, your unit economics, and your inventory and funding; the Excel export includes dedicated Orders Model and Inventory sheets.
Key Metrics
| Metric | Description |
|---|---|
| Orders | Volume of purchases per period |
| AOV | Average order value |
| Repeat Purchase Rate | How often customers come back |
| Gross Margin | What's left after product and fulfillment costs |
| Inventory | Stock you hold - and the cash it ties up |
Ecommerce Fits If Your Business
- Sells physical (or digital) products through your own channels
- Thinks in orders, baskets, and repeat customers
- Has to fund inventory ahead of sales
Hardware
What is a Hardware Business?
Businesses that design and sell physical devices: consumer electronics, IoT devices, medical devices, robotics.
What the Model is Built Around
The hardware model is built around units and the cost to build them: unit sales, bill-of-materials and product costs, the inventory you carry, warranty obligations, and any recurring software revenue attached to each device. The wizard walks through your company and hardware, software attach, product costs, inventory and warranty, and costs and funding; the Excel export includes dedicated Units Model and Inventory sheets.
Key Metrics
| Metric | Description |
|---|---|
| Units Sold | Devices shipped per period |
| BOM / Product Cost | What each unit costs to make |
| Hardware Gross Margin | Price minus per-unit cost |
| Software Attach | Recurring revenue per device sold |
| Inventory & Warranty | Cash tied up in stock and future repair obligations |
Hardware Fits If Your Business
- Ships physical devices with meaningful per-unit costs
- Manages manufacturing lead times and inventory
- May layer subscription software on top of the device
Marketplace
What is a Marketplace?
Businesses that connect buyers and sellers (or supply and demand) and take a cut of transactions: Airbnb, Uber, Etsy, Upwork, DoorDash.
What the Model is Built Around
The marketplace model is built around GMV, take rate, and two-sided liquidity: how much transaction volume flows through the platform, what share you keep as revenue, and whether supply and demand grow in balance. The Planning wizard has dedicated GMV & Revenue, Supply Side, and Demand Side steps; the Excel export includes a dedicated GMV Model sheet.
Key Metrics
| Metric | Description |
|---|---|
| GMV | Gross Merchandise Value - total transaction volume |
| Take Rate | Percentage of GMV you keep as revenue |
| Supply | Sellers, hosts, drivers, etc. |
| Demand | Buyers, guests, riders, etc. |
| Liquidity | How reliably supply meets demand |
Marketplace Fits If Your Business
- Connects two or more sides and earns fees or commissions on transactions
- Depends on network effects
- Grows by balancing supply and demand
Comparison at a Glance
| Aspect | SaaS | Services | Ecommerce | Hardware | Marketplace |
|---|---|---|---|---|---|
| Revenue Engine | ARR (subscriptions) | Billable capacity | Orders x AOV | Units x price (+ attach) | GMV x take rate |
| Key Growth Lever | Acquisition + retention | Hiring + utilization | Repeat customers | Unit volume | Liquidity on both sides |
| Main Challenge | Churn / NRR | Filling capacity profitably | Inventory + repeat rate | BOM cost + working capital | Supply/demand balance |
| Cash Trap to Watch | CAC payback | Bench time | Inventory | Inventory + warranty | Subsidizing one side |
What If My Business is a Mix?
Many real businesses blend models - a marketplace with seller subscriptions, a hardware device with a SaaS layer, an agency productizing into software.
Recommendation
Choose based on your primary revenue driver:
- Mostly subscriptions → SaaS
- Mostly billable time or retainers → Services
- Mostly product orders through your own store → Ecommerce
- Mostly device sales → Hardware (the hardware model explicitly supports software attach revenue)
- Mostly transaction fees between two sides → Marketplace (the investment model has a field for other monthly revenue such as seller subscriptions)
Still Not Sure?
Ask yourself:
- How do customers pay you? Recurring fee → SaaS. Hourly/project/retainer → Services. Per order → Ecommerce. Per device → Hardware. Per transaction between others → Marketplace.
- What's your biggest constraint? Churn → SaaS. Billable hours → Services. Inventory → Ecommerce or Hardware. Liquidity → Marketplace.
You can also start with "Describe your business" when creating a model - explain what you sell in plain language, and use the extracted assumptions as a sense-check on which type fits.