ProjectionHub’s free online marketplace revenue model Excel template is free to download, and will help you create sales forecasts for your marketplace business model. The sales forecast model allows you to add acquisition of both buyers and sellers on the platform. The financial model automatically ensures that you can’t sell more than you have seller supply or buyer demand. A marketplace model requires you to try to balance the buyer demand and seller supply, this template helps you determine whether to focus more on the buyer or supplier side. The model would work well for 2 sided marketplace businesses like Uber, Airbnb, UpWork and other popular marketplaces. Key features include:
Generally, a marketplace needs to focus on the supply side first so that when you turn on the demand side, there is supply to meet the demand. Now this can be challenging because you need to recruit suppliers before you have any demand for their product or service, but if a supplier can simply list a product or service for sale and then sit back and wait for demand to arrive this still ends up being a better option than working to bring buyers to your platform with nothing to buy. It should be easier to find sellers for a marketplace than acquiring buyers which is another good reason to start gaining momentum with the supply side of the marketplace.
Marketplace commissions vary dramatically between platforms. The Apple app store charges a hefty commission of 30%. Other marketplaces like Uber and Airbnb charge roughly 25% and 14 to 16% respectively.
According to our study of 102 tech startups projections, we were able to determine that “realistic” first year projections for a Marketplace startup should range between $1.4 and 3.4 million depending on stage of business. This is a large range, plus it begs the question whether these businesses were treating the total transaction value on the marketplace as revenue, or only the marketplace commission. As a marketplace business, your revenue should only be your commission, you don’t get to count the total transaction value as your revenue.
One key reason that online marketplaces are difficult to launch and scale is because you have to attract two different types of customers. You need to acquire both the buyers and sellers which makes your startup at least twice as complicated, but then you have to get the buyer demand and the seller supply to be in equilibrium in order to keep both parties satisfied. Marketplaces tend to turn into monopolies, so the most successful marketplace in a specific niche tend to monopolize the competition over time. For example, Amazon is the ecommerce marketplace juggernaut. They have the most buyers because they have the most sellers and they have the most sellers because they have the most buyers on the platform. It is a self reinforcing network once you hit a critical threshold.
If our free marketplace revenue model isn’t quite right for your specific online marketplace, we do offer marketplace financial modeling services to help you customize your revenue model to fit your type of marketplace model. Let us know if we can help!