What’s the best Model for your Business?

This article returns to the most important strategic question: what should your business model be? This decision will determine which customers you serve, the size of your market and the future value of your company.

The graphic above illustrates how your company’s assets can create and monetise value. This includes the most popular business models I’ve seen in many pitches and conversations with founders. There are lots more variations on these too. One way to view your business model is as a series of decisions on whether you perform each step in a value chain yourself or leave it to others.

To illustrate the trade offs within these business models I will use examples from industry, including the inkjet world where I’ve spent most of my career.

Arm: from Licensing to Chip sales

Arm (previously Advanced RISC Machines Ltd) are often quoted as an example of successful technology licensing. They also charged design consultancy fees and earned royalties from their customers’ chip sales. Semiconductor technology’s progression due to Moore’s Law enabled Arm to design successively more powerful chips for their customers. Combined with the growing market for handheld devices, this drove their annual revenue to £98m within a decade.

Arm’s first IPO in 1997 was initially at a modest evaluation, but this soon scaled quickly in line with their rapidly increasing revenues. At first license fees dominated their income, but royalties soon caught up. Their continued success is well known: in 2025 they booked over $4Bn revenue, the majority now from royalties. They also announced they are exploring selling their own semiconductor devices, reflecting a desire to capture more value from their chip designs.

Licensing challenges

Licensing might seem the easiest way to earn money from your invention. But away from the semiconductor industry it can be harder finding customers and sustaining growth. Early licensees may take a long while to reach market, delaying royalties. Your sales may plateau if your early products are an adequate and durable solution for your customers’ needs. Increasing revenues further may require continuous product improvement or a business model which creates more value.

Xaar: from Licensing to Manufacturing

Like Arm, Xaar also started business in 1990, beginning by selling licenses for their inkjet print head technology to OEMs (Own Equipment Manufacturers). This initially brought in millions of revenues, supplemented by consultancy fees. Due to their customers’ challenges in implementing and scaling their designs, it took longer for their royalties to grow.

Xaar’s IPO in 1997 raised £15m, more than three times their revenue that year. In 1998 they began making their own print heads after buying a customer’s factory. By 2005 manufacturing was generating over 85% of their £42m turnover. Their success continues to the present day, proving the value in producing your own product despite competition from licensees.

Manufacturing challenges

Delivering physical products brings more difficulties than licensing. Turning an early prototype into a successful product is often challenging. Scientific gadgets may work well when used by their well-qualified creators in a carefully controlled environment. But producing a cost-effective product which runs reliably for your customers requires careful engineering and many iterations. You will need to learn about manufacturing processes, quality management, and value engineering.

Some industries such as semiconductors, electronics and chemicals have well established supply chains for high quality contract manufacturing. Specialist firms will help you optimise your design for production and deliver finished, tested products for re-sale. But you will need to brief them carefully to ensure your product meets your customers’ needs. And beware the dangers of ‘out-sourcing profit’ by giving away too much margin to your suppliers.

Inca: from Manufacturing to Service

We founded Inca Digital Printers in May 2000. Like Xaar, Inca was another inkjet spin-out from Cambridge Consultants. Our business focussed on delivering complete inkjet printing solutions by integrating printheads from Xaar and others. We chose to develop and build our printers in-house, using a wide range of suppliers for parts and sub-assemblies.

Inca was first to market with a new type of ‘wide format’ inkjet printer. Our sales grew to £19m within 5 years, driven by customer demand for lower cost short print runs than screen printing. Our sale to Dainippon Screen of Kyoto in 2005 for 1.5 times revenues changed remarkably little about our operations. We continued as a mostly independent business and launched our most successful ‘Onset’ product line a few years later.

As the market for wide format inkjet printers matured, competition grew, putting equipment margins under pressure. Initially our maintenance service was a ‘loss leader’ helping to build our new brand’s reputation. The value of this customer support business gradually increased until it became a strong contributor to our revenue. It also helped to solve problems and manage customers’ expectations with our highly innovative products.

Inca’s success continues as a subsidiary of Agfa-Gavaert, following our second exit in 2022. Agfa now earn revenue from sales of their equipment, services and the consumables they use.

Equipment challenges

Building equipment may seem easier than component technology such as semiconductors and printheads. But delivering high-performance, robust industrial solutions can be tough. While some components may be regarded as consumables, the machine containing them must run reliably for many years.

Many DeepTech equipment markets will have similar challenges. Staying competitive will require constant innovation to bring new benefits to your customers. Sustaining growth may depend on building recurring revenue through consumables and services.

Business models and pivots

It is sensible to review your business model as your company grows. The vision you sell to early investors and customers may need to adapt as your markets and business evolve. The world keeps changing and it pays to know what worked for companies with similar products and customers. Many successful firms have found new ways to make money as they grew.

If you’d like to discuss which business model best suits your company, then please get in touch!