What Is A Business Model

A business model is the methods by which a company intends to generate revenues and become profitable.  It defines the manner by which the business enterprise delivers value to customers, entices customers to pay for value, and converts those payments to profit. 

A business model can be simple or complex.  Let's stick to keeping it simple.

To define your business model answer the following questions:

Where: 
Where will you sell your products or services?.  Will it be at a physical or a virtual location?.  For example, retail location, online (e-commerce website), directly to consumers, or a combination of all of those methods.

What:  
What products or services will you offer customers?. 

How: 
How will you offer those products and services to customers?.  Will they be sold at wholesale or retail prices, discounted, etc.?.  How will you reach your target audience?.

When:  
Will you sell only 8 hours per day or will it be a 24/7 operation so that customers can purchase at any time?.

Who: 
Who is the target audience for the products and services that will be offered?. 

It's important to know what your business model is.  It not only helps you to focus your efforts and resources but it is also important if you decide to raise money to finance your business.  The people you pitch to (whether that be venture capitalist or bankers) will want to know how your will generate revenues.

Use the menu below to learn more about some of the more well-known business models.  You are probably familiar with some of them

Note:  Other models include: Multi-level Marketing, Loyalty, Auction, Online Auction, Pyramid, etc.

 

You don't have to confine yourself to the traditional models.  You can devise your own business model.  See some examples below to get some idea on how you can model your business to achieve success.