Business model

Business model refers to the plan implemented by a company to generate revenue and make a profit from operations. The model includes the components and functions of the business, as well as the revenues it generates and the expenses it incurs.

Overview

A business model describes the rationale of how an organization creates, delivers, and captures value, in economic, social, cultural or other contexts. The process of business model construction and modification is also called business model innovation and forms a part of business strategy.

Types of Business Models

There are various types of business models that most companies fall into. Some of these include:

• Subscription business model: Subscription business models charge customers a recurring fee — typically monthly or yearly — to access a product or service.

• Freemium business model: The freemium business model works by offering simple and basic services for free for the user to try and more advanced or additional features at a premium.

• Direct sales model: A direct sales business model is where services or products are sold directly to a customer, without a "middleman".

• Franchise: A franchise business model is based on a legal and commercial relationship between the owner of a trademark, service mark, trade name, or advertising symbol and an individual or company wishing to use that identification in a business.

Business Model Canvas

The Business Model Canvas is a strategic management and lean startup template for developing new or documenting existing business models. It is a visual chart with elements describing a firm's or product's value proposition, infrastructure, customers, and finances.

See also

• Business Model Innovation
• Business Plan
• Value Proposition
• Revenue Model
• Business Model Canvas