A business model is a general outline of the transactions needed for your idea to make a
profit. The most basic business model is simply producing a product or service and selling it
directly to customers. The company makes a profit if revenues are greater than production
and business costs.
What’s a business model?
When developing your business model, clearly define the type of business you are
pursuing and your goals for your business venture. Once you have a well-defined business
idea and specific goals, you can establish the method by which you are going to make your
Define your business
First, identify your business type. Is it a product, a service or a business? If it’s a business,
is it a service business or a product business? Is it a lifestyle business or a high growth
business? A lifestyle business prioritizes lifestyle issues such as independence, location,
and hours. Growth, expansion, and money back to investors are the main priorities for
high growth businesses.
If you have an idea for a product, do you have the means to produce and sell this product
or do you plan to license it to another company? Ask yourself if your team is capable of
getting the product or service to market. These questions become relevant when you’re
figuring out how you are going to make money with your venture.
Your business model helps you generically define the product or business that you are
proposing, your customers and the transaction mechanism/s that will allow you to make
money before you begin creating your formal business plan. Your business plan will
describe your model in more detail.
Your business model
Two examples of business models found both on- and off-line are subscription-based and
advertisement-based models. Many companies combine two or more business models or
create their own unique model.
Subscription-based and advertisement-based models
, the provider charges a fee for access to the
service. An example of this is Consumer Reports magazine. Consumer Reports relies solel