What Is the Meaning of a Business Model?

A business model describes the basic organization of a business and the way it intends to bring value to a market and make profit; a business model is usually planned in the beginning stages of forming a new business.

Features

A business model includes various important considerations such as the infrastructure required for the business, the goods or services that the business provides, the target customer, how the goods and services are created and delivered and how profit is received.

Types

The types of possible business models are essentially limitless; while many business have similar models--retail stores, wholesalers, manufacturers, service stores, online vendors, etc.--each business is likely to have a model that differs from another in some way.

Misconceptions

A business model is not an actual model or a concrete description of the organization of the business, it is the structure of the business itself.

Potential

A business model changes as a company changes; for example, a company could decide to create a website and start selling products online that they originally sold in a retail store, which could change their business model.

Considerations

A formal description of a business model can be a useful tool for a business to conceptualize their operations.

References

• QuickMBA: The Business Model

Resources

• Business Week: Three Steps to a Sound Business Model