Whats a business model?
Define your business
First, identify your business type. Is it a product, a service or a business? If its 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 youre figuring out how you are going to make money with your venture.
Your business model
Subscription-based and advertisement-based models
In a subscription-based business model, the provider charges a fee for access to the service. An example of this is Consumer Reports magazine. Consumer Reports relies solely on its subscription sales. It can do this because it carries a well-known brand name, and provides high quality print and online content, for which people are willing to pay.
An exclusively advertisement-based model provides free content to attract users, and is financially supported by advertisers. Network TV is the most obvious model. The more successful a company is at attracting eyes, the more advertisers are willing to pay. Another example of an advertising-based business model, Yahoo!, provides free access to useful online resources. Users accept the presence of advertisements throughout the Yahoo! site. (Note: Yahoo! is gradually incorporating more subscription-based services)
And two more business model examples
What happened to the dotcoms?
To survive, plan your venture and evaluate your teams financial capabilities as well as your business management experience. Also, analyze the market to determine if your model can make a profit. Lastly make sure that you are aware of your competitors and your possible risks (more on these issues in the Opportunity section).
Differentiating your business: A real life example
We build, host, and manage private-label online directories for leading publishers and portals. We sell companies enhanced subscriptions (listings in the directories), and access to sales leads, or RFPs (Request for Proposals) on behalf of those directories, and return a portion of that revenue to the partner.
The partner gets a no-cost revenue stream; we get to sell a product with
an established brand name on it, and keep a large portion of that revenue,
as opposed to having to build our own brand.
About business models
A business model is quite simple: it is a brief statement of how
an idea actually becomes a business that makes money. It tells who pays,
how much and how often. The same product or service may be brought to
market with several business models.
In the most basic sense, a business model is the method of doing
business by which a company can sustain itself -- that is, generate revenue.
The business model spells-out how a company makes money by specifying
where it is positioned in the value chain.