businessmodel

A business model describes the rationale of how an organization creates, delivers, and captures value. It outlines who the customers are, what value is offered, through which channels, and how revenue and costs are managed.

Common components include the value proposition, customer segments, channels, customer relationships, revenue streams, key resources, key activities, key partnerships, and the cost structure.

Business models can be classified by revenue model (sales, subscription, licensing, advertising, usage-based), by market (business-to-consumer, business-to-business, or business-to-business-to-consumer), and by delivery mechanism (direct, channel-based, or platform-based).

Designing a business model involves formulating hypotheses about customers and value, mapping them to a business model canvas, testing with real users, and iterating toward fit.

Financial evaluation focuses on metrics such as gross margin, lifetime value, customer acquisition cost, payback period, and potential for scalability. Common archetypes include direct sales, subscription, licensing, advertising-supported, freemium, franchise, and platform or marketplace models.

Platforms and marketplaces coordinate multiple user groups and rely on network effects, while platform-based models often monetize participation rather than ownership of a product. Understanding a business model aids strategy, investment decisions, and partnerships, and is essential for long-term viability.