Business Model

A frequently misused business jargon term. A business model is in principle complete, and consists of a description of how a business will deliver something of value (or perceived value) to a relevant market, and in return generate profits, e.g., financial revenues that exceed the cost of what was delivered to the customer. Thus a business model will identify at least the following eight elements

  • The products or services to be offered and delivered;
  • The method of, or means for, producing the goods or services;
  • The cost of producing the goods or services;
  • A target market for the products or services;
  • Methods and means for delivering the goods or services to the target market;
  • The value of the goods or services to potential customers in the target market;
  • How revenue will be generated as a result of delivering such value; and
  • Whether the revenue will in principle exceed the costs incurred by the business and by how much (i.e. rate of return).

In addition, a good business model will seek to identify some commercial advantage(s) the business will have, e.g., a unique selling proposition or USP. Commonly, what are described or presented as “business models” are incomplete, in that they contain only some of the elements of such a model.

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