A business model clearly describes the reason for which an organization produces, delivers, and captures societal value, in various cultural, economic, technological or other contexts. The process of business model evolution and development is known as a business model innovation and is part of strategic business planning. A business model includes five distinct sections: identifying the customer/problem; defining the product or service offering; identifying the marketplace; and creating a financial plan.
The five sections address three primary issues: identifying the customers, the market, and the marketplace, developing a financial plan, and finally, delivering the product or service.
Each section is further divided into sub-sections, each addressing a different aspect of each issue.
Some business models include one or more of the following components. These include providing quality customer service, creating a quality product or service, driving growth, extending customer service, and building loyalty. Examples of components often found in businesses include the first two topics. Many businesses have the ability to build quality customer service by keeping their employees motivated and committed. Creating a quality product or service also allows businesses to build loyalty by continually providing their valued products or services to current customers.
Other business models allow users to submit ideas and create products and services based on the users’ needs, wants, and preferences. Examples of these include social media, crowdsourcing, and open source communities. Crowdsourcing refers to the process by which users can submit ideas and seek the most promising ones through a collective “brainstorming” process. Social media allows users to share information about their experiences through blogs and tweets.
A premium business model allows users to start with a low investment and gradually add additional features as their business grows.
These features could include payment tiers, subscriptions, advertising, or promotional offers. Subscription is used for users who want to get special deals or perks from a business owner. Other features could include a platform for reporting, customer support, and managing customer accounts. Advertising lets businesses promote themselves and their wares through different mediums.
A fourth business model explains four things. The first is that a business model explains four things because it helps determine what a company plans to do to generate revenue. Revenue is a key indicator of success because a company plans on using the money generated to either sustain its operations and/or make money on its products and services. Knowing what a company plans to do will help make money easier to make.
The fifth important concept is that business models describe the strategies and techniques needed to successfully launch a business.
There are five million ways to launch a business. This includes using the Internet, using physical spaces, marketing, distribution, and investing in technology. Businesses also have to factor in things like location and access to equipment when determining their strategy and techniques. Some of the most common business models include franchising, purchasing established businesses, outsourcing, leasing, partnerships, fundraising, acquire, and acquire-and-franchise.