business model – n : the method or process by which
a business makes money, or the way a business extracts economic value for its
products or services. A company’s business model includes how it charges for
its offerings and the context in which those products or services are offered
for sale to enduser customers (i.e., its distribution channels).
Examples:
eBay’s primary business model entails charging sellers a percentage “success
fee”
for any
item sold on its auction website. The business model for some websites and
enewsletters is to charge a subscription fee for access to premium content,
while others provide content at no charge and make their money by selling
advertising and sponsorships; some employ a business model that entails a blend
of these two ways of making money. Meanwhile, in the software business, some
companies charge a monthly or annual license fee (essentially leasing or
renting the software), whereas others charge a single, one-time license fee;
some charge full-price for an upgrade, while others offer a credit to
purchasers of the previous version. Some
online music services charge a per-tune download fee, while others charge a
flat monthly subscription fee for unlimited listening or downloads. To look at
an example of a personal services business, some executive recruiters charge a
finder’s fee calculated as a percentage of the candidate’s first-year salary, while
others charge a flat dollar amount for all recruiting tasks.
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Adapted from "The CompanyCrafters Entrepreneur's Dictionary"
Copyright © 2004-2006 CompanyCrafters LLC