The formula or framework that an enterprise uses to exactly plan how to make money from its business is called a business model. The business model describes how the enterprise will generate profit by detailing the product or service offered, the target market, and the methods of revenue generation
. Key components of a business model include:
- Value proposition : What makes the product or service attractive to customers.
- Target market : The specific group of consumers the business aims to serve.
- Competitive advantage : Unique features that differentiate the business from competitors.
- Cost structure : Fixed and variable costs involved in operating the business.
- Revenue model : The plan or mechanism for earning revenue, identifying sources of income.
- Revenue streams : Various ways the business generates money.
- Profit margin : The difference between revenue and costs
Common revenue models enterprises use to make money include:
- Transaction-based model : Earning revenue each time a customer completes a purchase.
- Subscription model : Charging customers recurring fees for ongoing access to a product or service.
- Pay-per-use model : Charging based on the customer's usage of a product or service.
- Interest revenue model : Generating revenue through interest on loans or deposits.
- Donation-based model : Receiving voluntary payments or donations, often combined with other models
Thus, the enterprise's exact plan to make money is embedded in its business model, particularly its revenue model, which outlines how it will earn income through specific methods suited to its industry and offerings
