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.