Business model
In short. A business model describes how a business creates value for customers, who those customers are, and how it earns money and covers its costs. It joins the offer, the customer, the way it is sold and the revenue and cost structure into one account of how the business works.
Last checked against its sources on 10 October 2026. How we write these.
Two businesses can sell similar things and have completely different models. One sells a product once at a margin. Another sells a subscription with a lower first payment but steady income. The model shapes cash flow, risk and the work needed to grow.
The US Small Business Administration's lean plan format breaks a model into nine parts: key partners, key activities, key resources, value proposition, customer relationships, customer segments, channels, cost structure and revenue streams. Putting these on a single page is a quick way to spot weak links.
A practical example is a mobile dog groomer. The customer segment is busy owners, the channel is word of mouth and a local group, the value is convenience, the revenue is a fee per visit, and the costs are the van, fuel and supplies. Writing that down shows that travel time, not grooming time, may be the limit on income.
A model is a working hypothesis. It should be tested against real customers and revised as costs, prices and demand become clearer.
Questions people ask
Is a business model the same as a business plan?
No. A model explains how the business makes money in outline. A plan is a fuller document covering forecasts, operations, people and funding, and usually rests on the model.
How often should a business model change?
When evidence shows part of it is not working, such as a channel that costs too much or a revenue stream customers resist. Many small businesses review it at least once a year.
Sources
- SBA: Write your business plan checked 10 October 2026