Business model
Also called: business models
How a company turns what it does into money, covering what it sells, who pays, how it reaches customers and what it costs to provide.
A business model explains the story behind the revenue and costs in the financial statements. The paying customer is not always the user: a free app may be paid for by advertisers, and a medicine by an insurer.
Being able to describe a company's business model in a few plain sentences is the starting point of fundamental analysis.
Example
A made-up appliance maker earns most of its revenue from one-off machine sales and a smaller, steadier share from maintenance contracts and spare parts.
Learn more in these lessons
- Understanding a company's business modelHow do you work out how a company actually makes money?
- Industry analysis and competitive positioningHow does an industry's structure affect the profits its companies can earn?
Related terms
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