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Business Models: Examples, Types, and Visuals
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From startups to established companies, understanding what a business model is and how to craft an effective one is at the heart of every thriving business. The business model essentially refers to how a company generates revenue. It outlines not only the products or services a business offers but also pinpoints its target market and expected expenditures. Let's dive deeper into business models and look at some real life examples.
What is a Business Model?
At its core, a business model describes how a company creates, delivers, and captures value. It's the blueprint for how a business operates, from sourcing raw materials to delivering the final product or service to customers. This framework also accounts for the revenue streams and expenses, ultimately determining profitability. Key components typically encompassed in a business model include value proposition, customer segments, and revenue streams.
The Business Model Canvas
As businesses evolved and sought more efficient ways to articulate and design their strategies, the "Business Model Canvas" emerged. This tool, designed by Alexander Osterwalder, is a visual chart with nine essential building blocks for businesses. The canvas provides a holistic view of a company, allowing for quick adjustments and iterations, making it particularly favored by startups and innovative ventures. It simplifies the complex structure of a business into a one-page breakdown. Here's the Business Model Canvas and a description of each block:
Key Partnerships: Here, external organizations, suppliers, or collaborators helping the business operate efficiently are identified.
Key Activities: This block pinpoints the main actions or tasks that a company must perform to function effectively and deliver its value proposition.
Key Resources: These are the critical assets required to make the business model work. It includes physical, intellectual, human, and financial resources.
Value Propositions: At the heart of the canvas, this block describes the unique value or benefit that the product or service offers to the customers. It answers: What problem are we solving or what need are we addressing for our customers?
Customer Relationships: This block defines the kind of relationship a business establishes with its customers, which could range from personalized human interaction to automated services.
Channels: This section outlines how a business delivers its value proposition to its customers, be it through a physical store, online platform, or direct delivery.
Customer Segments: This block identifies the different groups of people or organizations the business aims to serve. It answers the question: Who are our target customers?
Revenue Streams: Here, the canvas delves into the monetary aspect, answering: How does the business earn money? This could be through direct sales, subscriptions, licensing, or other methods.
Cost Structure: This section lays out all the major costs and expenses associated with running the business, taking into account the resources, activities, and partnerships.
By mapping out these nine building blocks, businesses can get a bird's-eye view of their operations and strategy. The Business Model Canvas is particularly popular for its simplicity and flexibility, enabling businesses to sketch, challenge, and pivot their models as needed.
Business Model Examples
To give a clearer picture, let's dive into a few prevalent business model examples:
Franchise
Selling the rights to a company's business model and brand for a set period. McDonald's and Starbucks are well-known franchises.
Further reading: The Starbucks Story: From Beans to Billions
Razor and Blades
Consider brands such as Gillette, owned by Procter & Gamble. They frequently offer the initial product – the razor – at a low cost or even a loss, while selling replacement parts, like the blades, at a high margin. This approach ensures repeat purchases.
Marketplace
Providing a platform for sellers and buyers to transact while taking a commission from each sale. Etsy and eBay are examples.
Advertising
Generating revenue by displaying advertisements to users, typically used by media companies and content-heavy websites like Google and Facebook.
Further reading: The Rise of Google, Meta, Amazon, and Youtube in Advertising
Subscription
Businesses like Netflix or Spotify operate on this model, where customers pay a recurring fee to access a service. Subscription based revenue is generally seen as safer and more reliable than other models such as selling hardware. Instead of a one-time sale, subscription models bring in a steady flow of income at regular intervals, be it monthly, quarterly, or annually. This regularity provides financial stability and reduces the risk of revenue fluctuations.
Freemium
Many online services, especially in the software as a service (SaaS) sector, provide basic services for free and charge for advanced features. Dropbox and Spotify are classic examples of this.
Find Business Model Slides Through Quartr Pro
Business models can be complex and difficult to convey through words alone. With this as a basis, companies usually communicate their business models through visual material – akin to the Business Canvas Model.
We've extracted slides from the PDFs of 9,000+ public companies, making each mention on every slide in our database – spanning millions of slides – individually searchable. We've also tagged each slide based on its content, allowing users to search for terms like "Business Model" and access all slides on this topic across the public markets in seconds. Let's take a look at some findings
Spotlight: Musti
Musti is the leading pet care company in the Nordic region, specializing in pet products, services, and veterinary care. Its business model revolves around offering a holistic approach to pet care, emphasizing both high-quality products and comprehensive services to ensure the well-being of pets. By seamlessly integrating retail and veterinary services, Musti positions itself as a one-stop destination for pet owners:
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Spotlight: HelloFresh
A beautiful business model slide that properly describes a business at its core is produced by the global meal-kit market leader, HelloFresh. Its business model, combined with its flywheel (or virtuous cycle) and market leadership, are arguably the most vital aspects to understand regarding HelloFresh as a business and its future. By simply searching for "Business Model" while filtering for "HelloFresh" in the Quartr Pro, you'll come across this slide:
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Further reading: Inside HelloFresh: The Meal Kit Monopoly
Spotlight: American Express
Emerging from its roots as a Lehman Brothers spinoff, American Express has forged a prominent path in the financial world on its own. Today, it's a leading force among global payment network providers with a valuation of approximately $110 billion. An interesting note: while now recognized by its iconic centurion logo, American Express was founded in 1850 as a mail-order company. Here's a visualization of their business model:
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Why are finance professionals around the world choosing Quartr Pro?
With a broad global customer base spanning from equity analysts, portfolio managers, to IR departments, the reasons naturally vary, but here are four that we often hear: