Back Of The Napkin Business Model

DEFINITION of 'Back Of The Napkin Business Model'

A slang term that refers to the representation of the basic components of a business model excluding any fine details. It incorporates only the core ideas and success factors of the business. The name comes from the notion that a quick outline of a business can be easily sketched on the back of a napkin to sufficiently demonstrate its fundamental concepts.

BREAKING DOWN 'Back Of The Napkin Business Model'

The slang term comes from a hypothetical scenario in which an entrepreneur pitches an idea to a potential investor over coffee, dinner or a drink. The entrepreneur quickly sketches the business model on the back of a napkin to demonstrate the feasibility of the business.

This type of business model should probably only be used as part of the initial stages of planning. A final business model should be drafted for clarity and color, including complete details on all operations as well as the short-term and long-term visions of the business. Without a clear understanding of how a business will operate and bring in sustainable revenues, the probability of building a successful company is low.

RELATED TERMS
  1. Revenue

    The amount of money that a company actually receives during a ...
  2. Escalator Pitch

    A slang term used to describe the quick delivery of a presentation ...
  3. Elevator Pitch

    A slang term used to describe a brief speech that outlines an ...
  4. Operating Income

    The amount of profit realized from a business's operations after ...
  5. Business

    1. An organization or enterprising entity engaged in commercial, ...
  6. Core Earnings

    The revenue derived from a company's main or principal business, ...
Related Articles
  1. Entrepreneurship

    Six Steps To A Better Business Budget

    This easy but essential process helps owners ensure that their businesses can stay afloat.
  2. Fundamental Analysis

    Interpreting A Company's IPO Prospectus Report

    Learn to decipher the secret language of the IPO prospectus report - it can tell you a lot about a company's future.
  3. Entrepreneurship

    Getting To Know Business Models

    Learning how to assess business models helps investors identify companies that are the best investments.
  4. Options & Futures

    Core Earnings Strip Away "Creative" Accounting

    This metric is an attempt to counteract creative accounting, but it poses its own set of challenges.
  5. Entrepreneurship

    9 Tips For Growing A Successful Business

    Give your business what it needs to thrive and it will reward you for years to come.
  6. Options & Futures

    Starting A Small Business In Tough Economic Times

    We provide 6 tips for creating a winning business in a losing economy.
  7. Entrepreneurship

    4 Steps To Creating A Stellar Business Plan

    If you're going into business, you must have a plan. Find out how to put this important document together.
  8. Investing News

    The 10 Fastest Growing Green Startups in 2016

    These social entrepreneurs adopt triple bottom lines that champion urgent environmental problems while generating returns for shareholders.
  9. Retirement

    Roth IRAs Tutorial

    This comprehensive guide goes through what a Roth IRA is and how to set one up, contribute to it and withdraw from it.
  10. Entrepreneurship

    Multilevel Marketing Isn't Always A Scam, But It Often Is

    Nerium and Amway are popular direct sales companies that recruit new buyers and sellers to make a profit. Sadly, many direct sales firms are scams.
RELATED FAQS
  1. Why did dotcom companies crash so drastically?

    The craze of the dotcom bubble and the flood of capital that came with it led to many back-of-the-napkin business models ... Read Full Answer >>
  2. Do working capital funds expire?

    While working capital funds do not expire, the working capital figure does change over time. This is because it is calculated ... Read Full Answer >>
  3. How does escheatment impact a company?

    In recent years, state governments have become increasingly aggressive in enforcing escheatment laws. As a result, many businesses ... Read Full Answer >>
  4. How much working capital does a small business need?

    The amount of working capital a small business needs to run smoothly depends largely on the type of business, its operating ... Read Full Answer >>
  5. What does low working capital say about a company's financial prospects?

    When a company has low working capital, it can mean one of two things. In most cases, low working capital means the business ... Read Full Answer >>
  6. Does working capital include inventory?

    A company's working capital includes inventory, and increases in inventory make working capital increase. Working capital ... Read Full Answer >>
Hot Definitions
  1. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  2. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  3. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  4. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  5. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
Trading Center