Back Of The Napkin Business Model

AAA

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.

INVESTOPEDIA EXPLAINS '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. Escalator Pitch

    A slang term used to describe the quick delivery of a presentation ...
  2. Business Model

    The plan implemented by a company to generate revenue and make ...
  3. Core Earnings

    The revenue derived from a company's main or principal business, ...
  4. Revenue

    The amount of money that a company actually receives during a ...
  5. Operating Income

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

    1. An organization or enterprising entity engaged in commercial, ...
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. How can I set up an accrual accounting system for a small business?

    First, determine whether accrual accounting makes the most sense practically and financially. If the small business is also ... Read Full Answer >>
  3. When does Q4 start and finish?

    Most companies such as Facebook have financial years that end on December 31st. For these companies, the fourth quarter begins ... Read Full Answer >>
  4. What are the key differences between marketing and advertising?

    The key differences between marketing and advertising are based on how each term defines a separate function in the process ... Read Full Answer >>
  5. What are the main objectives of cost accounting?

    Cost accounting is distinct and separate from general financial accounting, which is regulated by generally accepted accounting ... Read Full Answer >>
  6. Is there a way to invest in the income effect?

    Investing in the income effect consists of investing in areas that are affected when an individual's income increases. The ... Read Full Answer >>
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

    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.
  6. 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.
  7. Options & Futures

    Starting A Small Business In Tough Economic Times

    We provide 6 tips for creating a winning business in a losing economy.
  8. Economics

    What is a Management Buyout?

    A management buyout, or MBO, is a transaction where a company's management team purchases the assets and operations of the business they manage.
  9. Economics

    Explaining Cash On Delivery

    Cash on delivery, also referred to as COD, is a method of shipping goods to buyers who do not have credit terms with the seller.
  10. Entrepreneurship

    What is Unlimited Liability?

    Unlimited liability means that the owners of a business are liable for the entire amount of debt and obligations of that business.

You May Also Like

Hot Definitions
  1. Fisher Effect

    An economic theory proposed by economist Irving Fisher that describes the relationship between inflation and both real and ...
  2. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  3. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  4. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  5. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  6. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center