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.

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.



comments powered by Disqus
Hot Definitions
  1. Cash and Carry Transaction

    A type of transaction in the futures market in which the cash or spot price of a commodity is below the futures contract price. Cash and carry transactions are considered arbitrage transactions.
  2. Amplitude

    The difference in price from the midpoint of a trough to the midpoint of a peak of a security. Amplitude is positive when calculating a bullish retracement (when calculating from trough to peak) and negative when calculating a bearish retracement (when calculating from peak to trough).
  3. Ascending Triangle

    A bullish chart pattern used in technical analysis that is easily recognizable by the distinct shape created by two trendlines. In an ascending triangle, one trendline is drawn horizontally at a level that has historically prevented the price from heading higher, while the second trendline connects a series of increasing troughs.
  4. National Best Bid and Offer - NBBO

    A term applying to the SEC requirement that brokers must guarantee customers the best available ask price when they buy securities and the best available bid price when they sell securities.
  5. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and FINRA, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account.
  6. Leased Bank Guarantee

    A bank guarantee that is leased to a third party for a specific fee. The issuing bank will conduct due diligence on the creditworthiness of the customer looking to secure a bank guarantee, then lease a guarantee to that customer for a set amount of money and over a set period of time, typically less than two years.
Trading Center