Business Model

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DEFINITION of 'Business Model'

The plan implemented by a company to generate revenue and make a profit from operations. The model includes the components and functions of the business, as well as the revenues it generates and the expenses it incurs.

BREAKING DOWN 'Business Model'

Business model is a buzzword that everybody used (or overused) during the dotcom boom. In fact, poorly thought out business models were the downfall of many dotcoms.

However, the business model dates back to the earliest days of business; it merely describes the way in which a company makes money. A business model can be simple or very complex. A restaurant's business model is to make money by cooking and serving food to hungry customers. A website's business model might not be so clear, as there are many ways in which these types of companies can generate revenue. For example, some make money (or try to) by providing a free service and then selling advertising to other companies, while others might sell a product or service directly to online customers.

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