Business model is much more than a revenue model

The funny thing is most of the CEOs of companies think that business model is just another name for revenue model and when prodded to explain go on to detail  their cost of production, sales proceeds and net income. Well this is ok if we are talking only about the revenue structure of the company.

Predictably, a revenue model projects a firm’s income and profit potential at a particular operational level. Simply put, it is monetizing the products and services a business offers detailing what income is earned, what profit is made and what earnings are retained and what return or dividends are paid out to investors and shareholders.

Business model is much more than this. Indeed it talks about how the cost structure runs and how revenue stream flows that too after having employed modes, partners, activities and channels in value creation, value delivery and value capture.

Modes include materials and physical resources acquired as input to the production process staffed by labour and management and focussed on specialization of product & services

Partners in a business is a catch word covering suppliers, patent holders providing and/or maintaining know-how and technology as well as all outside service providers in functional areas

Activities is another encompassing term covering procuring supplies, storing, utilizing in production, quality checking on production line, packaging and finally readying for despatch.

The last item channels once again is an all-inclusive term for acquisition & retention of customers, segmentation, sales promotion and finally distribution of products & services.

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist

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