Business Model

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A Business Model is a plan for revenue and overall business operation which results in a net income (earnings or losses) for a particular individual, company, organization, or government institution.


Models

Creation

Venture Capital

While not a Business Model in the traditional sense (i.e. no steady/sustainable revenue stream is created through creation, consumption or exchange of a product or service) Venture Capital is a source of funding for the establishment of a Business Model, Technology, Product, Service and/or Business. Venture Capital is typically used to fund new venture creation, product-line expansion, service enhancement or research and design initiatives, until such a time when the product, service or business has proven to have (or appears to not have) a sustainable business model and revenue stream in sight.


Private Equity

Private Equity is obtained through the sale of shares in a company, or a promised percentage of any future proceeds a particular product, product-line or service may generate, whether through sales, donations or any of the other Business Models.

In an of itself, Private Equity is not a Business Model but rather a source for establishment or enhancement of, existing Business Models.




Payments

Micropayments

Micropayments are a means for transferring very small amounts of money, in situations where collecting such small amounts of money with the usual payment systems is impractical, or very expensive, in terms of the amount of money being collected. Early proposals for "Micropayments" were for transactions valued at as little as 1/1000th of a US dollar, [1] meaning a payment system that could efficiently handle payments at least as small as a mill, but now is often defined to mean payments too small to be affordably processed by credit card or other electronic transaction processing mechanism. The use of micropayments may be called Microcommerce.


Retail

Retail describes (either through real costs or hidden absorption of costs) the sale of a given product or service resulting in payment in-full or in-part of the price of production, plus cost of distribution, plus any additional retailer markup, plus any additional regional or federal sales (or other) taxes of a given product or service. Retail is typically thought of as B2C but lately the area has been expanded to include much more B2B commercial activities.

Downpayments

Downpayments are the minimum fee which should be charged in order to ensure that a payee will be capable and willing to fulfill any obligations as a result of their purchase of a given product or service. It is used most commonly as a barrier to expensive purchases, where only an individual or organization of a particular financial standing may afford to pay the downpayment. Recently, "No Downpayments" (also called "no money down") has become a common gimmick for enticing those who might otherwise shy away from expensive purchases into splurging and going ahead with a purchase regardless of their financial situation.

Installments

Installments are timed payments (i.e. monthly, weekly, yearly, or, after a certain time-period elapses) and as such are similar in nature to a subscription, but differ in that they are cumulative towards the ownership of a product, and thus, are rarely if ever used for service-centric Business Models. Installments are commonly used for expensive items, or, items which are needed/desired immediately (whether real or imagined) by the consumer, but for which there is not likely to have been a budget made specifically (i.e. infomercial items that sound time-saving or convenient, vehicles because of a change of season, etc). Installments are paid in small percentages of the total price of an item, for example a $1000 "super stereo" may be paid for in 10 equal installments of $100, over a 10-month period from the original purchase date. Another example of Installment payments are "no-money-down, don't pay a cent until date X" type offers. For example, a $25,000 car may be driven for 3 months for free (or with some minimal up-front charge), then after the first 3 months, a regular installment of $500 must be paid for a period of 5 years until the car has been paid for in full.

(NOTE: Expensive items such as cars and homes are usually actually paid for immediately - in full - on the day of purchase, initially by a bank, dealer, mortgage broker, or other lending institution, and then the buyer actually pays off the loan plus interest over the period of the Installment plan. In our example, the initial $25000 loan plus $5000 interest would be paid by the buyer over the 5-year period of the Installment plan.)


DNVB

[2] [3] [4] [5]

Rental

Renting is an agreement where a payment is made for the temporary use of a good or property owned by another person or company. The owner of the property may be referred to as the lessor and the party paying to use the property as the lessee or renter. There is typically an implied, explicit, or written rental agreement or contract involved to specify the terms of the rental, which are regulated and managed under contract law.[6] [7]

Hourly

A fee paid per hour of usage of something. Common for:

  1. short-term specialty home product rentals (carpet cleaners, leaf blowers, lawn mowers, etc)
  2. large-sized construction equipment (bulldozers, cranes, lifts, etc)
  3. entertainment services (bowling shoes, go-karts, paintball guns, etc)
Daily

A fee paid per 24 hours (1 day) of usage. Common for:

  1. Car & Truck rentals
  2. Movies
  3. Video Games (and gaming systems)
  4. Novelty products (costumes, bullhorns, gags, etc)
  5. mid-sized construction equipment (drills, power saws, sanders, etc)
Weekly

A fee paid per either 168 hours (7 days; 1 full week), or, 120 hours (5 business days; 1 work week) of usage. Common for:

  1. Office supply or equipment rentals (fax machines, printers, etc)
  2. Car & Truck rentals
  3. Movies
  4. Video Games (and gaming systems)
  5. Timeshares (apartments, condos, shared-living arrangements, etc)
Monthly

Common for:

  1. Hotel and Motel rooms
  2. Trailers, Mini-homes and Winnebagos
  3. Apartments
  4. Timeshares (apartments, condos, shared-living arrangements, etc)
  5. Shared resources (wells, lakes, forest/wood supply, green houses, gardens, etc)
Yearly

A fee paid per 8760 hours (365 days; 1 year) of usage. This is less commonly referred to as (or structured as) a rental agreement, and more commonly referred to as (and structured as) a lease. Common for:

  1. Vehicle (Car & Truck) ownership
Rent-To-Own

Rent-To-Own (commonly abbreviated RTO) is defined as renting something for a specified period of time through payments in order to reach a point where one can afford to either have paid for the item in its entirety, or, pay the difference between what one has already paid to rent that item, and the item's market value (either at the outset of entering into the RTO agreement, or at the current date at which a final purchase payment is to be made, depending on the type of contract). [8]

Leasing

Leasing is a type of renting by which a firm can obtain the use of a certain fixed assets for which it must pay a series of contractual, periodic, tax deductible payments. The lessee is the receiver of the services or the assets under the lease contract and the lessor is the owner of the assets. [9]

For example, in leasing an apartment, a relationship between the tenant and the landlord is created and referred to as a tenancy. The tenancy can be for a fixed or an indefinite period of time (called the term of the lease). The consideration for the lease is called rent.[10]


Donation

Donating products or services either in-kind or with specific considerations, obligations or contractual agreements.




Consumption

Subscription

A recurring fee for recurring services (such as a monthly magazine issue being delivered to your home/business, or, small bi-weekly charge for access to a website's premium content for a two-week period).

Daily

Recurring fee charged daily for continued use.

Weekly

Recurring fee charged weekly or bi-weekly for continued use.

Monthly

Recurring fee charged monthly for continued use.


Pay-Per-Use

A payment made for each use of a product or service (for instance: accessing on-demand movies through your cable company, a gym membership/punch-card, a phone plan that charges per call placed/received or cell phone plan that charges per MB of data used). Could be considered a form of rental but differs in some ways such as indemnity in case of damage/loss, onus of liability in case of injury/loss, etc.

Virtual Credits
Pay-Per-View


Freemium

Freemium is a business model that works by offering basic services for free, while charging a premium for advanced or special features. The word freemium is a neologism created by combining the two aspects of the business model: free and premium. The business model has gained popularity with Web 2.0 companies.[11]


Shareware



Exchange

Affiliate Fees


Link Sharing


Advertising

Paying to promote a product, service, business or other item on or within a given network, service or other message.


Sponsorship





Tools


Resources


External Links

References

  1. wikipedia: Micropayment
  2. What is a "Digitally Native Vertical Brand" (DNVB)?: https://www.pixlee.com/definitions/definition-digitally-native-vertical-brand-dnvb
  3. What is a DNVB? These digitally native vertical brands are pushing e‑commerce innovation: https://www.digitalcommerce360.com/2018/04/05/what-is-a-dnvb/ (44% growth rate of "Web-only" .vs. "Click & Mortar" E-Commerce)
  4. The rise of the web-only brands: https://www.digitalcommerce360.com/2018/02/28/why-web-only-brands-might-be-the-best-thing-in-online-retail/
  5. The largest digitally native vertical brands: https://www.digitalcommerce360.com/2018/02/13/largest-digitally-native-vertical-brands/
  6. wikipedia: Renting
  7. wikipedia: Video rental shop
  8. wikipedia: Rent-to-own
  9. wikipedia: Leasing
  10. wikipedia: Lease
  11. wikipedia: Freemium
  12. wikipedia: Advertising

See Also

E-Commerce | E-Business