business model
A business model is how a business actually makes money, and a startling number of Nigerian businesses have never articulated theirs.
In plain English
A business model is the answer to one question, and it should be answerable in a single sentence.
How does this make money?
Who is the customer, what do they get, what do they pay, what does it cost you to serve them, and why do they come back? If you cannot say that plainly, you may be running an activity rather than a business, and the difference will only become clear when the money runs out.
The models are more varied than most people realise. Buy and resell at a margin. Charge for a service by the hour. Subscription, where customers pay every month. Marketplace, taking a cut of transactions between others. Advertising, where the user is not the customer. Freemium, where a few paying users fund the many who do not.
Each has entirely different economics, and each demands different things from you. A subscription business lives or dies on retention. A marketplace is worthless until both sides show up. Advertising needs enormous scale before it pays anything at all.
Choosing a model by accident, because it is what everybody else does, is how businesses end up working extremely hard inside economics that could never have worked.
Write yours in one sentence. If you cannot, that is the finding.
Two businesses sell the same product. One charges per unit and must find new customers constantly. The other charges a monthly subscription and keeps earning from the same customers. Same product, entirely different economics, and only one of them compounds.
Questions people ask
What makes a good business model?
One where the value you deliver comfortably exceeds what it costs you to deliver it, and where customers have a reason to return.
Can I change my model?
Yes, and many successful businesses have. But changing it is a serious decision, because the economics, the team and the systems all have to change with it.
Why do subscription models get so much attention?
Because revenue recurs rather than having to be won again every month. It compounds, which is why investors pay far more for it.
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