Business Models: key terms, formulas and examples
A business model explains how you make money: subscriptions, freemium, franchise or platforms. A moat protects it, and product-market fit proves people truly want it.
Example
Freemium offers a free tier and converts a few percent of users to paid.
Takeaway
Test pricing early and favor recurring revenue.
Key terms
- Franchise
- Paying to run a business under an established brand.
- Competitive moat
- A lasting advantage that protects profits from rivals.
- Cash cow
- A mature product that reliably funds the rest.
- Freemium
- Offering a free basic version and charging for premium features.
- Product-market fit
- When a product clearly meets strong demand in its market.
- Subscription model
- Customers pay regularly for ongoing access.
- Platform business
- A business that connects two groups of users.
- Revenue stream
- A source of money for a company.
- Niche market
- A small, specialized segment of customers.
Formulas
Subscription break-evenF ÷ (ARPU − V)
Freelance hourly rate(T + E) ÷ H
Billable utilizationB ÷ T × 100
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