A business model is a simple blueprint that outlines how your business generates revenue and delivers value.
It answers…
It’s basically the engine of your business, showing what keeps the money flowing and your customers happy.
“A business model describes how a company creates value, delivers, and captures it.”
| Business Model | Business Plan |
| It’s high-level, showing how your business works. | It’s a detailed document, often 15–30 pages. |
| Who your customers are, what you sell, how you deliver it, and how money comes in. | Covers market research, operational plans, funding needs, financial forecasts, marketing tactics, and yes, your business model is just one section inside it. |
| Example… Sell fresh, preservative-free bread to health-conscious families through a retail shop + local delivery subscriptions. | Market analysis – Who are our local competitors, what gaps exist? Target audience – Families & working professionals in nearby societies. Marketing strategy – Free samples at local events, Instagram ads, tie-ups with fitness trainers. Operations plan – Small team of 5, baking starts 5 AM daily, deliveries by 8 AM. Financial plan – Initial investment ₹12 lakh, break-even expected in 14 months. |
Quick way to remember the differences!
Your business model is the WHAT & HOW, while your business plan is the detailed HOW & WHEN.
Need a business coach who can help you build the right business model for your MSME business?
When you’re running a business (or planning one), your business model is like the foundation of a building.
If it’s shaky, the whole thing can collapse, no matter how good your product is.
Small example…
A retailer who opens a new store without thinking through margins, customer footfall, and inventory turns is likely to burn cash.
A simple business model analysis would’ve shown whether the location or pricing needed tweaking.
A solid business model often gets mapped out using the Business Model Canvas, which breaks it into 9 essential parts…
The 9 elements!
Who exactly are your customers? B2B clients, walk-in retail buyers, online shoppers?
What problems do you solve, or what needs do you meet, better than competitors?
How do you reach and deliver your product or service to customers? Shops, e-commerce, resellers?
How do you attract, keep, and grow customers? Personal service, loyalty programs, self-service portals?
How does money come in? One-time sales, subscriptions, licensing, usage fees?
What critical assets do you rely on? Staff, machinery, patents, software.
What do you need to excel at daily? Manufacturing, marketing, and inventory management.
Which suppliers, distributors, or partners are vital to success?
What are your biggest costs? Fixed vs variable, production vs marketing.
Why does this matter?
Seeing your business through these 9 blocks shows if you’re relying too much on one customer type, or if your cost structure can’t support your pricing.
Choosing the right business model is like selecting the right vehicle for a journey. A truck, a scooter, and a luxury car all serve different needs.
Let’s explore each business model more deeply so you can see what fits your business.
You buy ready-made goods in bulk from wholesalers or manufacturers. Then, sell them in smaller quantities to individual customers or small shops.
How does it work in practice?
You earn by adding your margin over the wholesale cost. You may also offer small discounts to clear inventory faster.
Real-world examples…
You produce or assemble products using raw materials and sell either to wholesalers, retailers, or directly to consumers.
Why does it matter?
This gives you control over quality and costs, but it needs more machinery, skilled staff, and inventory management.
Real-world examples!
You pay to use a larger brand’s name, systems, and supply chain. You follow their exact model in return for faster trust and established processes.
Why is it attractive?
Because of less risk, customers already know the brand.
Real-world examples…
Here, the customers will pay a recurring fee (monthly, quarterly, yearly) to keep accessing your product or service.
Why is it smart?
This model builds steady, predictable cash flow.
Real-world examples!
You give a basic product for free to build a large user base, then charge for advanced features or add-ons.
Why is it popular?
This business model lowers entry barrier for customers, builds trust, and then earns from upgrades.
Real-world examples…
Want to build a strong business by choosing the right business model?
You connect buyers and sellers on your platform. You don’t usually own the inventory. You earn via commission or listing fees.
Why is it scalable?
Lower capital risk. You grow by adding more sellers.
Real-world examples!
You offer free content or tools to users and earn money from advertisers who pay to reach that audience.
Why is it effective?
Works when you have large traffic or a loyal user base.
Real-world examples…
You develop something valuable (like software, designs, or patents) and let others use it for a fee.
Why is it powerful?
Earns without large physical operations.
Real-world examples!
You bring together many small providers under one brand, set uniform standards, and market it collectively.
Why do customers like it?
Offers consistent quality across multiple providers.
Real-world examples…
A business that primarily solves a social or environmental problem, with profits often reinvested to increase impact.
Why is it growing?
Customers increasingly support brands with purpose.
Real-world examples!
Many businesses use hybrid models.
For example, a handloom unit that sells through retailers, runs its own store, and also does online subscriptions for regular customers.
Business owners often use these terms interchangeably, but they’re not the same. Knowing the difference helps you design a more solid strategy.
It’s the big picture… How your company creates, delivers, and captures value.
It includes…
It’s just one part of your business model, focused on how exactly you make money.
| Example of Business Model | Example of Revenue Model |
| You run a designer cake shop. You target young urban families, sell through an Instagram page + local store, and promise fast delivery + stunning designs. | Direct sales of cakes + monthly subscription boxes for parties + workshops on cake decorating. |
In short…
The revenue model is the engine that actually makes money.
Your revenue streams are just different ways your business brings in money. Understanding them helps you diversify, so you’re not relying on one single source.
| Revenue Stream | What It Means | Simple Example |
| Direct Product Sales | Selling physical goods directly to customers | Clothing store, furniture manufacturer |
| Service Fees | Charging for services you provide | AC installation, digital marketing agency |
| Subscription Fees | Customers pay regularly (monthly/yearly) | Gym membership, SaaS tools like Tally |
| Advertising Revenue | Earn from showing ads to your audience | Blogs, YouTube channels, free news sites |
| Licensing Fees | Charge others to use your IP or brand | Disney licensing Marvel characters |
| Commission / Brokerage | Taking a cut on each transaction | Amazon, UrbanClap, local property brokers |
| Franchise Fees & Royalties | Others pay to run your brand under your systems | Domino’s or Jockey franchises |
| Workshops & Training | Charging to teach or train | Bakery running paid cake workshops |
| Affiliate / Referral Income | Earn by promoting others’ products | Blogs sharing Amazon affiliate links |
| Transaction Fees | Charge each time money moves through you | Paytm, Razorpay |
Quick takeaway!
Diversifying your revenue streams is like having multiple legs on a chair. It keeps your business stable even if one leg wobbles.
It’s a one-page visual tool that helps you see your entire business model at a glance. Who you serve, what you offer, how you deliver, and how you make money.
Entrepreneurs widely use it because it forces them to think through all parts of their business on a single sheet.
| Business Model Canvas Block | Your Notes |
| Customer Segments | Who are your key customers? |
| Value Propositions | What problems do you solve for them? |
| Channels | How do you reach & deliver to them? |
| Customer Relationships | How do you attract & retain them? |
| Revenue Streams | How does money come in? |
| Key Resources | What assets are essential? |
| Key Activities | What must you do extremely well? |
| Key Partnerships | Who helps you run your model? |
| Cost Structure | What are your biggest costs? |
For example…
Customer Segments: Young parents in Tier-2 cities
Value Proposition: Affordable organic kids’ wear
Channels: Own store + Instagram shop
Customer Relationships: Regular WhatsApp updates, loyalty discounts for families, quick complaint redress
Revenue Streams: Direct sales + bulk festive orders
Key Resources: Skilled tailors, local organic cotton supplier
Key Activities: Sourcing, stitching, Instagram marketing
Key Partnerships: Logistics company, fabric dye house
Cost Structure: Labour, rent, social media ads
Now that you’ve mapped your business, look at…
How do they prefer to buy? One-time, subscriptions, bulk orders?
Do you have money for inventory or better to start as a reseller?
Want stable recurring income (subscription) or high-volume fast cash (direct sales)?
Do they value trust & hand-holding (like B2B) or speed & discounts (like B2C online)?
Revisit your model every 6 to 12 months. Costs change, customer preferences change… your business model should adapt too.
In today’s world, sticking to the same old way of doing business can hurt you. Customer expectations change fast, costs fluctuate, and new competitors pop up with clever ideas.
That’s why business model innovation (tweaking how you make money, serve customers, or deliver value) is critical.
Examples of new trends!
Many manufacturers now skip distributors and sell online directly to customers. E.g., boAt audio or Mamaearth.
More small businesses bundle subscription with tailored products. E.g., monthly snack boxes where customers pick preferences.
Small service providers like electricians or homestays join apps (like Urban Company, Airbnb) instead of hunting for customers on their own.
Brands making money from recycling, upcycling or buy-back schemes. E.g., clothing brands offering discounts if you return old garments.
Even local software vendors or digital marketers use this. Give a free template or small tool, then upsell for the premium version.
You don’t always have to invent something new. Often, you just blend two existing models differently, like combining direct retail + subscription + workshops, to stand out.
Building the right business model is how you keep your business healthy, profitable, and ready to grow.
Keep it simple. Stay flexible. Review your model every few months.
Most importantly, listen to your customers and watch your costs. That’s the smartest way to stay ahead.
Did this blog help you understand the business model? If yes, then check out my blog page for more business-related blogs!
None can destroy iron, but its own rust can! Likewise, none can destroy a person, but their own mindset can.
Former chairperson of the Tata Group
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