Understanding Business Models: Elements, Revenue Sources, and Cost Structures
This guide offers insights into business models, highlighting their core elements: defining what a business does, how it generates revenue, and the nature of rights and assets involved. Explore different types of assets including physical, financial, intangible, and human, while examining various revenue sources such as subscriptions, transaction fees, and licensing. Additionally, the text discusses cost drivers and structures, helping readers understand income, expenses, and cash flow considerations. Ideal for entrepreneurs and business students, this resource emphasizes strategic thinking in business operations.
Understanding Business Models: Elements, Revenue Sources, and Cost Structures
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Presentation Transcript
Emer Dooley University of Washington Business models
What is a Business Model • 2 elements • What does a business do? • How does it make money?
What rights are being sold? • Ownership of an asset • Those that significantly transform the asset: Creator • Those that don’t: Distributor • Right to use an asset: Landlord • Right to be matched with the buyers and sellers of something: Broker • Assets can be Physical, Financial, Intangible or Human
Start with… • Revenue • Expenses • How much capital you’ll need • What will the cash flow look like? • Do some sensitivity analysis
Revenue Sources and Streams • Single • Multiple • Interdependent • Loss Leader • Subscription • Unit-Based • Ad-based • Licensing • Transaction Fee
Free DVRs Total DVR Subscription Revenue $500 $450 $400 $350 $300 $250 $200 $150 $100 $ 50 0 Profit Loss Months $250= Cost of DVR Months 0 6 12 18 24 30 36
Direct Cross-Subsidy Producer Product One (Paid) Product One (Free) Consumer
The Three-Party Model Producer Ad Space (Paid) Content (Free) Paid Product Consumer Advertiser
Freemium Producer Basic Product (Free) Premium Product (Paid) Many Consumers Consumer
Cost Drivers and Structures • Fixed • Variable • Semi-Variable • Non-Recurring • Direct Payroll • Inventory • Space • Advertizing
Read Free: The Future of a Radical Price by Chris Anderson