Understanding Business Models and Revenue Streams, Slides of Fundamentals of E-Commerce

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Business Models and Revenue

Streams

Agenda

• Discuss Business Models

• Types of Business Models

• Activities: Recognize differences

between business models

• How to create your own model

Is a business model Important?

• No business model => no clear way on generating revenue
• No serious investor will invest in your company if he doesn’t understand your business model
• Big Bold CEO: My company doesn’t have a business model but has big revenue.. o It has but you are so #^! that you cannot understand how your company works

Elements of a Business Model

• Customer needs
• Value proposition: What creates utility for a customer?
• Target customer segments
• Execution Capabilities ( Distribution Channels, Relationships with the customers)
• Cost structure
• Revenue model

Income Function

• If not described then you don’t know what

you are doing

• Start by considering the cost first. Less

cost means less risk and less investment

money to start with.

• From Accounting:

o Net income or Net loss = Revenue - Cost of goods sold - Sales discounts - Sales returns and allowances - Expenses

Break Even Point

Internet Business Models

• Use of the Internet to base the operation of a business
• Highly dependent upon the technology o Technology is a strategic resource in the execution of the business model
• Value proposition is somehow based on the internet.
• Using the web as an execution channel doesn’t mean that the business model is based on that.

Types of Business Models

• Every business model is slightly different

than the others

• However there are patterns of business

models that we can discuss and see how

they work

• A business model is like a shoe .. you

may need different size based on your

feet…