At its core, a business model is the company’s plan on how to generate revenues and become profitable. A business model identifies the company's products or services, sources of revenue, the target market, customer base and details of financing.
Ultimately, a good business model focuses on the targeted customers and markets. It identifies what value propositions are offered through what channels, and how to do so in an effective and profitable way.
Every new business has to have a business model. Even established businesses have to revisit and update their business models often or they'll fail to anticipate trends and challenges ahead.
One of the most used business models tools is the Business Model Canvas. This allows entrepreneurs experiment, test, and, well model different ways that they could structure their costs and revenue streams.