Business Models: Types, Examples and How to Design One

A business model is a plan for generating revenue. Types include retail, manufacturing, subscriptions and more.

Writer | Small business, business banking, business loans

Randa Kriss is a small-business writer who joined NerdWallet in 2020. She previously worked as a writer at Fundera, covering a wide variety of small-business topics including banking and loan products. Her work has been featured by The Washington Post, The Associated Press and Nasdaq, among others. Randa earned a bachelor's degree in English and Spanish at Iona College.

Rosalie Murphy covers small business topics for NerdWallet. Previously, she led editorial strategy for a local news startup and covered business at The Desert Sun. She holds a journalism degree from the University of Southern California and is currently pursuing an MBA.

Assigning Editor | student loans, student loan repayment plans, and education financing

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⏰ Estimated read time: 9 minutes

A business model spells out how a business will generate revenue. If you want to start a business, take the time to determine what type of model will support your goals, and incorporate its design into your business plan and market research.

Here are details about different business models, examples of each, and how to identify the right one for you.

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How to design a business model

There is no one-size-fits-all business model. Many businesses include elements of several models — the yoga studio that bundles classes may also sell retail products in its lobby, for instance.

How will you make money? Outline one or several revenue streams, which are the different ways your company plans to generate earnings.

What are your key metrics? Having a profitable business is great, but it usually doesn’t happen right away. You’ll want to identify other ways your company will measure its success, like how much it costs to acquire a customer or how many repeat customers you'll have.

Who’s your target customer? Your product or service should solve a specific problem for a specific group of consumers. Your business model should consider how big your potential customer base is.

How will your product or service benefit those customers? Your business model should have a clear value proposition, which is what makes it uniquely attractive to customers. Ideally, your value proposition should be specialized enough that competitors can’t easily copy it.

What expenses will you have? Make a list of the fixed and variable expenses your business requires to function, and then figure out what prices you need to charge so your revenue will exceed those costs. Keep in mind the costs associated with the physical, financial, and intellectual assets of your company.

From the outset, you may not have a clear idea of what each of these components will look like for your business. Writing a business plan can help them become more evident.

It may also be helpful to research other businesses that are similar to yours and see how they've structured their operations. This market research may reveal things you want to imitate, as well as gaps in the market that your business can fill.

Your business model will inform your operations and vice versa. As your business grows, you'll be able to change and adapt your strategy based on your learnings.