A business model is the conceptual structure supporting the viability of a business, including its purpose, its goals and its ongoing plans for achieving them.
At its simplest, a business model is a specification describing how an organization fulfills its purpose. All business processes and policies are part of that model. According to management expert Peter Drucker, a business model answers the following questions: Who is your customer, what does the customer value, and how do you deliver value at an appropriate cost?
A business model is similar to a business plan in its makeup and content. However, a business plan specifies all the elements required to demonstrate the feasibility of a prospective business, while a business model demonstrates the elements that make an existing business work successfully.
The benefits of business model documentation include maintaining a focus on corporate goals, reviewing operational practices and ensuring that the two are congruent. A representation of a company's business model can be incorporated into public relations (PR) material and is useful to share with customers and partners. A mission statement or vision statement may be included in a business model.
Traditionally, financial goals have been the main focus of such models but business sustainability and corporate culture have become increasingly integral to business plans in recent years.