UK Accounting Glossary
Business model is a plan applied to yield revenue and bring in profit from operations. A business model includes business functions, its components and also revenues and expenses generated by a business.
Business models range from very simple to very complex. Simpler business models include the restaurant model where commercial establishments make money by cooking and serving customers. More complex business models include revenue from websites. A website may generate money from advertising or sell a product among many others.
A business model is the way or ways that a company generates revenues and profits. A particular business model can be thought of as the prototypical operational framework repeated in the business plans of several companies of the same type. For instance, magazine publishers generally operate according to the subscription business model. Each business model has applicability to particular situations. Extremely profitable businesses can result from an innovative business plan that either successfully applies an existing business model to a new context or introduces a completely new business model. For instance, McDonald’s pioneered what is now called the industrialization of services business model by applying process standardization and mass production techniques of the manufacturing business model to the foodservice arena. Yahoo succeeded with the online content provider business model following the technological innovation of the world wide web that made such a business model possible.
It is a document prepared by a company’s management in order to attract capital investment. The document details the past, present and future of the concerned company. A business plan is a decision-making tool. A good business plan clearly enumerates whether the company will or will not pursue a goal.
Information flow must be maintained for arriving at a good and effective business logic. Business logic finds wide importance in the information technology industry. Software developers usually bifurcate business logic from its application. This is due to the fact that the base technology is identical for every industry. Distinguishing factor lies in the front-end systems that permit particular information types to be inputted according to specific businesses.
Bottom-up is an investment strategy where companies are studied according to their own merit. In this type of investment strategy, external factors like the sector where a business operates are excluded. An investor adopting this type of strategy will closely look at a particular company’s business model, management of the company, company’s history, and its prospect for growth. The investor will not take into account economic and sectoral trends. The principal aim of bottom-up investing is to identify future blue-chip companies and to invest in them.
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This glossary post was last updated: 4th February 2020.