Business Model: Definition, Example, and How to Build One for Your Startup
Julian Drago
June 5, 2025
Having a great idea is not enough to make a startup successful. What really makes the difference is how that idea is turned into a viable, scalable, and sustainable business model.
In this article, we’ll explain what a business model is, why it matters, how to design yours step by step, and we’ll share a practical example using the Business Model Canvas.
What Is a Business Model?
A business model is the way a company creates, delivers, and captures value. In simple terms, it’s the strategy a business uses to generate revenue: how it offers its product or service, who it serves, how it delivers that value, and what cost and revenue structure makes it profitable.
Key components of a business model include:
Value proposition
Customer segments
Distribution channels
Customer relationships
Revenue streams
Key activities
Key resources
Key partners
Cost structure
Why Is Having a Clear Business Model So Important?
A well-defined business model allows you to:
Validate that there is a real market for your product or service
Focus your time and resources on the activities that create real value
Make informed decisions about pricing, costs, growth, and investment
Clearly communicate your strategy to investors, partners, and your team
The Business Model Canvas: A Powerful Tool
The Business Model Canvas, created by Alexander Osterwalder, is a visual tool used by startups, corporations, and consultants around the world to organize and define a company’s business model in one simple chart.
The canvas includes nine building blocks:
Customer Segments – Who are you selling to?
Value Proposition – What problem are you solving or need are you meeting?
Channels – How do you deliver your value proposition?
Customer Relationships – How do you interact with your customers?
Revenue Streams – How does your business make money?
Key Resources – What assets do you need to operate?
Key Activities – What core tasks must be performed?
Key Partners – Who do you need to work with?
Cost Structure – What are your main expenses?
Example Business Model: Sustainable E-commerce Store
Let’s say you run an online store that sells sustainable products (bamboo toothbrushes, reusable bags, natural cosmetics). Your business model might look like this:
Customer Segments: People aged 25–45 who are interested in responsible consumption and sustainability
Value Proposition: Eco-friendly daily-use products that are affordable and shipped plastic-free
Channels: Online store, social media, marketplaces like Amazon
Customer Relationships: Educational content, email marketing, personalized service
This example shows how a concrete idea can be structured into a viable and efficient business model.
Common Types of Business Models
There are many business models to choose from, depending on your industry and product. Some of the most popular include:
Freemium: Offers a free version with basic features and a paid version with full access (e.g., Spotify, Canva)
Subscription: Customers pay a monthly or annual fee to access a service or product (e.g., Netflix)
Marketplace: A platform that connects buyers and sellers and charges a fee per transaction (e.g., Amazon, Airbnb)
E-commerce: Direct sale of products online
Software as a Service (SaaS): Cloud-based software usage for a recurring fee
Affiliate: Earning commission by promoting third-party products
How to Create Your Own Business Model Step by Step
Identify your ideal customer Understand their needs, behavior, and pain points.
Define your value proposition What makes your solution unique and compelling?
Choose the right channels How will you reach your audience effectively?
Design your revenue strategy Define pricing, monetization model, and payment flows.
Assess your key resources and activities Identify what’s essential for delivering your value.
Build strategic partnerships Seek allies who can enhance or complement your operation.
Calculate your costs Understand how much it costs to run your business efficiently.
Validate your model Test your offer with real customers and refine based on feedback.
Iterate and improve Business models evolve—update yours as your market changes.
Final Thoughts
Clarity around your business model is one of the foundations of long-term success. It helps you focus, adapt, and grow with confidence. Whether you're just starting or redefining your direction, a solid business model is your roadmap.
At Openbiz, we help entrepreneurs from Latin America launch their businesses in the U.S. with clear, functional business models that support long-term growth.
Ready to take the next step? Contact us and let’s build your business the smart way.
Schedule a consultation with an advisor to solve all your doubts.
