Business model

How a company creates value for a customer, delivers it, and keeps a share of it for itself.

For an analyst, a useful description has four parts. Who pays, and for what. What it costs to serve them, split into what varies with volume and what doesn't. How much capital has to sit in the business for that to happen. And what stops somebody else doing the same thing.

Most of what passes for business model analysis stops at the first part, which is the least informative. Two companies selling the same product to the same customer can have entirely different economics if one owns its factories and the other contracts them out, or if one collects in advance and the other in ninety days. Parts two to four decide the money, and you can read every one of them out of published accounts with enough patience.

Describe the model in one paragraph before you touch a multiple.

Four parts. Most analysis stops at the first.

Most of the money depends on the fourth part, and it needs the most evidence. A business earning good returns without protection won't keep earning them. Capital is abundant and competitors read the same filings. So your description has to name the specific thing that prevents entry, and then find its number: the switching cost measured as retention, the cost advantage measured in unit costs, the brand measured as a price premium. If a business model description ends on a claim about quality and carries no measurement, it is an opinion.