business model – n : the method or process by which a business makes money, or the way a business extracts economic value for its products or services. A company’s business model includes how it charges for its offerings and the context in which those products or services are offered for sale to enduser customers (i.e., its distribution channels).

Examples: eBay’s primary business model entails charging sellers a percentage “success fee”
for any item sold on its auction website. The business model for some websites and enewsletters is to charge a subscription fee for access to premium content, while others provide content at no charge and make their money by selling advertising and sponsorships; some employ a business model that entails a blend of these two ways of making money. Meanwhile, in the software business, some companies charge a monthly or annual license fee (essentially leasing or renting the software), whereas others charge a single, one-time license fee; some charge full-price for an upgrade, while others offer a credit to purchasers of the previous version.  Some online music services charge a per-tune download fee, while others charge a flat monthly subscription fee for unlimited listening or downloads. To look at an example of a personal services business, some executive recruiters charge a finder’s fee calculated as a percentage of the candidate’s first-year salary, while others charge a flat dollar amount for all recruiting tasks.

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Adapted from "The CompanyCrafters Entrepreneur's Dictionary"
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