[GTM glossary](/glossary.md) Business model GTM Strategy & SaaS Metrics # Business model In short A business model is the way a company creates, delivers, and captures value. It covers who the customers are, what problem the product solves, how customers are reached, and how money comes in and goes out. For a go-to-market team, the business model sets the rules of the game. It decides price points, sales motion, deal size, and how many customers you need to hit a revenue target. ## The parts of a business model * **Customer segments:** Which companies and buyers you serve. * **Value proposition:** The problem you solve and why it matters. * **Channels:** How you reach and sell to customers, such as direct sales, self-serve, or partners. * **Revenue model:** How you charge: subscription, usage, seats, services, or a mix. * **Cost structure:** What it costs to build, sell, and support the product. --- ## Common B2B and SaaS business models ### Subscription Customers pay a recurring fee. Revenue is predictable, but you must keep customers long enough to recover acquisition costs. ### Usage-based Customers pay for what they consume. Entry is easy, but revenue can swing with customer activity. ### Marketplace and platform The company connects two sides, such as buyers and sellers, and earns a fee or a share of each transaction. ### Services-led Revenue comes mostly from projects or retainers. It scales with headcount rather than with software. --- ## Why the model shapes your go-to-market A low-priced self-serve product needs high volume and a low cost per lead. An enterprise product with large contracts can afford account research, long cycles, and several people per deal. Copying the sales motion of a company with a different model is a common reason plans fail. --- ## How to test whether your model works * Check that customer lifetime value is comfortably higher than the cost of acquiring a customer. * Check how long it takes to earn back acquisition cost. * Check that retention is stable enough to plan around. * Check that the channel you rely on can reach enough qualified buyers. --- ## Common mistakes * Confusing a business model with a business plan. The model is the logic; the plan is the schedule and budget. * Changing price without checking its effect on the sales motion. * Never revisiting the model as the market and product change. --- ## Business model FAQs **What is a business model in simple terms?** A business model is how a company makes money. It describes who the customers are, what value they get, how the company reaches them, and what it charges. It also covers the costs of delivering the product. **What is the difference between a business model and a business plan?** A business model describes the logic of how the company creates and captures value. A business plan describes how and when you will carry it out, with goals, budgets, timelines, and forecasts. A plan is built on a model. **What are examples of a SaaS business model?** Common SaaS models include flat-rate or tiered subscriptions, per-seat pricing, usage-based pricing, and freemium with paid upgrades. Each one affects how sales and marketing teams acquire, onboard, and expand customers. **How does a business model affect sales and marketing?** It sets price, deal size, and acceptable acquisition cost, which decide whether you need self-serve, inside sales, or enterprise reps. A mismatch between model and sales motion usually shows up as poor unit economics. Share term --- ## More related phrases * [Business-to-consumer](/glossary/business-to-consumer.md) * [Software as a Service (SaaS)](/glossary/software-as-a-service.md) * [Annual recurring revenue](/glossary/annual-recurring-revenue.md) ## Similar phrases * [Pricing strategy](/glossary/pricing-strategy.md) Pricing strategy is the approach a company uses to set prices and package its product, balancing customer value, competition, costs, and growth goals. * [Go-to-market strategy](/glossary/go-to-market-strategy.md) A go-to-market strategy is a written plan that defines the target customers, message, pricing, channels, and sales approach for bringing a product to market. * [Usage-based pricing](/glossary/usage-based-pricing.md) Usage-based pricing charges customers according to how much of a product they consume, such as records processed or messages sent, instead of a flat fee. * [Value proposition](/glossary/value-proposition.md) A value proposition is a clear statement of the specific benefit a product delivers to a defined customer and why it is better than the alternatives they have. * [Channel strategy](/glossary/channel-strategy.md) A channel strategy is the plan for which routes to market a company uses, such as direct sales, self-serve, or partners, to reach and serve its customers.