Business Model
Definition
The framework through which an organisation creates, delivers, and captures value. A business model defines the logic of how a company generates revenue, serves customers, and sustains competitive advantage. In the context of intangible assets, the business model itself can be a significant source of value — particularly when it creates network effects, generates recurring revenue, or builds switching costs that protect the company's market position. Platform business models, subscription models, and freemium models are especially effective at building intangible value because they compound customer relationships, data assets, and ecosystem effects over time. When valuing a business for acquisition or investment, understanding the business model is essential to identifying which intangible assets drive value and how sustainable that value creation is likely to be.
Complementary Terms
Concepts that frequently appear alongside Business Model in practice.
A business model that creates value by facilitating exchanges between two or more interdependent user groups — typically producers and consumers — through a digital platform. Platform businesses generate powerful network effects and intangible assets including user data, algorithmic matching capabilities, and brand trust.
A business model in which a basic version of a product or service is offered free of charge while premium features, enhanced functionality, or expanded capacity are available for a subscription fee. The freemium model is prevalent in SaaS, enabling rapid user acquisition and product-led growth, with conversion rates from free to paid users typically ranging from 2% to 5%.
A business strategy that minimises investment in physical assets and instead relies heavily on intangible assets such as software, brand, data, and intellectual property to generate revenue. Asset-light companies typically exhibit higher scalability and return on capital but can be harder to value using traditional balance-sheet methods.
Revenue that is contractually expected to continue on a regular basis, such as subscriptions, maintenance contracts, or licensing fees. Recurring revenue is more predictable than one-time sales and is valued at higher multiples because it reduces risk and improves forecasting accuracy.
The financial, operational, or psychological costs a customer incurs when changing from one product or service to another. High switching costs create customer lock-in and are a powerful intangible competitive moat, particularly in enterprise software, banking, and platform businesses.
A phenomenon where the value of a product or service increases as more people use it. Network effects create powerful competitive moats and are among the most valuable intangible assets, particularly for platform businesses, marketplaces, and social networks.
Related FAQ
What does it mean for a company to have a transparent business model?
Transparent business models clearly explain how revenue is generated, who benefits, and whether incentives align with customer interests.
Read full answer →What happens if my company pivots or changes business model?
Pivots change your intangible asset profile: technology may remain valuable, but customer relationships and brand may not. You'll need to re-run the valuator with new metrics.
Read full answer →Put this knowledge to work
Use Opagio's free tools to measure and grow the intangible assets that drive your business value.