What Is a Business Model?

Welcome to Lesson 1 of 4 in Enterprise Building Foundations. It takes about 15 minutes.

"Business model" sounds technical, but the idea is simple: how a piece of work pays for itself. Every shop you use has one, and so does every church project that has to cover its costs. In this lesson you will learn three plain questions that explain any business, why being busy is not the same as making money, and why honesty belongs in the price. You will finish by noting a need you have noticed, the first piece of your Idea Capture Sheet.

Scripture comes from the King James Version. This is general education, not business, legal or tax advice, and it cannot promise particular results.

In this lesson you will

• Explain any small business with three plain questions: who pays, for what, and what it costs to deliver.
• Explain why money in must be more than money out, and how understanding and honest dealing, as Scripture describes them, belong in a business.
• Note one need you have noticed and who would pay for something that meets it.

Before you start

How true is each of these for you today, from 1 (not true) to 5 (very true)?

• I can explain how a small business near me makes and spends its money.
• I know the difference between being busy and making money.
• I have noticed needs around me that someone could meet.

1. Three plain questions

A business model is how a piece of work pays for itself. You do not need special words to understand one. Three questions are enough:

• Who pays? Sometimes it is the person served. Sometimes it is someone else: parents pay for a child's lessons, an employer pays for a worker's training.
• For what? Think of what it does for them: a jacket that fits again, a lunch that saves a long walk, a child who passes an exam.
• What does it cost to deliver? Materials, transport, tools, phone credit, and your own time.

Try it on a tailor down the road. Who pays? People whose clothes need mending or altering. For what? Clothes they can wear again, sooner than buying new ones. What does it cost? Thread, a machine, rent for the space, and many hours of skilled work.

If you can answer the three questions for a business, you understand how it works. If you cannot answer one of them for your own idea, you have found what to work on next.

Think about it: Think of a small business you use often. Can you say who pays, for what, and what it costs them to deliver?

Try this week: This week, answer the three questions for one small business you use. Notice which answer is hardest to guess.

2. Busy is not the same as making money

Imagine a young man who loves cooking and starts selling lunches at work. He is busy every day and always tired, yet he never has money left. When he finally adds up his costs, he finds he has been charging less than the ingredients.

Proverbs describes how a house is built, and the words fit a business well.

Proverbs 24:3–4 (KJV) 3 Through wisdom is an house builded; and by understanding it is established: 4 And by knowledge shall the chambers be filled with all precious and pleasant riches.

Wisdom chose a good idea: people did want lunch. Understanding was missing: he did not know how the parts fitted, so money out was more than money in.

That is the most common reason small businesses fail: not a lack of customers, but not knowing the numbers. Before you sell anything, you need to know what one sale costs you to make and deliver, and to charge more than that.

Think about it: Have you ever been busy with something that cost you more than it brought in? What did you learn?

Try this week: Choose one thing you could sell or do for someone. Write down roughly what it would cost you to deliver once, including your time.

3. A just weight

In ancient markets, goods were sold by weight. A dishonest trader could cheat with a stone slightly lighter than it should be.

Proverbs 11:1 (KJV) 1 A false balance is abomination to the LORD: but a just weight is his delight.

Today's false balances look different: selling less than you promised, hidden charges the customer discovers later, taking payment for work you cannot finish on time, or two prices depending on who is buying.

Honesty belongs in a business from the start: a fair price you can explain, an offer described truthfully, and delivery you can keep. A small business lives on trust and word of mouth. One false balance can lose more customers than any discount can win.

When you are ready to draw your whole idea on one page, with all its parts and numbers, KMA's Enterprise Building Track teaches a full one-page model.

Think about it: Where might a small business be tempted to use a "false balance"?

Try this week: Describe something you could offer in one sentence that is completely true, with nothing exaggerated. Ask someone whether it sounds honest.

Activities

Reflection

• Which of the three questions do you find hardest to answer for an idea of your own: who pays, for what, or what it costs?

Key takeaways

• A business model is how a piece of work pays for itself: who pays, for what, and what it costs to deliver.
• Busy is not the same as making money. Know what one sale costs you.
• Wisdom chooses the idea; understanding makes the numbers work.
• A just weight is God's delight. Build honesty into the price and the offer.

Your next step

You have finished Lesson 1. You are on the path of growth: you can explain how a business pays for itself, and you have noted a need you have noticed.

These lessons give you the everyday basics. To keep growing, KMA offers two next steps:

Mentorship. Work on your own idea with a KMA mentor who helps you talk to real people, shape a first offer and follows up with you on what you tried. See KMA's mentorship packages. See the mentorship packages

Or: the Enterprise Building Track (monthly Learning membership). Prefer to learn on your own first? The Enterprise Building Track takes these basics further: a full one-page business model, a research plan with a small paid test, honest pricing and finding your first customers. See the Enterprise Building Track