Small business junkies say the business model is the profit engine of a business.
Like an engine, a business model is comprised of certain elements or parts. One possible schema is value proposition, market segment, revenue model, value chain, and competitive advantage.
Aligning these elements is an important determinant of the profits to be made from a business.
For example, value proposition is a promise of value to be delivered. Here, the promise would be to clean, shine, and protect customer's vehicles.
Market segment is the sub-group(s) of consumers in a market that are likely to be the most profitable and become the target market. Here, consumers would have common or shared characteristics such as similar demographic profiles.
Revenue model would describe how revenues are generated, cost structure, and target profit margin. Margin is the desired profit on sales and is used to determine selling price where the average total cost is known.
Value chain describes how a company intends to be positioned in a market so its activities can capture value. For example, the focus of location strategy for service/retail locations is volume, physical qualities, and cost determinants.
Competitive advantage is what makes a company's products and services superior to all other choices in an area. Common means to create sustainable advantage are cost, differentiation, or niche strategy.