Basic Business Models

There are three basic business models which underpin the US economy today. These are the private business model, the non-profit business model and the government business model. All business models extract revenue and deliver benefits to various groups. These business models are elemental; most real organizations are a combination, for example a non-profit organization that is partially funded by tax revenue distributed by government is a combination of the non-profit and government models.

Model	Revenue Extraction	Beneficiaries
		Primary	Secondary	Tertiary
Private	Voluntary purchases by Customers	Customers receive goods and services	Employees receive pay and benefits	Shareholders receive money dividends
Non-Profit	Voluntary payments by Contributors	Employees receive pay and benefits	Clients receive goods and services	Contributors receive social dividends
Government	Involuntary payments by Taxpayers	Employees receive pay and benefits	Clients receive transfer payments or favorable treatment	Taxpayers receive services

The beneficiaries are ordered by priority. In the case of a private business, if the customers don’t receive satisfactory products, then revenue will stop. Salaries may be reduced but deliveries cannot be. It is obvious that shareholders are lower in priority – they will only receive dividends if profits are created. Employees will be paid even if the company is losing money.

In the other cases, the feedback link between revenue and the goods and services delivered is broken. Non-profit contributors do not see the goods and services delivered to the client and so the quality control “loop” is non-existent. The same is true in the government case, where the primary clients, the recipients of transfer payments or government preferences, contribute little or nothing to revenue, but supply their votes.

The important point to note in this table is that if you are a shareholder, contributor or taxpayer you are way down on the priority list.