The phrase “business model” can be defined as the nature of repetition or operating routine of an enterprise. The addition of sustainable to the phase adds an element of longevity or durability to a business model. Professional investors insist on understanding the sustainability of a business in terms of its ability to come up with ways to routinely grow revenue, manage expenses and generate cash.

The traits of an enterprise with a sustainable business model might include some of the following. The more traits recognizable by investors, the more highly valued the company.

• The company has management capable of:
  • Having the resources that allows the sale of a profitable product in the marketplace.
  • Allocating resources without assuming an excess of risk.
  • Recognizing and adapting to changing business conditions in a timely fashion.
• The company sells products that are clearly safe from an excess of pressure:
  • Downward from customers – on product price.
  • Upward from suppliers – on product raw materials.
  • Upward from internal costs – to prepare, administer and deliver products to customers.
• The company participates in a marketplace that can be taught to recognize and reward the real value of their products in comparison to the real value of competing products.

A sustainable business can continuously influence the level and rate of operating income by making appropriate risk/reward decisions. Here is the formula:

Controllable
Gross
Revenue
-
Controllable Cost
Of Goods Sold
=
Enviable Gross Margin
-
Controllable Operating
Expenses
=
Shareholder Value-Creating
Operating Income