Company Description/Overview
Products/Services Offered
Market Analysis
Marketing and Sales Strategies
Operations and Management
Financial Plan
Appendices
In simple terms, a business model is how the business will make money. Selling ice to eskimos, for instance, is a bad business model. Selling team jerseys to rabbit sports fans, on the other hand, is a solid business model.
The components of a business model are best illustrated by Swiss entrepreneur Alexander Osterwalder’s Business Model Canvas, which is a visual representation with nine sections. Four sections represent internal elements of a business that enable it to function and are related to costs.
Four other sections represent external elements that enable the business to bring in revenue and are related to the customer. The ninth section is the business’ value proposition.
The value proposition is at the heart of your business model. Your value proposition, which should be no more than two sentences long, needs to answer the following questions:
Key activities are all the activities required to run the business and create the proposed value. These can include product development and distribution and any other necessary activities.
The cost structure is a sum of all you’ll need to spend to make the business function. It’s the costs you’ll incur to run the business and bring in revenue.
Key partners are external partners involved in delivering value, such as vendors and suppliers, or maybe a bank.
Key resources are any necessary practical elements that come with a cost. These might include your office space, employees, and equipment like computers.
Revenue streams are the ways in which you receive payment from customers. You may have more than one revenue stream, such as via direct sales and subscriptions.
Customer segments are the groups of people to whom you provide goods or services. In other words, your target market. Maybe your products are aimed at younger women, for instance, or older men. Whatever your target segments, you should build customer personas of each group so that you know how and where to reach them with your marketing.
Customer relationships refer to how you interact with your customers to deliver value. Your interactions may be online only, by phone, in-person, or all of the above.
Channels refer to how you reach your customers, such as social media, internet search, direct sales calls, trade shows, and so on.
If you’re just starting a business, the Business Model Canvas is a great way to understand and examine your business model. One thing to remember is that the elements you put in your Canvas will be based on assumptions that will at some point be tested in the market and adapted as needed.
Another thing to remember is that you do not need to do a Business Model Canvas. It’s merely an exercise that can help provide insight into your business model.
A business plan is a detailed document that describes how the business will function in all facets. The key is in the “plan” part of the name. It will specify how you’ll launch your business, gain customers, operate your company, and make money. A business plan, however, is not a static document .
The initial version will be based largely on assumptions, supported by research. As you run your business you’ll constantly learn what works and what does not and make endless tweaks to your plan.
Thus, creating a business plan is not a one-time action – it’s a dynamic and continuous process of crafting and adapting your vision and strategy.
You’ll present your business plan to potential backers, though in recent years some investors have begun to embrace the Business Model Canvas as a tool to assess a business’ potential.
A strong business plan includes eight essential components .
The executive summary is the initial section of your business plan , written last, summarizing its key points. Crucial for capturing investors’ and lenders’ interest, it underscores your business’s uniqueness and potential for success. It’s vital to keep it concise, engaging, and no more than two pages.
This section provides a history of your company, including its inception, milestones, and achievements. It features both mission (short-term goals and driving force) and vision statements (long-term growth aspirations). Objectives, such as product development timelines or hiring goals, outline specific, short-term targets for the business.
Detail the product or service you’re offering, its uniqueness, and its solution to market problems. Explain its source or development process and your sales strategy, including pricing and distribution channels. Essentially, this section outlines what you’re selling and your revenue model.
Remember, although the financial section might seem daunting, it is pivotal for understanding the economic feasibility of your business. Proper financial planning helps in making informed decisions, attracting investors, and ensuring long-term sustainability. Don’t hesitate to engage financial experts or utilize tools and software to ensure accuracy and comprehensiveness in this section.
The appendices section of a business plan is a repository for detailed information too extensive for the main document. This can include resumes of key personnel, full market research data, legal documents, and product designs or mockups. By placing this data in the appendices, it keeps the main plan concise while allowing stakeholders access to deeper insights when needed. Always ensure each item is clearly labeled and referenced at the relevant point in the main document.
As you can see, business models and business plans have some similarities, but in the main they are quite different. Your business model explains the foundational concept behind your business, while a business plan lays out how you’ll put that model into action and build a business.
When you’re starting a business, it’s best to have both, as the work of getting them done involves learning about your business from every angle. The knowledge you’ll gain is likely to be invaluable, and could even be the difference between success and failure.
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Written by Vinay Kevadiya
Published Sep. 24 2024 · 6 Min Read
“Failing to plan is planning to fail," as the old saying goes. This sentiment rings especially true in the modern business world.
For entrepreneurs, effective business planning can be the difference between a dream and a reality. And this reality hinges on two important blueprints: business models and business plans.
But what differentiates them, and when should you focus on each?
In this article, we will explore the key differences in the business model vs business plan debate and help you clarify these concepts.
A business model is a plan that shows how a company creates, delivers, and captures value. It explains how a business operates, spends money, and makes money in a way that leads to profit.
A good business model answers key questions like:
Pricing and costs are the key factors that affect profitability.
Beyond the financials, some business models consider the broader social or cultural impact a company will have. Think of it as the exchange of value beyond just money–it's about the difference you'll make in your community or industry.
Here are some basic types of business models:
A business plan is your detailed guide, outlining everything from launching products and setting milestones to even planning your exit. It clearly defines what your company does, its long-term vision, and the strategies to achieve success.
In short, a business plan is your roadmap to growth.
Business plans typically come in two main styles: traditional and lean startup. The U.S. Small Business Administration notes that traditional business plans are the more commonly used format.
The components of your business model are the foundation of your business. They define your business operations and strategy for company success.
Here are some of the key ones you'll want to include when creating your business model:
While a clear business model explains how your business works, a business plan is like your company's resume.
It’s a detailed document often shared with investors, lenders, and other stakeholders to give them a clear view of the company's potential for success.
Because of this, business plans tend to include more detailed sections, such as:
Both business model and business plan are important for your business. However, they play unique roles at various stages of your business journey.
Let's break down those key differences:
Feature | Business Model | Business Plan |
---|---|---|
Defines the core logic of how a business operates and generates profit. | Provides a roadmap for executing the business model and achieving specific objectives. | |
Primarily internal, used to guide strategic decision-making within the company. | Often shared externally with investors, lenders, and other stakeholders. | |
Relatively flexible and adaptable, can evolve as the business grows and the market changes. | More rigid and structured, typically covers a specific timeframe (e.g., 3-5 years). | |
Primarily internal stakeholders (founders, management team). | Internal and external stakeholders (investors, lenders, partners, etc.). | |
Typically created in the early stages of a business, often before a formal business plan. | Developed once the business model has been established and validated. |
A business model is best for early-stage startups or entrepreneurs who want to check or improve their ideas. It's a flexible organizational structure for outlining how your company will create and capture value for customers.
You can use a business model when you're:
A business plan is commonly used once a business idea has been approved or for businesses that are looking to grow or secure funding. It includes more detailed steps and formal strategies.
When to use a business plan:
For the best results, we recommend using both the business model and business plan together. Start with the business model to sketch out the essentials of your business and quickly test your ideas.
Once those ideas are approved, create a business plan to prep your execution strategy. This ensures that your detailed plan is rooted in a solid, tested foundation.
There's no single right way to choose between a business plan and a business model–it all depends on your specific goals.
Remember, planning is a continuous process. You can't just make a plan once and expect it to work forever!
To keep your business model and plan up-to-date, try a tool like Bizplanr. It uses AI to help you quickly create professional business plans, including essential financial projections, and makes it easier to move from idea to execution.
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Do I need both a business model and a business plan?
Yes, having both is ideal. The business model will lay out your revenue streams and how your business delivers value. On the other hand, a business plan will have strategies and steps to grow and manage the business. Together, they give a complete picture of how to operate and scale effectively.
Can a business plan include a business model?
Yes, a business model is usually part of the business plan. It forms the basis for understanding how you’ll generate income. The rest of the plan sheds more light on operational details like marketing and finances.
What is a better starting point, a business model or a business plan?
It’s generally advisable to start with a business model as it will give you a clear idea of how your business will create and capture value. Once that concept is clear, you can then create a detailed business plan to fill out the details like market research and strategies for execution.
How does a business model impact financial projections in a business plan?
It impacts because the business model defines revenue streams, cost structures, and pricing strategy. These details shape how you project your profits, losses, and cash flow in the business plan.
Is a business model canvas the same as a business plan?
No, they’re different tools. A business model canvas is a one-page snapshot that has key components like value propositions and customer segments. A good business plan is much more detailed. As it covers everything from market strategies to financial forecasts. The canvas helps with clarity, while the plan helps with execution.
As the founder and CEO of Upmetrics, Vinay Kevadiya has over 12 years of experience in business planning. He provides valuable insights to help entrepreneurs build and manage successful business plans.
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It might be stating the obvious, but planning and preparation are keys to success in business.
After all, entrepreneurs put in hard work to develop their product, understand the market they plan to serve, assess their competitive landscape and funding needs, and much more.
Successful business owners also take time to document their strategies for guiding the growth of their companies. They use these strategies to take advantage of new opportunities and pivot away from threats.
Two common frameworks for documenting strategies – the business model canvas and the business plan – are also among the easiest to get confused.
Though they can complement each other, a business model canvas and a business plan are different in ways worth understanding for any entrepreneur who’s refining their business concept and strategy.
Let’s start by digging deeper into what a business model canvas is.
You may have heard the term “business model” before. Every company has one.
Your business model is just a description of how your business will generate revenue. In other words, it’s a snapshot of the ways your business will be profitable.
Writing a business plan is one way of explaining a company’s business model. The business model canvas takes a different approach.
A business model canvas is a one-page template that explains your business model and provides an overview of your:
While the business model is a statement of fact, the business model canvas is a strategic process—a method for either documenting or determining your business model.
It’s meant to be quickly and easily updated as a business better understands what it needs to be successful over time. This makes it especially useful for startups and newer businesses that are still trying to determine their business model.
You can think of a business model canvas as a condensed, summarized, and simplified version of a business plan. It’s a great way to quickly document an idea and get started on the planning process.
The business plan is a way to expand on the ideas from the canvas and flesh out more details on strategy and implementation.
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The simplest way to think about your business model canvas is to map it out visually. A business model canvas covers nine key areas:
[Want an even simpler alternative? Try downloading our free one-page plan template and start building your plan in less than 30 minutes.]
To get a better sense of how a business model canvas documents business strategy, consider a company like Netflix. The streaming company’s business model is based on generating subscription revenue through its content library and exclusive content.
If Netflix executives were to create a business model canvas, it would map out how the company leverages key resources, partnerships, and activities to achieve its value proposition and drive profitability. The business model is the destination.
The great thing about a business model canvas is that you can quickly document business ideas and see how a business might work at a high level. As you do more research, you’ll quickly refine your canvas until you have a business idea you think will work.
From there, you expand into a full business plan.
If a business model canvas captures what a company looks like when it’s operating successfully, then a business plan is a more detailed version along with a company’s blueprint for getting there.
Think of your business plan as a process of laying out your goals and your strategies for achieving them.
The business plan is more detailed, and changes over time. It examines each aspect of your business, from operations to marketing and financials.
The plan often includes forward-looking forecasts of a company’s projected financial performance. These are always educated guesses. But these forecasts can also be used as a management tool for any growing business.
Comparing actual results to the forecast can be a valuable reality check, telling a business if they’re on track to meet their goals or if they need to adjust their plan.
Using an investor-approved business plan template is also a must for companies hoping to receive a bank loan , SBA loan , or other form of outside investment . Anyone putting up funds to help you grow will want to see you’ve done your homework.
So a business plan is how you not only prepare yourself, but also show your audience that you’re prepared.
While there are several different types of business plans meant for different uses, well-written plans will cover these common areas:
Avoid the trap of using the two terms interchangeably. As we’ve shown, the two have different focuses and purposes.
The business model canvas (or our one-page plan template ) is a great starting point for mapping out your initial strategy. Both are easy to iterate on as you test ideas and determine what’s feasible.
Once you have a clearer sense of your idea, you can expand the canvas or one-page plan into a business plan that digs into details like your operations plan, marketing strategy, and financial forecast.
When you understand how – and when – to use each, you can speed up the entire planning process. That’s because the business model canvas lays out the foundation of your venture’s feasibility and potential, while the business plan provides a roadmap for getting there.
The work of business planning is about connecting the dots between the potential and the process.
Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.
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A business model is your core framework for operating profitably and providing value to customers; a business plan outlines how you’ll execute your goals.
“A goal without a plan is just a wish,” wrote famed French author and aviator Antoine de Saint-Exupéry. These words ring especially true in modern business planning. As an entrepreneur, planning is a skill that can help ensure your success.
Business models and business plans are both integral aspects of starting a business. But what are the similarities and differences between the two, and when is the right time to think about each for your company? Here’s a breakdown.
A business model is a company’s core framework for operating profitably and providing value to customers. They usually include the customer value proposition and pricing strategy. A business plan outlines your business goals and your strategies for achieving them.
The two documents have a few critical differences, namely their structure and application. But the topics they deal with—such as a company’s finances, goals, and operational framework—are largely the same.
There are dozens of different templates that you, as a business owner, can draw from when building out your operation. Here are four examples of basic business models:
One of the most common retail business models, brick-and-mortar , includes a traditional physical storefront (or a pop-up shop ) selling either business to business (B2B), in the form of wholesale goods, or business-to-consumer (B2C). Although overhead such as rent is a consideration in this model, physical locations offer the competitive advantage of tapping in-person customers and building brand awareness through exposure.
Direct to consumer (D2C or DTC) is a retail model that allows your business to sell straight to customers, rather than going through a third-party retailer such as Amazon. There are numerous benefits to D2C, including higher profit margins because you don’t have an intermediary taking a cut. However, the main disadvantage of D2C is that you have to develop your own customer base without the help of an established platform.
Projections indicate that the subscription ecommerce market has boomed in recent years and is set to hit nearly $900 billion in 2026. The subscription business model includes charging customers a recurring fee for a good or service—anything from home-delivery meal kits to media streaming. Subscription services are dependent on customer relationships and customer loyalty , but they can offer businesses a more predictable revenue stream.
Under a so-called freemium model, consumers can access part of the business’s goods or services free of charge, but must pay to receive unlimited access to everything the company has to offer. Examples include many media organizations, such as The New York Times, which offers several free articles before requiring a subscription, or audio streaming service Spotify, which has a free version with ads, as well as a paid version without.
A comprehensive business plan details many aspects of your company, including everything from marketing strategies to finances to the legal ownership structure. Here are a few key sections to include when writing your business plan.
Which comes first, a business model or business plan.
A business model typically comes before a business plan . Business plans often include the business model, and then explain in detail how you plan to achieve the goals set out in a model.
Market research, financial modeling, and even seeking out expert advice or consulting are all ways to review and validate your operation’s business model before developing a business plan.
A business should be prepared to update its business plan dynamically, based on changes in the market, shifts within the operation, or new investment or opportunities. Many businesses update their plans annually
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Why do some business owners have to face a failure while the other gets a great business success? You might sometimes wonder and ask yourself. Let us help you understand this. Other than business plan there is a term called “business model” is often used interchangeably. However, they found to have distinct concepts in the world of entrepreneurship and business development. Before embarking on a new venture, understanding the Business model vs business plan is essential for any entrepreneur. Both terms serve different purposes and have distinct scopes that help business owner become successful in their entrepreneurial journey.
So if you want your business to be successful, come up with a business plan and a business model. Although these two terms cannot coexist, likewise implementing these terms could not be possible for you until you get them deeply clear. A thoroughly drafted business plan is a document that outlines the goals, and financial projections of a company over a particular period. Comparatively, when talking about a business model, is a document that dives deeper into how a business drives, delivers and captures value.
Let’s now understand these two terms separately and then closely look into the key difference that makes them equally unique and valuable for every successful business.
It is a written form document that describes how a company establishes, delivers, and captures value. It explains the core aspects of how a business operates, including its revenue streams, target customer segments, distribution channels, value proposition, and cost structure.
Imagine a business plan as a roadmap guiding you to navigate the operational and financial activities. It is a document that talks about your business objectives, strategies, and functions of a business in detail. It typically involves sections such as executive summary, company description, market analysis, organization and management structure, marketing strategy, product or service description, funding requirements, and financial projections.
Comparing a business plan and a business model lets you identify how these two categories in businesses work and may help foresee the differences among them to avoid making mistakes in your future business.
Business models describe how a business manages to deliver products and services to customers. They focus on the fundamental logic of how a company intends to follow sales funnels, and marketing strategies and sustain its operations over time. Whereas, business plans are more comprehensive explanations of every facet of a business that focuses on the specific steps and tactics a company will take to achieve its goals. It provides a direction about how the business will be launched, operated, and grown.
Business Model contains the overarching strategy and framework that guides the entire business. It’s more conceptual and has a high-level view of a company or business tendency. A business plan, on the other hand, turns a thorough synopsis of the enterprise into several tactical measures, such as target markets, financial predictions, operational plans, and short- and long-term goals.
Business plans primary goal is to persuade external parties such as potential investors and other stakeholders. For example, demonstrating a business plan to raise funds, apply for grants, or update investors on business progress.
Alternatively, business models are primarily designed for executives and internal members within a company. These schemes aim to help team members coordinate activities like producing a product, delivering, and capturing value in economic, social, cultural, or other contexts.
Business model is found to be more flexible and adaptable to changes in the market or business environment. It’s meant to be dynamic and evolve due to being at the center of the business plan.
On the other hand, a Business Plan tends to be more rigid and static, as it’s often used as a formal document for obtaining funding or as a roadmap for initial business operations.
The business owners can use the Business model to understand the fundamental mechanics of how a business will be operated and generate value. It helps the owner in decision-making and identifying opportunities for innovation or optimization.
In comparison business plan is typically utilized for external purposes such as securing funding from investors or loans from financial institutions, or for internal planning and communication purposes.
In general, the business model and business plan are completely different notions. The business model serves as the mechanism, defining the core components that generate the company’s revenue streams and sustainable operations. In contrast business plan is a written document presenting the future of a business. It’s a document that not only gets a business concept on paper but also outlines the company strategy and people’s roles that will be involved to lead the business to success for the years to come.
Although both the business model and the business plan are essential parts of a successful business. Therefore, all businesses must have a well-thought-out business plan along with an exceptional business model supporting them to consistently do hard work to win the competitive market landscape.
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In the entrepreneurial journey, understanding the difference between a Business Model and a Business Plan is crucial. These terms are often used interchangeably, but they serve distinct purposes and are integral at different stages of a business’s lifecycle. This guide aims to clarify these differences and provide insights into how each can be effectively utilized for business success.
A business model is a conceptual framework that explains how a company creates, delivers, and captures value. It’s the foundational blueprint outlining how the business will generate revenue and sustain itself in the market. On the other hand, a business plan is a comprehensive document that provides a detailed roadmap for achieving the business's goals. It includes specific strategies, financial projections, and operational plans. Understanding the key differences between these tools can significantly impact your business’s strategic planning and execution.
Key takeaway: Grasping the distinct roles of a business model and a business plan helps entrepreneurs align their strategic vision with practical execution.
A business model encapsulates the core business idea and how it will operate to generate revenue. It answers fundamental questions like what product or service the business will offer, who the target customers are, and how the business intends to reach and serve these customers. Essentially, it’s the strategy that outlines how the business will sustain itself and thrive in the competitive market.
Key takeaway: A well-defined business model is essential for conceptualizing the business's value proposition and ensuring its long-term sustainability.
The business model canvas is a popular tool for outlining the key components of a business model . These components include the value proposition, customer segments, channels, customer relationships, revenue streams, key resources, key activities, key partnerships, and cost structure. Each component plays a vital role in defining how the business will create and deliver value to its customers while maintaining profitability.
Key takeaway: Understanding and effectively integrating the components of a business model can help streamline business operations and enhance value delivery.
There are various examples of business models that businesses can adopt, depending on their goals and market environment. For instance, the freemium model offers basic services for free while charging for premium features. Another example is the subscription model, where customers pay a recurring fee to access products or services. These models highlight different approaches businesses can take to generate revenue and achieve their business goals .
Key takeaway: Exploring different business models can provide inspiration and direction for structuring your own business's revenue-generating strategies.
Understanding the differences between a Business Plan and a Business Model is vital for any entrepreneur. While a business model provides a high-level overview of how a business intends to create and capture value, a business plan offers a detailed roadmap for achieving the business's objectives. Grasping these distinctions can significantly enhance strategic planning and operational success.
The business plan is a comprehensive document that outlines the operational plan, financial projections, marketing strategies, and more. Its primary purpose is to detail how the business will achieve its goals and manage its operations. In contrast, the business model describes the underlying logic of how the business will generate revenue and sustain itself. It focuses on the value proposition, customer segments, revenue streams, and key resources.
Key takeaway: A business plan provides a detailed roadmap for business operations, while a business model focuses on the conceptual framework for generating revenue.
The business model canvas is a popular tool that succinctly outlines the key components of a business model, such as value proposition, customer relationships, and revenue streams. It’s a visual representation that helps entrepreneurs quickly grasp the business’s structure and strategy. On the other hand, a business plan is a more detailed document that includes extensive analysis, such as market research, financial projections, and operational plans. While the business model canvas offers a quick overview, the business plan delves into the specifics necessary for execution.
Key takeaway: The business model canvas provides a streamlined view of the business structure, while the business plan offers a detailed guide for implementation.
Strategically, the business model provides the foundation for a successful business by defining how the company will create and deliver value. It’s crucial for understanding the market in which the business operates and identifying the best ways to serve customers. Conversely, the business plan outlines the operational and strategic steps necessary to bring the business model to life. It includes detailed strategies for marketing, operations, and finance, ensuring that every aspect of the business is planned and accounted for.
Key takeaway: While the business model sets the strategic foundation, the business plan details the operational steps to achieve business objectives.
In the entrepreneurial world, both a business model and a business plan are crucial for achieving success. While a business model defines the strategy for generating revenue, a business plan offers a detailed roadmap for executing that strategy. Understanding their importance helps entrepreneurs effectively navigate the complexities of starting and growing a business.
A business model is paramount in articulating the core business idea . It lays out how the business will create, deliver, and capture value. This includes identifying the target market, defining the value proposition, and outlining the revenue streams. By focusing on these elements, the business model provides a clear framework for how the business intends to make a profit. It serves as a foundational guide that aligns the business’s strategic vision with its operational tactics.
Key takeaway: A clear business model is essential for conceptualizing the business idea and ensuring a strategic approach to generating revenue.
A business plan is a comprehensive document that delves into the specifics of how a business will achieve its goals, particularly through its marketing strategies. It outlines the steps necessary to reach the target audience, promote products or services, and drive sales. This includes detailed plans for advertising, social media, and other marketing channels. By presenting a business plan , entrepreneurs can attract investors and stakeholders by showcasing a well-thought-out strategy for market penetration and growth.
Key takeaway: A well-crafted business plan is crucial for detailing the marketing strategies that will drive business growth and attract investment.
When it comes to setting business goals , both the business model and business plan play integral roles. The business model typically focuses on the high-level objectives related to value creation and revenue generation. It defines the broad goals that guide the business’s strategic direction. Conversely, the business plan breaks down these broad objectives into actionable steps, detailing how each goal will be achieved. This includes setting milestones, allocating resources, and establishing timelines.
Key takeaway: The business model lays out the strategic goals, while the business plan provides a detailed roadmap for achieving them.
What is the primary purpose of a business model? The primary purpose of a business model is to outline how a company creates, delivers, and captures value. It defines the strategy for generating revenue and sustaining the business in the market.
How does a business plan differ from a business model? A business plan is a comprehensive document detailing the operational, financial, and marketing strategies to achieve business goals, while a business model focuses on the high-level strategy for value creation and revenue generation.
Can a business succeed with just a business model and no business plan? While a business model is crucial for defining the strategic direction, a business plan is essential for outlining the detailed steps to execute that strategy. Both are necessary for a business to succeed.
What are the key components of a business model? Key components of a business model include the value proposition, customer segments, revenue streams, channels, customer relationships, key resources, key activities, key partnerships, and cost structure.
Why is a business plan important for attracting investors? A business plan provides detailed information about the business’s strategies, financial projections, and operational plans, which helps investors understand the feasibility and potential profitability of the business.
How often should a business plan be updated? A business plan should be updated regularly, especially when there are significant changes in the business environment, market conditions, or business goals. Typically, an annual review is recommended.
Did you know that the concept of the "business model" became popular during the dot-com boom of the late 1990s and early 2000s? Companies like Amazon and eBay pioneered innovative business models that significantly disrupted traditional industries and paved the way for the modern digital economy!
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Sculpting success in the realm of commerce hinges on two critical blueprints: the business model and the business plan . As if peering through a dual-lens, one unveils the anatomy of value creation, while the other charts a course for achieving it. This isn’t about mere documents; it’s the lifeblood of strategic foresight and operational vision.
Here’s the crux: although they waltz together in strategic symbiosis, these entities each spin a unique narrative of your venture’s voyage. One sketches the architecture of your enterprise, laying bare the revenue streams and value proposition.
The other, a meticulous roadmap, presents meticulous market analysis, financial projections, and the operational plan set to navigate the turbulent tides of commerce.
By journey’s end, you’ll not just differentiate between the two but harness their combined power.
Delve into concepts like competitive advantage, customer segmentation, and scalability. Decode the mesmerizing narrative behind a robust strategic planning foundation. Sales forecasting, funding requirements, investor pitch decks.
A framework for creating economic value and capturing a portion of that value. | A formal document detailing a business’s objectives, strategies, target market, and financial forecasts. | |
To define how a company creates, delivers, and captures value in economic, social, cultural, or other contexts. | To guide management in running the business and to persuade external parties, like investors, to fund the business. | |
– Value proposition – Customer segments – Channels – Revenue streams – Cost structure | – Executive summary – Market analysis – Organization and management plan – Sales strategies – Financial projections | |
Typically more flexible, subject to adjustment as the company grows or market conditions change. | Tends to be a more rigid document, often used for a specific purpose, like seeking investment or a bank loan. | |
Primarily internal; used by founders and management to understand and operate the business. | Both internal management and external stakeholders, including investors, banks, and potential partners. |
The business model is the foundation of a company, while the business plan is the structure. So, a business model is the main idea of the business together with the description of how it is working.
The business plan goes into detail to show how this idea could work. A business model can also be considered the mechanism that a company has to generate profits. At the same time, the business plan also does its part in being the way a company can present its strategy. It is also used to show the financial performance that is expected for the near future.
Comparing how business models and business plans work to help you in different ways is important. A business model can help you be sure that the company is making money. It helps to identify services that customers value. It also shows the reciprocation of funds for the activity that a business renders to its customers.
Any business can have different ways of generating income, but the goals of the business model should aim to simplify the money process. It does this by focusing on the large income generators.
So, we now understood that a basic business model is a gateway to show how an organization is functioning. A business plan is a document that shows the strategy of an organization together with the expected performance details.
We can find the details of a company when we check its business plan. What it does is offer more info about the business model. It does this by explaining the teams needed to meet the demand of the business model. It explains the equipment needed, as well as resources that need to be obtained to start creating. Explaining the marketing goals, and how the business is going to attract and retain more customers over the competition , will be part of the model.
Another interesting thing when it comes to comparing business models and business plans is that they cannot function without each other. Just remember this, the business model is going to be the center of the business plan.
When comparing using a business model versus a business plan, we also need to understand each one better to draw some final conclusions. One of the first goals of a company could be to define its business model.
The business plan is going to be the detailed part that includes all the information and steps like Mayple’s marketing plan template, organization, products or services, sales plan, business proposal for investors , and so on. Some useful questions that you can use when developing your business plan are:
This business model focuses on products that need to be replaced often. From razors to paper, and so on. In general, we are talking about products that are sold at a very high markup.
This affiliate business model relates to the advertising model. It has some differences and is used mainly online. It uses links that are embedded in content forms that act as advertising visuals. There’s a reason that many experienced SEO consultants have a side project that uses the affiliate model.
Another old and popular business model is the franchise model. You can sell the right to use your business model in exchange for some percentage of the revenues. Some of the popular entities for the franchise are C Corporation, S Corporation, Limited Liability Company (LLC) , and Sole Proprietorship.
Limited Liability Company (LLC) arrangements offer unique advantages and flexibility for businesses. A significant part of structuring your LLC effectively involves drafting a robust operating agreement. You can seamlessly acquire a free operating agreement to ensure compliance and governance across various states.
One thing in the case of LLCs is that you must pay a franchise tax and the amount of tax depends on the state where it is formed. If you have an LLC in Texas , you need to pay 0.75 percent of the business’s total gross revenue whereas an LLC in California must pay an annual tax of $800.
What’s the difference between a business model and a business plan.
The business model is the engine under your enterprise’s hood. It details how value is created, delivered, and captured . Think customer segments and value propositions.
The business plan, by contrast, is the journey’s map— including market analysis, strategic planning, and financial projections to steer the ship toward success.
It’s not about importance; it’s about order and function . Your business model lays the foundation—identifying revenue streams and cost structures. The business plan takes this blueprint and scales it—complete with sales forecasting and operations plan—to marshall resources and navigate the business landscape.
Consider the business model your playbook. Review when the game changes: significant shifts in consumer preferences, market conditions, or competition. Business models thrive on agility— it’s essential for adaptation and innovation .
A written plan isn’t always mandatory, but it’s incredibly prudent for clarity and fundraising . It serves as a communication tool for stakeholders and a guide to validate your business model’s viability, making complex concepts like break-even analysis accessible.
Typically, a plan will include an executive summary, marketing plan, financial plan, SWOT analysis , and much more. It’s your enterprise’s DNA—laying out strategic objectives, funding requirements, and the go-to-market strategy .
Sure, a model can generate revenue, but a plan scales it. Without a business growth plan , it’s like sailing without a compass; you might float but not necessarily in the right direction.
Market research is crucial—it informs your value proposition in your business model and fuels the competitive analysis in your business plan . It’s the wind to your sails, directing towards what your target market desires and how to outmaneuver competitors.
Financial projections should be the North Star of your plan— detailed enough to guide but flexible to adapt. They demonstrate potential ROI, including sales forecasting and cash flow management, which are pivotal for investors.
Think of it as an appetizer, not the main course. The Business Model Canvas gives a snapshot—great for quick pitches and ideation . Still, the comprehensive business plan is where you lay out the full banquet for stakeholders to feast upon.
Regular checkpoints enable reevaluation. Market fluctuations demand responsive risk management and strategic pivots . Listen to the heartbeat of your business—customer feedback, sales trends, all while keeping a steady eye on the competitive landscape . Adjust as necessary to maintain alignment with your business objectives and ensure long-term viability.
The business model of a corporation can be carried out according to a plan. It details the precise actions the business will take to accomplish its objectives, including marketing and sales strategies , monetary forecasts, and operational plans.
A business plan assists a company in staying on track and making wise decisions by offering a comprehensive blueprint.
Absolutely, a startup can succeed without having a thorough business plan. But a thorough business plan can serve as a guide for carrying out that model and assist the business to avoid frequent mistakes.
However, enlisting the expertise of business plan consulting professionals can provide invaluable insights and strategic analysis, enhancing the effectiveness of the model and helping the business navigate potential pitfalls with confidence. A well-crafted business plan can be a powerful tool in steering the startup toward long-term success and sustainable growth.
A thorough plan may be necessary to obtain financing from lenders or investors.
Navigating the labyrinth where business model vs business plan intersects, one thing stands clear: intricacy meets necessity. The blueprint and roadmap duo – each a beacon on this entrepreneurial odyssey.
Imagine the business model : a living organism, continuously adapting, urging market analysis to stay abreast, always fine-tuning the value proposition . The business plan : a masterful strategic planning tome, evolving yet steady, with financial projections serving as lighthouses amidst entrepreneurial seas.
In sum, the two are not adversarial but complementary – dancers in a tango of commerce where one leads and the other follows. Whether sculpting the revenue streams of tomorrow or drafting an operational plan to conquer today’s market, both are invaluable. They are quintessential narratives in the grand story of strategic foresight and operational vision . Hold them close; they will guide through tumultuous and tranquil waters alike.
If you enjoyed reading this article on business model vs business plan, you should check out this one about Steve Jobs’s leadership style .
We also wrote about a few related subjects like accelerator vs incubator , startup funding stages , how to value a startup, IPO process, IPO lockup period , risk assessment matrix , business process modeling , and business model innovation .
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It’s very common to make confusion on what’s the difference between Business Model and Business Plan. But, in fact, they are similar only in name. Their functions and purposes are quite different and, actually, complementary. While the business model refers to a one-page representation of how a company creates, delivers, and captures value, the business plan is an in-depth description on a long textual document form about how your company is structured and plan to achieve strategic and financial objectives. This business plan is a document that contains every data of the business – usually including its model. Let’s separate them both, to make it simple.
Your company’s business model is all about the way a company creates, delivers, and captures value. For example, a restaurant franchise is a business model. A Software-as-a-Service is another one. A razor-and-blade , a subscription company , a Freemium internet tool, a e-commerce marketplace . Each of that is a business model, with its own peculiarities. What it’s commonly mistaken with the business plan is not the business model itself. It’s, indeed, the business modeling tool . And this tool provides a base to design a business model. It’s, in fact, by modeling your business through this kind of tool that you’ll be able to identify your they main construction blocks of a business, who they relate to each other and combine to form a unique strategy. It’s with the business model tool that you may identify the key resources for your business to succeed, which key activities it must perform, who it has to interact with, and by which means and channels . Usually, this business model tool is a framework, made up of a single page, that allows you to recognize your own business under several perspectives. According to the type of business, you may take a look at different modeling options, such as Business Model Canvas , Value Propositions Canvas, Lean Canvas , and others. Each of them fits a different purpose. For example, if your business is brand new, the Business Model Canvas is likely to be the better option. On the other hand, for early validation of your startup, the Lean Canvas must be the most appropriate. And, to pivot your product, it’s a good idea to check the Value Proposition Canvas. In short, if you aim to understand your business better, from inside, or make predictions for growing your venture, then your need to work on your business model, not make a business plan. So, now, let’s check what the business plan is for.
A business plan is a written document that contains detailed information of the business, product/service, market, and the entrepreneur vision for the company’s future. It is basically the most accurate portrait of the field, products and services, customers, competitors, suppliers, all the operational and financial goals of the company, its marketing and sales strategy. Its purpose is to display the strengths and weaknesses of the business and to project the gains and losses of the organizations, in order to identify the viability and sustainability of the idea. The business plan is often a long document, made up of several pages. In general, it contains:
The goal of the business plan is to determine whether your idea is sustainable or not. It also shows the weaknesses to be repaired, as well as the strengths to be potentialized. It is a kind of script, to reduce the chance of failure. The business plan is a core document if you are looking for partners, in order to demonstrate profitability. Its focus is, indeed, to provide executives, investors, and any other stakeholders a full overview of the business. So, it is especially important when you are seeking loans, sources of financing, and investments. It is the best way to demonstrate that your business is trustworthy and solid enough for credit.
the difference between Business Model and Business Plan lies in key points like how they should be developed, where should the focus be, how to organize ideas and what are their main objectives.
Business Models and Business Plans are important documents to help you plan and organize your business strategy. It can be either a document for early-stage companies that need to validate hypothesis or big companies that need to plan ahead, capture investment or even make an IPO .
Whatever the case is, it is very important to understand that these are different terms, with different purposes and have different tools to develop them. To summarize here, the key terms that are commonly confused between each other:
Business model – provides a rationale for how a business creates, delivers and captures value, and examines how the business operates, its underlying foundations, and the exchange activities and financial flows upon which it can be successful. Business Plan – a formal document that typically describes the business and industry, market strategies, sales potential, and competitive analysis as well as the company’s long-term goals and objectives. Revenue Model – Outlines the ways in which your company will make money (e.g. revenue streams). Did you better understand the difference between Business Model and Business Plan? Comment below!
I love understanding strategy and innovation using the business model canvas tool so much that I decided to share my analysis by creating a website focused on this topic.
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Very interesting. Concise and comprehensive at the same time.
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You might be wondering what the difference is between a business plan and a business model. The truth is, they are different things with different purposes.
The main difference between a business plan and business model is that a business plan outlines your goals and strategy to grow your company, while a business model shows you how to generate revenues. Read on to learn more about this subject, including what types of business models there are and how to figure out which type best suits your situation.
During the business planning process, especially if you are trying to attract investors, there are 10 essential elements of a business plan which you must include as follows:
For each of these sections, you should provide an in-depth description of your research, analysis, and expected financial performance. You can learn more about the components of a business plan and review our repository of 100+ business plan examples to help you get started on writing your own business plan.
A business model should include the details of every way in which your business makes money. It’s important not to leave anything out, even if it seems insignificant. Every dollar counts!
Business models outline how your company generates revenues. On the other hand, business plans focus on the specifics of how the business will achieve sales and growth over a given period of time, typically five years. Business plans discuss your business model among other things and are critical if you want to gain investments to grow your business.
The business model strategy is very different from a business plan. While they overlap a bit, the critical difference is that a business plan outlines the goals and business strategy while the basic business model shows you how to make money.
Your needs will change over time so it’s important to be able to switch between these two documents when needed. For example, if your goal is long-term growth then you may want more information about what type of strategy would work best for this situation or which resources might help get there faster. On the other hand, if you’re looking for some immediate income then paying attention to the various types of models available could give you an idea of where to start with generating enough sales quickly without too much cost upfront.
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Do you want to know the difference between a and a business plan? If YES, here is a detailed comparison and analysis and how each is used. A business plan and a business model look amazingly similar like two peas in a pod, but they are equally different, just like two peas in a pod. They are both part of each other but play different roles thus making the line between them seem dim.
A business plan and a business model both contain , customer retention strategy, revenue generation strategies, and overall, they are used to outline the vision of the company. So what then differentiates a business plan from a business model and how can you make a clear distinction of both?
What is a business model.
A business model is a company’s outlined plan for making profit. It identifies the products or services the business will sell, the target market it has identified , and the expenses it anticipates. A business model also shows the destination of the business, how it is meant to work, and what it is meant to become.
A business model ascertains how your business makes money. It identifies the services that your customers value and shows how funds are generated for the services your business renders to your customers. A small business can have more than one method of generating income, and it is the duty of the business model to simplify the money process by focusing on the largest income generator.
For instance, a gas station sells gas to customers, but it also provides other services such as a car wash, lube station, etc. The business model only recognizes the majority income generator, which is the sale of gas. Therefore, the business model will reflect the sale of gas to the customer, which generates income at the time of the customer’s purchase.
The business model summarily simplifies and makes revenue-generation easy to understand by focusing on the key generator, highlights exactly how you intend to acquire, retain, and service your customers. The business model can come in different distinct models like:
The business model is basically at the center of the business plan, as it describes how the company is positioned within its industry’s value chain, and how it organises its relations with its suppliers, clients, and partners in order to generate profits. The business plan translates this positioning in a series of strategic actions and quantifies their financial impact.
A business plan is a formal written document that contains business goals, the methods on how these goals can be attained, and the time frame within which these goals need to be achieved. A business plan acts like a GPS. It shows you the roadmap of how you intend to get to your destination as a business person.
It highlights the market opportunities you want to take advantage of, the existing competition, the strength and experience of your team, a detailed description of the products and services you intend to offer, and a roadmap that shows exactly how you intend to execute your plans in the market.
A business plan is a document presenting the company’s strategy and expected financial performance for the years to come.
The business plan provides the details of your business. It takes the focus of the business model and builds upon it. It explains the equipment and staff needed to meet the details of the business model. It also explains the marketing strategy of your small business, or how your business will attract and retain customers, and deal with the competition.
Furthermore, the business plan explains the financial stability of your small business at a particular point in time, as well as in the forecasted future. Overall, the business plan supports the business model and explains the steps needed to achieve the goals of that model
The business plan pays close attention to your goals, projects the cash flow, profits or losses, and ultimately shows how long and what would be required to enable the business break-even.
A sample structure of a business plan is seen below:
Some of the major differences between a business plan and a business model are outlined thus;
Every successful business starts with a concept, a plan and a product or service that customers are willing to pay money to obtain. Business strategies are never conducted in a vacuum, however, and for a business to be successful, there must be a business plan and a business model generated. These two terms are unfortunately used interchangeably, but in reality, they are two very different documents that cannot exist without one another. It is essential that a business owner understand the use of a business model vs a business plan.
At its simplest, a business plan is a written description of the future of a business. It's a document that not only gets a business concept on paper but also outlines the people and steps that will be involved to lead the business to success. The business plan is where you discuss the industry and the need for a particular product or service, the business structure and how you will achieve success.
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How to install a dynex web camera capture device, what is a strategic business plan, business plan vs. business model, the importance of a business plan, the chief elements of business models.
The business plan also talks about the market in which the business will operate, lays out the competition and what the plans are to position the business as a leader. Lastly, the business plan lays out the ever-important financial plan, discussing things such as income and cash flow, loans and obligations and when and how investors can expect to see a return.
A business model, on the other hand, is a business's rationale and plan for making a profit. If the business plan is a road map that describes how much profit the business intends to make in a given period of time, the business model is the skeleton that explains how that money will be made. A model covers everything from how a company is valued within an industry to how it will interact with suppliers, clients and partners to generate profits.
There are several different kinds of business models. A software company, for instance, might be based on a subscription model, which generates revenue from customers that renew subscriptions annually for a license to use the software. An example of an accessories model would be a razor company or computer printer company that guarantees future income through the sale of razor blades and printer cartridges.
While it's true that a business plan and business model are two separate documents, the reality is that the business plan cannot live without the business model. While a business plan can describe the structure of a business's financial goals, the business model explains how the money will flow - from customer generation to marketing to sales, and finally, to customer retention. The business model must have room to grow and adapt. Consequently, if the business model changes, so must the business plan.
One of the most prominent examples of a business model changing is currently occurring in the computer software industry. About 10 years ago, the way to purchase software programs was to go to the store and buy a CD-ROM to download the application and license to your computer. Today, the advent of cloud-based subscription services makes it possible for customers to download software and renew licenses remotely over the internet.
This transition to the Software as a Service (SaaS) subscription model has caused many businesses to change their plans. Companies affected by this shift include computer companies that no longer need to build machines with CD-ROM drives in them and software companies that no longer need to make or sell software in physical form.
As a result, software companies have had to change their business plans, including costs and infrastructure costs for cloud storage and bandwidth, as well as maintain a cloud operations team 24 hours a day, seven days a week. These ongoing efforts can increase costs and reduce margins, but they're a necessary adaptation to changing customer needs and market technology with the new business model.
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The Difference Between a Business Model and a Business Plan
By Samantha Garner, GoForth Institute
When you’re getting ready to start your small business, you might have heard that you should start with a business plan, or a business model. That’s great! But what are they, exactly, and how are they different from one another?
Business model
The business model is a blueprint for the business, outlining how you’re going to run your business, and how you’re going to make money.
There are five components in a business model:
Business plan
Where a business model is a blueprint, a business plan is a roadmap. A business plan is a formal written document that includes a description of the business you want to run, your business goals, and the plan for reaching those goals.
A business plan is a detailed document that contains sections such as: Marketing Plan, Startup Expenses and Capitalization, Management and Organization, Products and Services, and Operational Plan.
A business plan is usually developed around the answers to three common questions:
And is usually written for one or more of these five reasons:
Do you need both a business model and a business plan?
A business model and a business plan work in tandem. You need a good foundation and planning before you invest your time and money. To get started, check out our free One-Page Business Plan .
Samantha Garner is GoForth Institute's Director, Communications. Contact Samantha by email: [email protected]
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Business plan, business model, strategies, financial forecasts, and whatnot!
Starting a business means encountering new terms every day, but not exactly knowing when to use what!
Two such terms are business plan and business model. People often use them interchangeably, and it’s okay if you do too. Today we’ll change that so you know which to use when.
In this article, we’ll conduct a thorough business plan vs. business model comparison to understand their meanings and know their purpose.
So, let’s kick-start this journey now.
A business model is a mechanism that directs how you create, deliver, and attain value in the market; it’s the profit-generating plan of your company.
This involves identifying your value proposition, targeting specific customer segments, defining revenue streams, leveraging key resources, and forming strategic partnerships.
Simply put, it’s how you sell your product to make money.
The essential elements of a business model are:
A business plan is a comprehensive document that outlines your entire business operations. It covers everything from launching products and setting milestones to planning an exit strategy, detailing every step of your business journey. A business plan describes what a company does, its vision & goals, and its strategies.
Essentially, a business plan serves as a roadmap for how your business will operate, grow, and achieve success.
Here are the core components of a business plan:
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Now that you know the exact meaning of a business model and business plan, it’s time to understand the difference.
Your business model focuses on optimizing the internal and external company operations to earn maximum profits. It explains your relationship with dealers, distributors, service partners, customers, and target audience.
Conversely, your business plan focuses on how you set business goals, create strategies, make predictions, and manage labor to sustain and scale your business. It also outlines your relationship with your customers, competitors, industry, and the market.
Adopting the right business model(s) help you:.
Gain a competitive edge
Incorporating a unique business model amazes your audience and attracts them to be your first-time customers. It also provides you with a competitive edge over other businesses in your industry.
Ensure sustainability and scalability
A business model pushes an entrepreneur to have monthly update meetings and plan what the next month should exactly look like. Many businesses shut down due to poor financial management, which is why a business model is required.
From economic storms to unexpected difficulties, a business model ensures both sustainability and scalability.
Inspires trust in investors
Investors know the failure rate of small businesses, which is why incorporating a clear business model provides a sense of security. They will also know that you have a strategy and what your profitability expectations are for the upcoming years.
Test the viability of your business idea
A business plan defines the target customers and their willingness to pay for your product or service. This way, your business idea will be validated, helping you decide whether to move forward with it or not.
Acquire funding
If you want funds from banks, investors, or other parties, then you’ll require proper financial details like goals, plans, and projections. A good business plan will help you impress investors.
Plan for exit
A business plan includes strategies and a timeline to accomplish any task, which helps in planning your business’s exit too. While handing over your business or closing it directly, meeting the financial goals is also important—which are very specific in the business plan.
Other advantages of writing an ideal business plan include:
First, consider the scalability of your business, then measure the value you offer. List down your competitors, segment your customers, see the market potential, and then choose a business model.
Here are other points to consider:
Answer a few questions first, like where you think your business will be in 10–15 years, what’s your expected income, or what are your projections.
A business model outlines how a company creates, delivers, and captures value. Understanding different types of business models can help identify the best approach for their businesses, ensuring growth. Some of the types of business models are:
Each type of business plan serves a unique role, whether it’s for a startup looking to enter the market, an existing business planning for growth, or a company looking to improve its operational efficiency. Here is an overview of the most common types of business plans:
There’s no standard answer for business plan vs. business model; the choice entirely depends on your business’s specific needs and objectives.
Additionally, planning is an ongoing process. You can’t create a business plan or a business model and rely on that for years to come!
So, to keep your business model and business plan updated, explore a business plan app like Upmetrics . It has a business model canvas template, sample business plans, and an AI assistant to help you plan as many times as you need.
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Can i write a business plan without a business model.
No, a business plan is like a roadmap for your business—but it also needs direction. This direction comes from a business model. A business model explains how you’ll make money by defining its target market, value proposition, revenue streams, cost structure, and distribution channels. So, writing a business plan after making a business model is advisable.
Well, no! For funding an investor would want to know everything about your business like the management team, competitive landscape, industry analysis, financial projections, and more. So, having a business plan for funding is necessary.
Create a business model and a business plan when you’re starting a new business or launching a new product or service. However, you need to create or alter both documents if there are any shifts in the current business operations.
About the Author
Upmetrics Team
Upmetrics is the #1 business planning software that helps entrepreneurs and business owners create investment-ready business plans using AI. We regularly share business planning insights on our blog. Check out the Upmetrics blog for such interesting reads. Read more
Reach Your Goals with Accurate Planning
by Andrea Ovans
A look through HBR’s archives shows that business thinkers use the concept of a “business model” in many different ways, potentially skewing the definition. Many people believe Peter Drucker defined the term in a 1994 article as “assumptions about what a company gets paid for,” but that article never mentions the term business model. Instead, Drucker’s theory of the business was a set of assumptions about what a business will and won’t do, closer to Michael Porter’s definition of strategy. Businesses make assumptions about who their customers and competitors are, as well as about technology and their own strengths and weaknesses. Joan Magretta carries the idea of assumptions into her focus on business modeling, which encompasses the activities associated with both making and selling something. Alex Osterwalder also builds on Drucker’s concept of assumptions in his “business model canvas,” a way of organizing assumptions so that you can compare business models. Introducing a better business model into an existing market is the definition of a disruptive innovation, as written about by Clay Christensen. Rita McGrath offers that your business model is failing when innovations yield smaller and smaller improvements. You can innovate a new model by altering the mix of products and services, postponing decisions, changing the people who make the decisions, or changing incentives in the value chain. Finally, Mark Johnson provides a list of 19 types of business models and the organizations that use them.
In The New, New Thing , Michael Lewis refers to the phrase business model as “a term of art.” And like art itself, it’s one of those things many people feel they can recognize when they see it (especially a particularly clever or terrible one) but can’t quite define.
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Food should be treated like a preventive healthcare ingredient, processed with the same attention to detail that is given to pharmaceutical ingredients, says jalachari ella.
By Richa Mishra
A dermatologist turned entrepreneur, Jalachari Ella, Managing Director and Head of research and development of Ella Foods, wears her paternal name as a badge of honour.
Ella has worn many hats including that of as head of Corporate Strategy and Communications at Bharat Biotech International Ltd, playing a pivotal role in the distribution of Covaxin. In a candid conversation with businessline, she talks about challenges of carrying the family name and the difference in pharma and food sector.
“We (in pharma) are used to having a nice sound framework to work within and suddenly to work in an industry that may not have that framework is an added responsibility, we are now being given this onus, to set up the benchmarks we are used to,” she said.
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By: Author Tony Martins Ajaero
Home » Starting a Business » Choose a Business Model
Do you want to know the difference between a <a class="wpil_keyword_link" title="Business model" Business model and a business plan? If YES, here is a detailed comparison and analysis and how each is used. A business plan and a business model look amazingly similar like two peas in a pod, but they are equally different, just like two peas in a pod. They are both part of each other but play different roles thus making the line between them seem dim.
A business plan and a business model both contain <a class="wpil_keyword_link" title="marketing strategies" marketing strategies, customer retention strategy, revenue generation strategies, and overall, they are used to outline the vision of the company. So what then differentiates a business plan from a business model and how can you make a clear distinction of both?
What is a business model.
A business model is a company’s outlined plan for making profit. It identifies the products or services the business will sell, the target market it has identified, and the expenses it anticipates. A business model also shows the destination of the business, how it is meant to work, and what it is meant to become.
A business model ascertains how your business makes money. It identifies the services that your customers value and shows how funds are generated for the services your business renders to your customers. A small business can have more than one method of generating income, and it is the duty of the business model to simplify the money process by focusing on the largest income generator.
For instance, a gas station sells gas to customers, but it also provides other services such as a car wash, lube station, etc. The business model only recognizes the majority income generator, which is the sale of gas. Therefore, the business model will reflect the sale of gas to the customer, which generates income at the time of the customer’s purchase.
The business model summarily simplifies and makes revenue-generation easy to understand by focusing on the key generator, highlights exactly how you intend to acquire, retain, and service your customers. The business model can come in different distinct models like:
The business model is basically at the center of the business plan, as it describes how the company is positioned within its industry’s value chain, and how it organises its relations with its suppliers, clients, and partners in order to generate profits. The business plan translates this positioning in a series of strategic actions and quantifies their financial impact.
A business plan is a formal written document that contains business goals, the methods on how these goals can be attained, and the time frame within which these goals need to be achieved. A business plan acts like a GPS. It shows you the roadmap of how you intend to get to your destination as a business person.
It highlights the market opportunities you want to take advantage of, the existing competition, the strength and experience of your team, a detailed description of the products and services you intend to offer, and a roadmap that shows exactly how you intend to execute your plans in the market.
A business plan is a document presenting the company’s strategy and expected financial performance for the years to come.
The business plan provides the details of your business. It takes the focus of the business model and builds upon it. It explains the equipment and staff needed to meet the details of the business model. It also explains the marketing strategy of your small business, or how your business will attract and retain customers, and deal with the competition.
Furthermore, the business plan explains the financial stability of your small business at a particular point in time, as well as in the forecasted future. Overall, the business plan supports the business model and explains the steps needed to achieve the goals of that model
The business plan pays close attention to your goals, projects the cash flow, profits or losses, and ultimately shows how long and what would be required to enable the business break-even.
A sample structure of a business plan is seen below:
Some of the major differences between a business plan and a business model are outlined thus;
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By learning what exactly a business plan and business model are and how they work, you can gain a deeper understanding of the fundamentals of business operations. In this article, we explain the differences between a business model versus a business plan and provide common examples of business models.
A business model is the foundation of any business idea; it basically outlines how the concept offers value and potential for growth. Essentially, a solid business model ensures that the business will make money. A business plan, on the other hand, is the business owner's plan to put that model into action. It's much more detailed and ...
Ensuring coherence between the business model and business plan. Maintaining coherence between your business model and your business plan is necessary. For example, if a retail store decides to shift from a traditional brick-and-mortar model to an e-commerce model, this change of business model would need to be reflected in the business plan.
The business model will lay out your revenue streams and how your business delivers value. On the other hand, a business plan will have strategies and steps to grow and manage the business. Together, they give a complete picture of how to operate and scale effectively.
How a business plan and business model canvas inform business strategy. Avoid the trap of using the two terms interchangeably. As we've shown, the two have different focuses and purposes. The business model canvas (or our one-page plan template) is a great starting point for mapping out your initial strategy. Both are easy to iterate on as ...
A current Business Plan is also invaluable when seeking further investments, opening new branches, or exploring partnerships. In summation, while the Business Model encapsulates the very soul of the enterprise, the Business Plan serves as the detailed blueprint for bringing that vision to fruition.
A business model is a company's core framework for operating profitably and providing value to customers. They usually include the customer value proposition and pricing strategy. A business plan outlines your business goals and your strategies for achieving them. The two documents have a few critical differences, namely their structure and ...
Few Major Differences between the Business Model & Business Plan. ... In general, the business model and business plan are completely different notions. The business model serves as the mechanism, defining the core components that generate the company's revenue streams and sustainable operations. In contrast business plan is a written ...
The business plan is a comprehensive document that outlines the operational plan, financial projections, marketing strategies, and more. Its primary purpose is to detail how the business will achieve its goals and manage its operations. In contrast, the business model describes the underlying logic of how the business will generate revenue and sustain itself.
A business model is a high-level plan for profitably operating a business in a specific marketplace. This plan helps the company to identify the best way to go about doing its business while also ...
Key Highlights: Business Model vs. Business Plan: A business model is a comprehensive framework for creating and capturing value in a business, while a business plan is a document that outlines how a business can become viable. The primary goal of a business plan is often to secure investments.
Both internal management and external stakeholders, including investors, banks, and potential partners. The business model is the foundation of a company, while the business plan is the structure. So, a business model is the main idea of the business together with the description of how it is working. The business plan goes into detail to show ...
While the business model refers to a one-page representation of how a company creates, delivers, and captures value, the business plan is an in-depth description on a long textual document form about how your company is structured and plan to achieve strategic and financial objectives. This business plan is a document that contains every data ...
The truth is, they are different things with different purposes. The main difference between a business plan and business model is that a business plan outlines your goals and strategy to grow your company, while a business model shows you how to generate revenues. Read on to learn more about this subject, including what types of business ...
A business model is centered around Value; while business plan is centered around Resources. The business plan thus lays out how to manage these resources over time to materialize the business model, grow and scale the business. A model explains how you will make money: for example, by selling advertising, by earning a commission, by adding a ...
A business model, on the other hand, is a business's rationale and plan for making a profit. If the business plan is a road map that describes how much profit the business intends to make in a ...
Business plan. Where a business model is a blueprint, a business plan is a roadmap. A business plan is a formal written document that includes a description of the business you want to run, your business goals, and the plan for reaching those goals. A business plan is a detailed document that contains sections such as: Marketing Plan, Startup ...
Four key differences: business model vs. business plan. Now that you know the exact meaning of a business model and business plan, it's time to understand the difference. 1. Focus. Your business model focuses on optimizing the internal and external company operations to earn maximum profits. It explains your relationship with dealers ...
In simple terms, a business model is how a company makes money, and the business model canvas is a tool to help entrepreneurs find a coherent business model for their business (or for new products or services). A business model can be broken down into two parts: The first part deals with what a business is about.
In The New, New Thing, Michael Lewis refers to the phrase business model as "a term of art.". And like art itself, it's one of those things many people feel they can recognize when they see ...
A dermatologist turned entrepreneur, Jalachari Ella, Managing Director and Head of research and development of Ella Foods, wears her paternal name as a badge of honour.
Some of the major differences between a business plan and a business model are outlined thus; A business model aims at highlighting the profit making potentials of a business, while a business plan highlights every aspect of the business. The business plan explains in details the steps needed to achieve the goals of your business model.