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Business Model vs. Business Plan: Key Differences

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.

Business model vs. business plan: What’s the difference?

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.

Financial projections

• How they’re similar: Both business models and business plans provide an in-depth description for how a company will generate profits.
• How they’re different: A business plan includes financial performance details relevant to both internal and external stakeholders, such as investors, lenders, or potential business partners. Alternatively, a business model describes your value proposition —what product or service a business will offer and why customers should buy it—as well as the target market .

Operational details

• How they’re similar: Both business models and business plans include overarching information about how a company plans to operate, including components such as distribution channels and management structure.
• How they’re different: Business models explain the fundamental structure of a company, such as how it plans to create and deliver value to customers, while business plans get into the actionable details of how to achieve a company’s operational goals.
• How they’re similar: Business models and business plans are used to outline the goals, strategies, and operations of a business.
• How they’re different: A business plan generally incorporates a business model, explaining how the model should be implemented and executed to achieve the business's goals.

4 examples of business models

• Brick-and-mortar
• Direct to consumer
• Subscription

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:

1. Brick-and-mortar

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.

2. Direct to consumer

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.

3. Subscription

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.

4. Freemium

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.

What's in a business plan?

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.

• Executive summary . The executive summary includes your mission statement , an explanation of your core values and goals, a brief company history, and descriptions of the products or services you plan to provide to a potential or existing market.
• Organizational structure. Management hierarchy, as well as their roles and responsibilities, would be included in this section.
• Marketing and sales. How do you plan to market your offerings? Who is your target market? What is your pricing strategy and how does it compare to that of your competitors? How do you plan to acquire and retain customers? All these questions should be answered in this section.
• Expected financial performance. This includes projected revenue streams,  cash flow management , cost structure, expenses, and anticipated profitability. It typically covers from one to five years in the future.
• Business operations. This section covers everything about the day-to-day running of your business, including your storefront (if you have one), inventory management , supply chain, and production.

Business models vs. business plans FAQ

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.

How can a company test and validate its business model before creating a business plan?

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.

How often should a company review and update its 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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Business Model vs Business Plan: Main Differences

19 Aug, 2024

Distinguishing business models from plans is crucial for success. Models outline value creation and profit generation, while plans detail strategies, research, and projections. Together, they form the blueprint for long-term success and operational execution.

What is a Business Model?

A business model is the backbone of any company, detailing the plan for how it intends to operate, generate revenue , and make a profit. It's less about the nitty-gritty details found in a business plan and more about the overall concept of how the business creates value for customers and captures value for itself. Essentially, a company's business model describes the way the company sells its products or services and how it establishes and maintains customer relationships to achieve financial success.

At its core, a business model involves identifying the value proposition of the company, which is what makes its products or services attractive to customers . It also outlines the customer segments targeted, the key activities and resources needed to operate, and the channels through which it reaches its customer base. Importantly, it details the revenue streams the business will pursue to generate income and the cost structure that outlines the expenses involved.

What is a Business Plan?

A business plan is a detailed roadmap for building a successful business. Unlike the broader strokes of a business model that describes how a company creates and delivers value, business plans are a comprehensive document that outlines the specifics of business strategy. They serve as a guide to what the business intends to do and how it plans to do it and are often used to attract investors and secure financing.

The heart of a business plan includes an executive summary, which is a snapshot of the business and its plans for success. This section briefly explains the business idea, key objectives, and how the business will achieve its goals. It's followed by detailed sections that outline the business's structure, market analysis, value proposition, marketing and sales strategies, financial projections, and more.

Key components of a business plan include the business model canvas, which lays out the key resources and activities needed to operate the business. It also delves into the cost structure, detailing all the expenses the business will face. A thorough market analysis assesses the existing market, target customers, and competitive landscape. This helps in formulating a solid marketing strategy and establishing a unique value proposition that sets the business apart from its competitors.

Financial planning is also crucial, with sections dedicated to expected financial performance, revenue generation, and a detailed financial forecast. This helps potential investors and business owners understand the financial viability and growth potential of the business.

Types of Business Models

There are many types of business models, each defining a unique way a company creates value for its customers and generates profits. Understanding different business models helps owners and entrepreneurs select the right approach for their business concept and target market. Here are some common business models:

• Subscription Services : This model offers customers regular, ongoing access to products or services in exchange for a recurring fee. Popular among digital services and software, it provides steady revenue and customer loyalty.
• Freemium Model : Common in the tech industry, the freemium model offers basic services for free while charging for advanced features. It attracts a large user base quickly, with the potential to convert a portion to paid versions.
• Product Sales : This traditional model involves selling goods directly to customers. It can range from retail operations to online stores, focusing on producing, marketing, and selling physical items.
• Service-Based Model : Professional firms and contractors often use this model, providing specialized services like consulting, design, or maintenance. Success relies on expertise, customer service, and reputation.
• On-Demand Model : Popularized by companies like Uber, this model provides goods or services directly on customer request, often facilitated through a digital platform or app.
• E-commerce : With the rise of the internet, many businesses operate online, selling products or services directly through their website or online marketplaces.
• Affiliate Marketing : This model pays external parties to generate traffic or leads to the company's products and services. It's a way to extend market reach without directly handling sales.
• Advertising Model : Media companies and websites often use this model, providing content or services free of charge, but generating revenue through advertisements.

Understanding these business models helps a company decide the best strategy for market entry and growth. Each model has its own set of operational details, target market strategies, and financial implications. Selecting the right business model is crucial for a company's success, aligning with its core values, customer needs, and long-term goals. As the business evolves, it may adopt multiple models or shift strategies to adapt to changing market conditions or customer feedback.

Business Model vs Business Plan: Key Differences

Understanding the difference between a business model and a business plan is crucial for anyone diving into the world of entrepreneurship or looking to scale their business. Here are the key differences:

• Business Model : A business model is an overarching concept that explains how a company creates, delivers, and captures value. It's about the company's core strategy for generating profits and includes elements like value propositions, customer segments, and revenue streams.
• Business Plan : A business plan is a detailed document that outlines the specific strategies, goals, and actions of a business. It's a comprehensive plan that includes market analysis, financial projections, and operational details aimed at guiding the business's trajectory and attracting investors.
• Business Model : Generally broader and more conceptual, a business model provides a high-level view of the business's approach to the market. It's about the fundamental structure of how the business operates and competes.
• Business Plan : More detailed and tactical, a business plan lays out the step-by-step plan for executing the business model. It includes in-depth information on planning, marketing, finances, and more.
• Business Model : Business models often need to be flexible and adaptive, especially in early stages or in rapidly changing markets. They can evolve as the business learns more about its customers and competition.
• Business Plan : While it's a detailed guide, the business plan is also a living document but typically requires formal revisions and updates as the business grows and market conditions change.
• Business Model : Primarily used internally to guide the company's strategy, but it can also be used to succinctly explain the business to external stakeholders and potential partners .
• Business Plan : Often intended for external stakeholders, especially potential investors, lenders, or partners who want a detailed understanding of the business's approach and potential for success.
• Business Model : Includes the business model canvas or similar frameworks detailing the company's value proposition, customer segments, channels, customer relationships, revenue streams, key activities, key resources, key partners, and cost structure.
• Business Plan : Includes an executive summary, company description, market analysis, organization and management structure, product or service line, marketing and sales strategy, funding request, financial projections, and appendices.

While a business model provides a conceptual framework for understanding how the company creates value and money, the business plan offers a detailed guide on how to implement these concepts and achieve specific business goals. Both are vital, but they serve different purposes and address different needs within the business's lifecycle.

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Business Plan vs. Business Model

Back to Business Plans

Written by: Carolyn Young

Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.

Edited by: David Lepeska

David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.

Published on February 19, 2023 Updated on August 18, 2024

If you’re starting a business , you have a business model, whether you know it or not. 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 includes financial projections, objectives, management decisions and further steps. 

Still unsure? Have no fear, this handy guide lays out the differences between a business plan and a business model so that you know exactly what you and your business need to succeed.  

• Business Model

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. 

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:

• What are you offering
• Whose problem does it solve
• What problem does it solve
• What benefits does it provide
• How is it better than competitor products

Key Activities

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.  

Cost Structure

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

Key partners are external partners involved in delivering value, such as vendors and suppliers, or maybe a bank. 

Key Resources

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

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

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

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. 

To Summarize

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.  

• Business Plan

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 .

1. Executive Summary 

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.

2. Company Description/Overview

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.

3. Products or Services Offered

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.

4. Market Analysis 

• Industry Analysis : Research your industry’s growth rate, market size, trends, and future predictions. Identify your company’s niche or sub-industry and discuss adapting to industry changes.
• Competitor Analysis : Examine main competitors , their unique selling points, and weaknesses. Highlight your competitive advantages and strategies for maintaining them.
• Target Market Analysis : Define your target market , their demographics, needs, and wants. Discuss how and where you’ll reach them and the potential for market shifts based on customer feedback.
• SWOT Analysis : Break down your company’s strengths, weaknesses, opportunities, and threats. Detail your unique attributes, potential challenges, market opportunities, and external risks, along with strategies to address them.

5. Marketing and Sales Strategies

• Marketing and Advertising Plan : Use insights from your target market analysis to decide advertising channels, emphasizing platforms that best reach your audience, like TikTok over Instagram. Develop a concise value proposition to be central to all marketing, detailing how your product addresses specific needs.
• Sales Strategy and Tactics : Define where and how you’ll sell, such as online, in-store, or through direct sales calls. Sales tactics should highlight the customer’s needs, presenting your solution without overly aggressive promotion.
• Pricing Strategy : Decide on pricing based on market positioning, whether you aim to be a discount or luxury option. Ensure prices cover costs and yield profit, and position your product in a manner that aligns with the chosen price range. Justify your chosen pricing strategy in this section.

6. Operations and Management 

• Operational Plan : Outline daily, weekly, and monthly operations, specifying roles, tasks, and quality assurance methods. Include supplier details and order schedules, ensuring clarity on key business functions and responsibilities.
• Technology Plan : For tech-based products, detail the development plan, milestones, and staffing. For non-tech companies, describe the technology tools and software you’ll employ for business efficiency.
• Management and Organizational Structure : Define who’s in charge, their roles, and their backgrounds. Discuss your management strategy and forecast the development of your organizational hierarchy.
• Personnel Plan : List current and future hires, specifying their roles and the qualifications necessary for each position. Highlight the significance of each role in the business’s operations.

7. Financial Plan 

• Startup Costs : Clearly detail every anticipated cost before starting operations. This will be vital for understanding the initial investment required to get the business off the ground.
• Sales Projections : Estimate monthly sales for the first year, with an annual forecast for the next two years.
• Profit and Loss Statement : An overview of revenue minus costs, resulting in either a profit or loss.
• Cash Flow Statement : Provides clarity on the business’s liquidity by showing cash inflows and outflows over a specific period.
• Balance Sheet : Displays the company’s net worth by detailing its assets and liabilities.
• Break-even Analysis : Understand at which point revenues will cover costs, helping to predict when the business will start making a profit.
• Funding Requirements and Sources : Enumerate the required capital and the sources of this funding. This should also include the purpose for which these funds will be used at different stages.
• Key Performance Indicators (KPIs) : Identify the metrics vital for measuring the company’s performance. Use these indicators to spot challenges, understand where improvements can be made, and pivot strategies as necessary. Ensure that each KPI aligns with the business’s objectives and offers actionable insights for growth.

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.

8. Appendices

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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Business Plan vs. Business Model: What's the Difference?

Dive into the nuances of Business Plans & Models. Uncover their key differences, applications, and tips for strategic growth. Master your business journey today!

November 28, 2023

In the world of business, two terms often emerge as foundational elements to startup founders, seasoned entrepreneurs, and everyone in between: the Business Plan and the Business Model. Both are crucial, yet their roles, purposes, and impacts are distinct, and understanding these differences can mean the difference between the success and failure of an enterprise.

In a landscape where innovation is rampant and industries are constantly evolving, having clarity about one's business direction is indispensable. It's akin to a sailor knowing the direction of the wind and having a map. While the wind's direction can be equated to the broader strategy of the sailor (the Business Model), the map which plots out the course in detail is akin to the Business Plan.

Yet, with these tools being so pivotal, it's alarming how often they are misunderstood or used interchangeably. Some entrepreneurs pour weeks into crafting the perfect business plan, only to realize they haven’t clarified their fundamental business model. Others sketch out a brilliant business model on the back of a napkin but falter when asked for the detailed strategy and projections that a business plan requires.

This guide aims to dissect the nuances between a Business Plan and a Business Model, highlighting their unique roles in the entrepreneurial journey and offering insight into how each can be harnessed most effectively. By the end of this exploration, readers will have a clear roadmap (pun intended!) for their own business endeavors, understanding when, why, and how to leverage each tool.

Definition of Key Terms - Understanding Business Plan and Business Model

In order to delve deep into the distinctions between a Business Plan and a Business Model, it's imperative that we first lay down clear definitions for each term. This ensures that as we progress, we're aligned in understanding and can avoid any ambiguities. So, let's start by putting these cornerstone concepts under the microscope.

Business Plan

A Business Plan can be envisioned as a detailed blueprint for setting up a business and ensuring its success. It's a comprehensive document that articulates what a business intends to achieve and the strategies it will deploy to make those aspirations a reality. Let's break down the typical components:

• Executive Summary: A snapshot of your business, providing a concise overview of what the business is about, its mission, and how it stands out in the market.
• Company Description: An in-depth look at the company, detailing its formation, mission, objectives, and overarching goals.
• Market Analysis: A study of the industry landscape, understanding potential competitors, target audience, market trends, and opportunities.
• Organizational Structure: A delineation of the company's hierarchy, roles, responsibilities, and the dynamics of how operations will be conducted.
• Product or Service Line: A detailed description of the product or service the company offers, its benefits, lifecycle, and relevance in the market.
• Marketing and Sales Strategies: Outlining the approach for promoting the product/service, attracting customers, and the strategies for sales conversion.
• Funding Requirements: If seeking external investment, a clear layout of the capital needed, the reasons, and the strategy for effective utilization.
• Financial Projections: Forecasts for the business, including projected income statements, balance sheets, cash flow statements, and break-even analysis.

Business Model

A Business Model is akin to the conceptual foundation of a business. It succinctly defines how a company plans to generate revenue, make a profit, and ensure sustainability in a competitive market. Core components of a business model include:

• Value Proposition: What makes the company’s offering unique and desirable? How does it solve a problem or fill a need in the market?
• Customer Segments: Who are the primary target customers? What are their needs and how will the business cater to them?
• Channels: Through which avenues will the product/service be delivered to the customers?
• Customer Relationships: How does the business intend to interact with its customers, ensuring retention and loyalty?
• Revenue Streams: The avenues through which the company will make money. This can include sales, subscriptions, licensing, and other revenue models.
• Key Resources: Assets required to run the business, which can be physical, intellectual, human, or financial.
• Key Activities: The main operations and tasks that need to be performed to ensure the business runs smoothly.
• Key Partnerships: Collaborations, alliances, and affiliations that will be essential in supporting the business operations.
• Cost Structure: A clear breakdown of the business’s expenses and financial obligations.

With these definitions at our fingertips, it becomes easier to discern the distinct role each plays in the grand scheme of establishing and running a business. As we progress further, we will delve into how these elements differ in scope, objective, and application.

Main Differences - Navigating the Nuances Between Business Plan and Business Model

Having delineated clear definitions for both a Business Plan and a Business Model, it's now time to pinpoint their distinctive differences. While both tools are essential to a business's success, they serve varied purposes and are used at different stages of the entrepreneurial journey. Let's explore the primary differences between the two:

• Business Model: This represents the broader concept of the business's structure and its fundamental modus operandi. It's an overview of how the business plans to function at its core, capturing, delivering, and creating value.
• Business Plan: This is a comprehensive document that dives deep into the strategy required to make the vision (often illustrated by the business model) a reality. It details everything from operations, marketing, sales, and finances to ensure the business is on the right track.
• Business Model: Its primary aim is to define the method through which the company creates, delivers, and captures value. It's about answering the "What, Why, and For Whom" of the business.
• Business Plan: This seeks to showcase the feasibility of the business model, detailing how the business will operate, generate revenue, manage costs, and expand. The business plan is more about the "How, When, and Where."
• Business Model: While it is primarily crafted for internal stakeholders to align their vision and operations, it also serves as an overview for potential investors, partners, and other external parties who are interested in understanding the company's foundational strategy.
• Business Plan: This is a tool tailored for both internal decision-makers and external stakeholders. When seeking investments, partnerships, or loans, a well-drafted business plan becomes indispensable. It provides the detailed insight that external parties often require before committing resources or capital.

Flexibility

• Business Model: Given its higher-level perspective, the business model is often more adaptable. As market conditions change, customer preferences evolve, or new opportunities emerge, the business model can be adjusted to pivot or capitalize on these shifts.
• Business Plan: Though not rigid, a business plan is more static compared to a business model. While it should be periodically updated as milestones are achieved, market conditions change, or business goals evolve, it typically requires a more formal revision process.

In essence, while the business model is about conceptualizing the heart and soul of the enterprise, the business plan is about putting flesh to that skeleton, bringing it to life with details, strategies, and actionable steps. Grasping these nuanced differences is vital for entrepreneurs as they chart the course of their business journey.

When to Use Which - The Strategic Application of Business Plan and Business Model

The distinctions between a Business Plan and a Business Model are clear, but knowing when to deploy each can be equally as crucial. Their application at the right junctures can enhance clarity, attract resources, and drive effective implementation. Here's a guide on when to use which:

Starting Up a Business

• Business Model: Before any detailed planning commences, it's pivotal for entrepreneurs to draft a Business Model. This helps in conceptualizing the very essence of the business: what value it offers, who it caters to, and how it will generate revenue. Using tools like the Business Model Canvas can provide a visual and concise representation of this.
• Business Plan: Once the fundamental business concept is clear, the Business Plan comes into play. This document will map out the strategy to realize the business model, offering detailed steps, financial projections, marketing strategies, and more. It's a roadmap for how the business will operate and grow.

Seeking Investments

• Business Model: Investors will want a snapshot of your business's core. They want to know why your business exists and how it stands out. Thus, presenting a clear business model is paramount.
• Business Plan: Alongside understanding your business's essence, investors also need reassurance on its feasibility and growth potential. This is where the Business Plan becomes crucial. It offers detailed projections, strategies, and plans that can instill confidence in potential investors, showing them the roadmap to returns on their investment.

Iterating on Business Ideas

• Business Model: In rapidly changing industries or for startups practicing the lean startup methodology, frequent iterations might be needed. Every time there's a significant pivot or change in direction, the Business Model should be revisited and possibly adjusted.
• Business Plan: While the Business Model might be revised more frequently, it's not always necessary to overhaul the entire Business Plan. However, if the pivot is significant enough to alter operations, marketing strategies, or financial forecasts, then a revision of the Business Plan is warranted.

Periodic Review and Expansion

• Business Model: While the core of a business might remain steady, it's beneficial to revisit the Business Model periodically, especially when considering expansion into new markets, launching new products, or diversifying revenue streams.
• Business Plan: As businesses hit milestones, they should update their Business Plan. This could be done annually or during strategic inflection points like mergers, acquisitions, or significant market shifts. 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. Knowing when to focus on each, and how to leverage them effectively, can guide businesses through their initial setup, growth, challenges, and expansions. Both tools, when used strategically, are the compass and map guiding a business towards its envisioned success.

Real-world Examples - Illustrating the Nuances of Business Plan and Business Model

A theoretical understanding of the distinction between Business Plans and Business Models is one thing, but observing them in practice can offer an invaluable perspective. Let’s explore some real-world examples that showcase these tools in action:

• Business Model: At its core, Airbnb’s model is about connecting people with spaces to rent to those looking for accommodations. Their value proposition revolves around offering unique, homely, and affordable accommodations compared to traditional hotels. Their primary revenue stream comes from charging hosts a commission on each booking.
• Business Plan: When Airbnb sought investments, they presented a detailed startup business plan that included their marketing strategy, growth projections, financial details, and expansion plans into new markets. This plan articulated how they intended to move from their foundational model to a global powerhouse in the hospitality industry.
• Business Model: Uber’s primary model is a platform connecting drivers with passengers. Their value proposition is offering a convenient, affordable, and reliable alternative to traditional taxis. Revenue primarily comes from taking a cut from each ride a driver completes.
• Business Plan: Uber’s rapid expansion into cities worldwide didn’t happen by chance. It was part of a strategic plan that included targeted marketing campaigns, strategies to onboard drivers, handling regulatory challenges, and financial projections for each new market.
• Business Model: Netflix started as a DVD rental-by-mail service, pivoting to streaming as technology and consumer preferences evolved. Their value proposition revolves around offering an extensive library of content for a fixed monthly price, without ads. Revenue comes from monthly subscriptions.
• Business Plan: When Netflix decided to pivot from DVD rentals to streaming, and later into producing original content, it would have required detailed planning. Their business plan would outline content acquisition strategies, technological infrastructure needs, financial forecasts for the new ventures, and a marketing strategy to promote their evolving services.
• Business Model: Dropbox’s model is based on providing cloud storage solutions for individuals and businesses. Their value proposition is offering a simple, reliable, and accessible means to store digital content. They employ a freemium model where basic services are free, but advanced features come at a cost.
• Business Plan: As Dropbox sought to grow, especially in the competitive cloud storage market, they needed a comprehensive plan. This would include strategies for user acquisition, scaling their technological backend, partnerships with other software providers, and financial plans for managing their freemium model efficiently.

In essence, these examples vividly illustrate how the foundational concept of a business (Business Model) is different from the detailed strategy for its operation and growth (Business Plan). While the model captures the essence, the plan dives into specifics. Both are integral at different stages, and as seen with companies like Netflix, they need to be revisited and revised as the company evolves.

Navigating the Business Landscape with Precision

Throughout this exploration of Business Plans and Business Models, one thing remains abundantly clear: both are indispensable tools in the toolkit of every entrepreneur and business leader. However, understanding the nuanced differences between the two and knowing how to deploy each effectively can significantly impact a company's success.

A Business Model provides the visionary blueprint of a company – it's the big picture that showcases what the company stands for, its primary methods of generating revenue, and how it intends to deliver value to its target market. It’s the foundation upon which a company is built, a reflection of its core identity.

On the other hand, a Business Plan dives into the specifics, detailing the strategies, operations, financial projections, marketing approaches, and other key components necessary to bring the business model to life. It's the roadmap, detailing the route a business needs to take to achieve its goals.

In the rapidly changing world of business, where consumer preferences evolve, technologies disrupt traditional operations, and markets are continually in flux, having a robust business model is crucial. But it’s the detailed business plan that allows businesses to navigate these complexities with precision, foresight, and strategic acumen.

Drawing inspiration from real-world examples, we've seen how giants like Netflix and Uber have effectively utilized both these tools. They've conceptualized innovative business models and then deployed detailed business plans to capture market share, adapt to changes, and remain at the pinnacle of their respective industries.

In conclusion, as an entrepreneur or business leader, think of the business model as your compass, giving direction and purpose. The business plan is your map, detailing the terrain and showing the path forward. With both in hand, you're not only set for the journey but also equipped to tackle the challenges and capitalize on the opportunities that lie ahead.

Key Takeaways

Foundational Differences: A Business Model provides an overview of how a company creates, delivers, and captures value, whereas a Business Plan delves into the detailed strategies, operations, and financial projections for realizing the model.

Strategic Application: The Business Model sets the core vision and foundation for a business, while the Business Plan acts as a roadmap, detailing steps for achieving business goals and milestones.

Real-world Applications: Successful companies, such as Airbnb, Uber, Netflix, and Dropbox, have effectively conceptualized innovative business models and employed comprehensive business plans for strategic execution and growth.

Necessity for Adaptation: Both the business model and business plan should be revisited and revised periodically to ensure alignment with evolving market realities and business objectives.

Call to Action: Entrepreneurs and businesses should constantly reflect on, refine, and update their models and plans, engage with experts, commit to continuous learning, and actively share insights to ensure sustained success.

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Business Model vs Business Plan: Key Differences Explained

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.

What is a Business Model?

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.

Business Model Key Components

• Value proposition
• Customer segments
• Revenue streams
• Cost structure

What is a Business Plan?

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.

Business Plan Key Components

• Executive summary
• Market analysis
• Organization and management plan
• Sales strategies
• Financial projections

Few Major Differences between the Business Model & Business Plan

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.

Flexibility in Nature

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.

Their Usage

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.

Several companies offer Business plan writer service , but you can trust us for numerous services on one platform such as Franchise Business Plan , E2 visa business plan , and Strategic Business Plan .

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Business Plan vs Business Model: All You Need to Know

• August 23, 2023

When you’re starting a new company, it can be difficult to determine what you should focus on first. Financing, marketing, developing your product or service, etc. are all important components. This guide to business plan vs business model will compare two of the most important documents for establishing these systems and building a successful business.

Both a plan and model are essential components of any successful business, so it’s important to understand the differences between them and how they intersect. This way you can use each one effectively.

Whether you’re considering launching a new business from home or growing an existing enterprise, understanding each of these concepts can help ensure future success.

Let’s dive 🤿 into the comparison of business plan vs business model!

Table of contents 📚

What is a business plan?

What is a business model.

• Differences and similarities

According to Dictionary.com, a business plan is “a detailed plan setting out the objectives of a business, the strategy and tactics planned to achieve them, and the expected profits, usually over a period of three to ten years” [1] .

We like to think of it as a roadmap for any business starting out, as it allows entrepreneurs to think through the practicalities of getting off the ground and running successfully.

A typical business plan has many different components, including:

• Your company’s basic information . It is essential to include the basic information that describes the company’s purpose and operations so that potential investors or partners can clearly understand the company’s goals. Essential details to include in a business plan include a summary of services, target markets, funding needs, competitive landscape analysis, company name , and registration details.
• Mission statement . A mission statement is an integral part of any successful business plan as it sets out the company’s ambition and establishes the general direction of its operations. It defines the company’s goals. In addition, it guides decision-making throughout the business, by clearly focusing on all stakeholders, from top-level management to entry-level employees.
• Executive summary . The executive summary is structured to include information on the primary team guiding the business.

Now let’s move on to the next part of the debate of business plan vs business model: defining a business model.

Investopedia defines a business model as “a company’s core strategy for profitably doing business” [2] .

You can view it as the blueprint for how your company does business. It involves intricate processes like defining customer segments, pricing strategies, production phases, distribution modes, and so on. In other words, a business model outlines what the business will do to make money. It also lays out the structure of how the business will operate, including its resources, customers, partners, and operations.

A typical business model will include components such as:

• Your company’s primary purpose . What is the end goal of your business? The answer to this question can help you plan effectively for future decisions to align with short- and long-term objectives.
• Value chain position . Having a firm grip on your value chain position allows you to see precisely where inefficiencies might lie and what components of your service you can improve. It will let you identify any potential points of failure, such as weaknesses that competitors may be able to exploit or aspects of the operation that cost time or money.
• Competitive advantage . A comprehensive business model should include a company’s competitive advantage (e.g., running a thought-leadership business blog to connect with customers), which presents a unique set of capabilities that sets it apart from its competitors.

Business plan vs business model: differences and similarities

Creating a business plan and a business model can seem complex, but understanding their key differences and similarities makes for strong groundwork for successful entrepreneurship.

Key differences

A business plan focuses on the following :

• The structure of the company
• The teams needed to meet the demands of the business model
• Equipment and resources needed

It’s no secret that a successful business requires more than just a great concept. You need a surrounding structure, a team to bring it to life, and the appropriate resources for success. Your business plan should have all these details. It’ll make it easier for you, or any of your team members, to refer back to at any time.

A business model focuses on the following :

• Identifying services customers value
• Focusing on the large income generators
• Helping to ensure the company is making money

It helps to track financial performance, identify services that customers most value, and focus on activities that will produce the biggest income generators. When crafted correctly, a business model paves the way for achievable goals and long-term strategies to see a company thrive in its industry.

Key similarities

Both business plans and models share several key similarities. They help entrepreneurs to:

• Clearly articulate their value proposition and target market
• Develop a clear understanding of their competitors
• Establish a detailed financial plan, including revenue projections and expenses
• Identify potential risks and challenges, and develop strategies to overcome them

Business plan vs business model: which is more important?

From the differences and similarities highlighted above, we can conclude that a business model is a framework that outlines how a business will create and deliver value to its customers. On the other hand, a business plan is a comprehensive document that outlines how a business will achieve its goals.

Therefore, a business model will often be a critical component of a business plan, as it informs key elements such as the revenue model, target market, and competitive strategy. By including a business model in your business plan, as an entrepreneur, you can communicate your vision and strategy more clearly to potential investors and partners.

Business plan vs business model: use both elements

The difference between a business plan and a business model is often misunderstood.

A business plan lays out the fundamentals of your project and helps guide decisions during its execution phase. While the best way to think of a business model is as the engine that makes a company’s plan come to life, specifying how it will make money and satisfy customer needs.

In addition, some essential things you’ll need to help your business succeed are adequate funding, necessary licenses and permits, a legal structure, a website , a social media presence, and a solid marketing strategy.

A passion for your business idea, a willingness to learn, and a commitment to hard work can also go a long way toward helping you achieve success as an entrepreneur.

🏁 Starting a new business? Check out our best tips on starting your own business to help you get started.

[1] https://www.dictionary.com/browse/business-plan [2] https://www.investopedia.com/terms/b/businessmodel.asp

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Business Model Vs. Business Plan: What’s the Difference?

There’s a big misconception about the whole business model vs. business plan debate because both terms have been wrongly used. Today, we’ll look into what they’re really for and why they’re needed for the business.

Strategy has always been a building block of business. In the ever-competitive and highly volatile industry, you have to come up with a sustainable advantage over your competitors. Few lucky entrepreneurs successfully start on the right foot, but luck often runs out while keeping a great momentum. This is where a solid business strategy comes to play.

You can’t just launch your startup without establishing where it’s heading. You need a business strategy to identify which direction you’ll operate towards. This is why a business plan and a business model are essential factors in a company’s success. But because they seemingly have a similar purpose, they’re mistakenly used interchangeably. The truth is, one cannot exist without the other.

To truly understand the difference between a business model vs. a business plan, we’ll need to define what they are and what they’re used for. 

What is a Business Model?

A business model is the company’s rationale and plans for making a profit. It explains how a company delivers value to its customers at a specific cost. A business model would include details about the company’s products and services, its target market, and all expenses related to the operations and production.

Why is it necessary?

It’s considered a roadmap for a business to achieve its financial goal in a given period. It maps out how you can sustain the value you deliver to your customers. Entrepreneurs use it as a tool to study, test, and estimate cost and revenue streams.

They can make quick hypothetical changes to the business model to determine how a financial decision can impact their long-term operations . This allows business owners to anticipate and adapt to trends and challenges in their industry.  

Consequently, a strong business model also helps attract investors, recruit talent, and motivate employees. The management and staff are often motivated by how well a company adheres to the business model.  

Types of Business Model

When it comes to different kinds of business models, there are several options for a company. For example, a software company might go with a subscription model because it’s easier to sell their product through a license subscription. On the other hand, retail companies might go for the accessories model because it’s more straightforward.

In determining which type of business model to use, companies choose the style that best suits their operations and industry. A growing method is using a combination of business models to create a hybrid system for the business.

The following are some of the most widely used types of business models:

• Subscription
• Transactional
• Retail sales

Creating a Business Model

Now that we’ve established what a business model is, it’s time to learn how to create one for your startup. Your business model has to answer all the critical questions about your business.

Here are the key components you must include in your business model:

• Key Objectives
• Target Market
• Product Value
• Product Pricing
• Required Funding
• Growth Opportunity

Keep in mind, the business model has to be updated regularly to fit your goals. All companies undergo a stage of maturity that directly affects the business model it follows. 

For early-stage startups, the business model would ideally be simple and straightforward. Most business owners would even opt for a flat organization where staff could communicate their concerns directly to the owner. This, of course, will change as the company expands.

Now that we’ve learned what a business model is, it’s time to move on to the next part of the business model vs. business plan discussion. So, let’s discuss what is a business plan.

What is a Business Plan?

A business plan is a written document that details a company’s goals and its strategies to achieve them . It’s considered the “blueprint of the business” because it summarizes all the essential aspects of the company such as finance, marketing, and operations.

It serves as a reference for the company owner and the management in making major business decisions. It can also be presented to investors when the owner is raising capital. It’s beneficial for startups who have no proven track record since a business plan can pitch its full potential.     

A business plan is not only helpful to a business in its early stage, but it also helps it pivot during unforeseen circumstances. In a volatile industry, a company needs to adapt quickly and efficiently. Hence, update the goals and methods should accordingly.

Creating a Business Plan

So, what should a business plan include?

Business plans vary according to industry, but there is a general format for writing a business plan. You can expand or shorten this template based on long-term goals.  

• Executive Summary
• Business Description
• Market Analysis
• Product Development
• Marketing Strategies
• Operations and Management
• Financial Plans

You can choose from a wide selection of business plan templates when it comes to the actual writing. Remember to keep it concise and avoid jargon in the content. You will present your business plans to investors and stakeholders; hence, they need to get a clear idea of it in one reading.

Business Model vs. Business Plan: How to Use Them 

At this point, we’ve established that both a business model and a business plan are essential to success. However, both can only take your business so far. How well you execute and follow them is a whole other story. It’s challenging to start a startup , let alone maintain it.

If you want to avoid common startup mistakes , you need to build your business on a strong foundation. Hire the best people, invest in reliable tools, and sign up for mentoring.

Speaking of mentors, Full Scale founders Matt DeCoursey and Matt Watson are incredibly passionate about helping entrepreneurs succeed. They’ve created Full Scale to assist startup owners in launching and managing their companies.

Full Scale is an offshore software development company that offers a wide array of services for startups. We offer the best talent and resources needed to begin your entrepreneurial journey.

We have seasoned project managers, marketing specialists, and technology experts at your service. We’ll take care of all the hassles out of your daily operations so you can focus on your core competencies.

Want to learn more about Full Scale? Get your FREE consultation today!

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Copyright 2024 © Full Scale

Business Plan vs Business Model Canvas Explained

6 min. read

Updated July 29, 2024

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. 

• What is a business model canvas?

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:

• Relationships with key partners
• Financial structure
• And more…

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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Components of a Business Model Canvas

The simplest way to think about your business model canvas is to map it out visually. A business model canvas covers nine key areas:

• Value proposition : A company’s unique offering in the market and why it will be successful.
• Key activities: The actions that a company takes to achieve its value proposition.
• Customer segments : The types of people or businesses that are likely to want a company’s products or services.
• Channels : How a company reaches customers through marketing and distribution efforts.
• Customer relationships: How a company interacts with customers and maintains important relationships.
• Revenue streams: The ways in which a company makes money.
• Key resources: The assets such as property, equipment and staffing that a company needs to perform its key activities.
• Key partners: The relationships with suppliers, vendors, customers and other stakeholders a company must maintain in order to be successful.
• Cost structure: The major drivers of company expenses that will need to be tracked and managed.

[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.

• What is a 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.

Components of a business plan

While there are several different types of business plans meant for different uses, well-written plans will cover these common areas:

• Executive summary : A brief (1-2 pages) overview of your business.
• Products and services : Detailed descriptions of what you’re selling and how it fills a need in the market.
• Market analysis : Assessing the size of your market, and information about your customers such as demographics (age, income level) and psychographics (interests, values).
• Competitive analysis : Documenting existing businesses and solutions your target customers are finding in the market.
• Marketing and sales plan : Your strategies for positioning your product or service in the market, and developing a customer base.  
• Operations plan : Describing how you will run the business from day to day, including how you will manage inventory, equipment, and staff.
• Organization and management team: Detailing the legal structure of the business, as well as key members, their backgrounds and qualifications.
• Financial Plans : Business financials that measure a company’s performance and health, including profit & loss statements, cash flow statements and balance sheets. Effective financial plans also include forward-looking sales forecasts and expense budgets.

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 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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• How both inform your strategy

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Business plan vs. business model - examples

Business plan vs. business model - introduction

Are you looking for information on business plans and business models? If so, you are in the right place. From the following article, you will learn whether there is a business plan, what a business model is and the difference between them. You will also gain knowledge on how to build a business plan or business model and where to look for examples.

Table of contents

Business plan - what is it.

A business plan is a document describing a planned business venture. Depending on your assumptions and needs, it can be a very short study (a few pages), or it can be several hundred pages long. What connects elaborate business plans with generalized ones is the structure (table of contents). Most business plans consist of elements such as:

• Description of product/service (scope of offer);
• Personnel and other key resources;
• Customer Profile (customer segments);
• Market analysis;
• Competitive analysis;
• Sales (distribution channels) and marketing (advertising campaign plan);
• SWOT analysis;
• Description of financial assumptions (cost structure and revenue plan);
• Financial projections (balance sheet, income statement, cashflow).

Business model - an example

There are many different types of business models, and each is designed to generate revenue and make profits in different ways. A business model in this sense is nothing more than a way to make money (generate income).

Here are some common types of business models:

• Direct selling - involves selling products or services directly to customers.
• Subscription (subscription) - customers pay a set fee to use a product or service for a specified period of time.
• Freemium - offers free use of basic features of a product or service, but fees are charged for more advanced or expanded features.
• E-commerce - is based on the sale of products over the Internet and mainly concerns online stores.
• Licensing - The owner of a product or service charges a fee to allow other companies to use its technology or know-how.
• Franchise - the business owner allows other entrepreneurs to use his name, brand, products or services, and in return collects royalties and/or a share of the revenue.
• Crowdfunding - involves raising funds from a number of people via the Internet in exchange for stocks, shares or other benefits.
• Institutional customers (B2B) - involves providing products or services to companies, institutions and organizations, instead of consumers (B2C).
• Network marketing (network sales) - involves selling products through a network of distributors who receive a commission for each unit sold.

It is worth remembering that many companies use combinations of different business models to increase their revenues and profits.

Business model written out on a piece of paper - business model canvas and lean canvas

Business model (business model) equally often refers to a form of business plan captured on a single sheet of paper (business model template). The most popular business models in this sense are business model canvas (otherwise known as the Osterwalder model) and lean canvas.

On our blog you will find a dedicated article discussing the above models in detail. Their purpose is the so-called validation of the business model, i.e. verification that we have the right resources and action plan to succeed in the market.

Osterwalder's model consists of the following elements:

• Customer segmentation;
• Value proposition;
• Customer Relations;
• Key Resources;
• Key Activities;
• Key business partners;
• Cost structure;
• Revenue structure.

When creating a business model, it is important to consider all the factors mentioned above. Analysis of these elements (business model analysis) at the initial stage of business planning, will increase the chance of success. When you put the developed model into practice, it will become clear to what extent your assumptions were correct. The purpose of the business model canvas is to clearly present the most important elements of the business on a single sheet of paper.

Business model of the enterprise - an example

To get a better idea of the specifics of the business model canvas version, take a look at the example below. At the same time, remember that creating business models is not a simple task, and if you have no experience in this, it is worth taking advice from specialists.

Business plan - an example

Sample business plan you can download for free from our website. This is a study of a fictitious Polish company that sells apples to international markets. The business plan was developed in a basic (standard) version and is available in English. Remember that a professional business plan is best developed from scratch, taking into account the specifics of your business and the criteria on the expectations of the recipient of the document (form, level of detail, etc.). You can find a downloadable business plan on the home page under the "download sample business plan" button. If you have any problems, please contact us.

Business plan vs. business model - differences

A business plan and a business model are two different documents that are often used to describe and plan a business activity.

A business plan is a detailed description of a business strategy that includes information on the product or service, business goals, ways to attract customers, marketing, financial plan, personnel management and much more. A business plan is usually a detailed roadmap that helps entrepreneurs prepare for starting a business or growing an existing business.

A business model describes the overall way a company will generate revenue and make money. A business model consists of several key elements, such as customer segments, value proposition, distribution channels, revenue sources, cost structures, etc. The business model helps entrepreneurs understand what actions need to be taken to make the company profitable and financially sustainable.

In short, a business plan is a detailed description of a plan of action, while a business model is a description of how a business will operate and generate profits. A business plan is often based on the business model and helps entrepreneurs understand how best to use the business model for their specific goals.

When to make a business plan and when to make a business model?

A traditional business plan and a business model are two different tools that are used to plan and run a business. The choice of which tool is more appropriate depends on the goals and needs of the business.

A standard business plan is usually a long, detailed document that describes business goals, strategies, marketing activities, finances, operational plans and many other issues related to running a business. A business plan is especially useful when an entrepreneur plans to start a new business that requires a large financial investment and long-term planning.

A business model, on the other hand, is a simplified version of a business plan that focuses on the main elements of a business, such as revenue, costs, sources of income and value offered to customers. The business model is more focused on a fast and flexible approach to business planning and is useful for companies that want to test different business ideas quickly and efficiently.

In summary, a traditional business plan is appropriate when an entrepreneur plans to start a new business or enter a new market, while a business model is useful for companies that want to test new business ideas or changes in their strategy. Ultimately, the choice between a traditional business plan and a business model depends on the individual needs and goals of the business.

How business plan and business model flow into each other

The business plan and business model are closely related and influence each other. The business plan defines the company's overall strategy and describes what goals it wants to achieve and what actions it will take to achieve them. The business model, on the other hand, focuses on how the company generates revenue and makes money.

The business plan influences the business model because it defines the goals the company wants to achieve, as well as how it wants to operate in the market. It plans what products or services it wants to offer, what markets it wants to target, what the costs and revenues will be, and what the marketing and sales strategies will be. These elements directly influence the selection of the appropriate business model.

On the other hand, the business model affects the business plan because it determines how the company will make money. The business model determines how the company generates revenue, what its sources are, what its costs are, what its profit margins are and what its financial projections are. All of these elements influence the company's long-term planning and decisions about its development.

A business model in the sense of a lean canvas or business model canvas indicates the most important actions to be taken based on the resources at hand. It is a specific, shortened version of the traditional business plan. To a greater extent, it shows the real value brought to the market by the entrepreneur. It also indicates the key activities to be performed or a model for establishing cooperation with customers from different groups.

It is also worth noting that the business plan and business model are documents that are constantly changing and evolving. Companies are constantly adapting their business models to changing market trends, and improving their business plans to account for changing market and financial conditions.

Business plan vs. business model - summary

When you're thinking about starting a business or growing your company, it's a good idea to start by developing a business plan or business model.

In each case, issues such as real customer needs (customer problems), ways to attract potential customers, a service or product that is a value proposition (unique selling proposition), positioning against competitors or expected revenue streams and cost calculations should be analyzed.

Both a business plan and a business model are useful tools for planning and monitoring business development. It is a professional presentation of your offer as well as all relevant elements that can affect the company. In addition, these documents can be useful in obtaining external financing. You will find many articles on this subject on our blog.

Questions and answers

What is a business plan.

A business plan is a document that describes a business idea and how to implement it. Typically, it is a document that includes, among other things, a description of the products or services, a marketing plan, a competitive analysis, a financial plan, and an operating strategy.

What is a business model?

A business model is a description of how a company generates profits. It describes the organizational structure, ways to attract customers, production or service delivery processes, ways to manage costs and growth strategy.

What are the similarities between a business plan and a business model?

Both a business plan and a business model are documents that are designed to help develop and practically implement a business idea.

What are the differences between a business plan and a business model?

A business plan is a more detailed document that describes a specific plan for the company's operations, including a description of products or services, a marketing plan and a financial plan. A business model focuses more on the organizational structure and ways to generate income. A business plan describes a specific business project, while a business model outlines the overall strategy for running the business based on key resources and the environment.

Are a business plan and business model essential to running a business?

A business plan and business model are needed for any company that wants to succeed. A business plan is a detailed document that allows you to plan your activities and minimize risks. A business model allows you to plan ways to generate income and attract customers. The development of these documents is advisable so that the company can operate effectively and grow from the beginning.

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Private investor test, complete guide: write your own company's business plan step by step, how to check subsidies for companies - a simple guide, subsidy for one-person companies, business plan of a renovation company, potrzebujesz wsparcia przy tworzeniu biznesplanu lub modelu biznesowego.

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Home » Business Model

Business Model Vs Business Plan – What is the Difference?

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?

Business Model Vs Business Plan

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:

• Franchise model
• Direct sales model
• Advertising model
• Subscription based model
• Lowcost model
• Freemium model
• Affiliate model
• Production model

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.

What is a BUSINESS PLAN

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:

• Executive Summary
• Business Description
• Service or Product Line
• Market Analysis & Strategies
• Organization & Management
• Funding Request
• Financial Assumptions
• Financial Projections

Differences Between a Business Plan and a Business Model

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.
• Another difference is that business plans are usually written at the beginning of a business or a business initiative, while a business model is relevant at any time, and can be written at any time.
• Again, business models are less expensive to put together, and may represent a fictional future goal. As a goal, they may be both complete and entirely unprofitable or even infeasible, quite unlike your business plan.
• 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 markup to services, working with partners, selling direct, charging by the hour, with additional services, etc. While a business defines specific activities, it includes timeframes, budgets, owners, dependencies and impact.

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Business Model Vs Business Plan: What’s The Difference

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.

The differences between business model vs business plan

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.

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:

• What do we have now?
• What do we want to have in the future?
• What do we need in order to be there?

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Business Plan VS Business Model: Key Difference

This is a major question people ask, they want to know the difference between a business plan and a business model.

Key to note is that your business plan is incomplete if it doesn’t have a business model section more so if you are a for-profit venture .

Business Plan VS Business Model: Key difference

So let’s dive in, business plan vs business model, what’s the difference. Let’s start by defining both.

There are many definitions of a business plan but put simply a business plan is a document that states your business objectives, where you intend to be and how you would get there. It has different sections such as:

• Executive Summary
• Problem Statement
• Solution Statement
• Market Size/Industry Analysis
• Competition Analysis
• Business Model
• Marketing Plan
• Management Team
• Financial Projections

The sections of a business plan vary, some business plans have Operation Strategy, and some have Web Plan Summary etc. The nature of the business would determine the key sections to add and what to leave out .

So what then is a business model?

A business model is the operation of your business that has to do with revenue generation, simply put “how you make money.” This is one of the reasons investors pay keen attention to your business model even in a pitch deck !

Your model should show clearly the kind of business model you are operating. For example: Will you operate the commission based model like Uber ? Other questions your business model should answer include:

• How much does your service or product cost?
• What’s your profit margin?
• How are you reselling or manufacturing the products?

If you remember I told you that a business model is usually part of a business plan. This doesn’t mean that you can’t have a document or one page dedicated to a business model.

Like you might have noticed, sometimes people use the word “revenue model” in place of “business model.”

Well, they are not exactly the same; a revenue model mainly states how you generate revenue without really making emphasis in other areas like profit margin etc.

A business model has several types, like the commission based model mentioned above, others are:

Subscription model

One of the key advantages of the subscription model is that it opens the door for recurring revenue. Usually, under this model, customers are billed daily, weekly, monthly or even yearly! Most software as a service model, come under the subscription model.

Freemium Model

The freemium model is simply giving out your service for free with the intent of generating revenue through some other means. Take for example Google or Facebook, they primarily don’t charge users for using their service, but then they make money from advertisements placed on their platforms.

Franchise Model

The franchise model is a quick way for a brand to scale and open several offices without having to spend to actualize this. Under the franchise model, the franchisee pays the franchisor a defined amount for using their brand.

Affiliate Model

The affiliate model is when a company or individual gives their product or services to affiliates to promote under certain conditions such as the affiliates get a commission for every sale that comes through their unique affiliate link.

Direct Sales Model

This is a model where the manufacturer of a product sells the product directly without using distributors. This happens for not so large manufactures, you probably have seen a bakery that has a showroom, right where they produce. So in the same spot where they produce they have an outlet where they sell.

In fact, there is one I know where you would literally see them baking right from where you are trying to make a purchase.

Well, I hope through this article, I have been able to help you understand business plan vs business model; the key difference! Just to recap, a business model and a business plan are not the same!

A business model does not have a business plan but a business plan has a business model.  A business plan is incomplete if it doesn’t have a business model; stating how the business makes money.

Thank you for reading business plan vs. business model the key difference. Should you have any questions, please leave a comment below or send a mail to [email protected]

Emmanuel author

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What is the difference between Business Model and Business Plan?

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.

Business Model Definition

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.

Business Plan Definition

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:

• Table of Contents;
• Executive Summary;
• Business and product/service description;
• Market analysis;
• Competitive Analysis;
• Marketing Plan;
• Operational and Management Plan;
• Financial Plan;
• Supporting data and documents.

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.

Business Model vs Business Plan

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!

Who is Daniel Pereira ?

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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Table of contents, comparing business plan vs business model.

• 2 May, 2024

Understanding Business Models

To lay the groundwork for understanding the comparison between a business plan and a business model, it is important to first grasp the concept and importance of business models. Business models serve as the foundation for any successful company, providing direction, creating a roadmap for success, and helping to make informed decisions for sustainable growth and profitability.

Definition and Importance

A business model refers to a company’s plan for making a profit. It encompasses various elements, such as the products or services the company plans to offer, the target market it aims to serve, and the anticipated expenses involved. Having a well-designed business model is crucial for both new and established businesses. It helps attract investment, recruit talent, and motivate management and staff ( Investopedia ).

A business model serves as a strategic framework that guides the organization in achieving its objectives. It outlines how the company creates, delivers, and captures value. By analyzing the components of a business model, companies can identify opportunities for growth, optimize their operations, and adapt to changes in the market.

Types of Business Models

Business models can vary significantly depending on the nature of the business and its industry. Here are some common types of business models:

These are just a few examples of the diverse range of business models that companies can adopt depending on their industry, target market, and competitive landscape. It’s important for businesses to understand the different types of business models and choose the one that aligns with their unique value proposition and market positioning.

By developing a well-defined and effective business model, companies can establish a strong foundation for success and ensure long-term viability in a competitive business environment. The business model sets the stage for the creation of a comprehensive business plan, which further outlines the strategies and tactics necessary to achieve the company’s goals.

Significance of Business Plans

A well-crafted business plan plays a vital role in the success and growth of a business. It serves as a roadmap, guiding entrepreneurs and small business owners towards their goals and helping them navigate the complexities of the business world. Let’s explore the purpose and benefits of a business plan, as well as the key components it should include.

Purpose and Benefits

A business plan serves multiple purposes and offers several benefits to entrepreneurs and small business owners. It provides a comprehensive overview of the business, outlining its structure, goals, and strategies. Some of the key purposes and benefits of a business plan include:

Securing Funding : A well-prepared business plan is essential when seeking funding from investors, lenders, or potential partners. It helps these stakeholders understand the company’s structure and goals, explaining why the business is necessary and how it will differentiate itself from competitors. By showcasing the potential return on investment, a business plan increases the likelihood of attracting financial support.

Guiding Decision-Making : A business plan serves as a reference point for making informed decisions. It outlines the company’s vision, mission, and strategies, providing a framework for decision-making at various stages of the business. It helps entrepreneurs stay focused on their goals and make strategic choices that align with their overall business objectives.

Identifying Strengths and Weaknesses : Through the process of creating a business plan, entrepreneurs conduct a thorough analysis of their business idea, market, competition, and financial projections. This analysis helps identify the business’s strengths, weaknesses, opportunities, and threats. By understanding these factors, entrepreneurs can leverage their strengths and address any weaknesses to increase their chances of success.

Components of a Business Plan

A well-structured business plan comprises several key components that provide a comprehensive understanding of the business and its potential for success. Some essential components to include in a business plan are:

Company Description : This section provides key information about the business, including its goals, target customers, strengths, solutions offered to customers, and competitive advantages. It sets the business apart from competitors and helps establish its unique value proposition ( SmartAsset ).

Market Analysis : A market analysis demonstrates a thorough understanding of the industry and specific market the business aims to enter. It substantiates strengths with data and statistics on industry trends, customer preferences, and competitive landscape. By showcasing market knowledge, a business plan demonstrates why the business can outperform competitors.

Competitive Analysis : This section involves a clear comparison of the business against direct and indirect competitors. It highlights the business’s strengths and weaknesses and demonstrates how it will differentiate itself in the market. By analyzing the competition, entrepreneurs can identify opportunities to position their business strategically.

Products and Services : The breakdown of products and services outlines details about the offerings, suppliers, manufacturing costs, sales projections, and any additional information related to patents or copyrights. This section provides a comprehensive understanding of the business’s offerings and how they fulfill customer needs.

Financial Projections : Financial projections are a crucial component of a business plan, as they demonstrate the potential profitability and financial viability of the business. This includes projected revenue, expenses, and cash flow statements. By providing a clear financial roadmap, entrepreneurs can attract investors and demonstrate the business’s growth potential ( SmartAsset ).

For a more detailed breakdown of the components of a business plan, check out our article on business plan for small businesses .

By creating a well-structured business plan that encompasses these key components, entrepreneurs and small business owners can gain a deeper understanding of their business, increase their chances of obtaining funding, and make informed decisions that drive growth and success.

Business Model vs Business Plan

When it comes to strategic planning for a business, two essential components that often come into play are the business model and the business plan. While these terms may seem similar, they serve distinct purposes and have different focuses. Let’s explore the differentiating factors between a business model and a business plan, as well as how they align and integrate.

Differentiating Factors

A business model is a company’s core framework for operating profitably and providing value to customers. It defines how a business creates, delivers, and captures value ( Shopify ). In other words, the business model outlines the fundamental approach a company takes to generate revenue and sustain itself in the market.

On the other hand, a business plan is a formal document that outlines a company’s goals and strategies for achieving them. It provides a comprehensive roadmap for the business, including details on the target market, competition, marketing and sales strategies, financial projections, and operational frameworks ( SmartAsset ). The business plan serves as a guide for the company’s operations and helps stakeholders understand the business’s structure and goals.

Alignment and Integration

While the business model and the business plan have different purposes, they are closely interconnected and should align with each other. The business model sets the foundation for the business plan, guiding the strategies and decisions outlined in the plan. The business plan, in turn, reflects and supports the business model by providing a detailed roadmap for achieving the goals defined in the model.

The business plan includes components that directly relate to the business model. For example, the company description in the business plan provides key information about the business, its target customers, solutions offered, and competitive advantages, all of which are essential elements of the business model.

The market analysis and competitive analysis sections of the business plan also support the business model. The market analysis demonstrates an understanding of the industry and specific market, while the competitive analysis showcases how the business will differentiate itself from competitors.

Furthermore, the breakdown of products and services in the business plan aligns with the value proposition and revenue streams defined in the business model. It outlines details about the products, suppliers, manufacturing costs, sales projections, and intellectual property considerations ( SmartAsset ).

By integrating the business model and the business plan, entrepreneurs and small business owners can ensure that their strategies, goals, and operational frameworks are cohesive and aligned. This integration allows for a comprehensive approach to business planning, enabling effective decision-making and setting a clear path for sustainable growth and profitability.

In conclusion, while a business model and a business plan serve distinct purposes, they are interconnected and mutually supportive. The business model provides the framework for how a business operates and creates value, while the business plan outlines the strategies and goals to achieve success. By understanding the differentiating factors and ensuring alignment and integration, entrepreneurs can lay the foundation for a successful and thriving business.

Impact on Business Growth

Having a well-crafted business plan can significantly impact the growth and success of a business. Research findings consistently highlight the positive correlation between business planning and growth. Let’s explore these findings and discuss the importance of planning for success.

Research Findings

According to a research study conducted by the University of Oregon, businesses that plan grow 30% quicker than those that do not. The study indicates that while some firms may experience short-term success without a plan, those with a well-developed plan tend to achieve faster and more sustainable growth.

The research also revealed that fast-growing companies are more likely to have business plans in place. In fact, 71% of rapidly expanding businesses had working plans that helped them set sales targets, establish budgets, and actively monitor their progress ( Kreston Pedabo ). This demonstrates the value of planning as a tool for strategic decision-making and goal achievement.

It’s worth noting that the impact of planning tends to be more significant for established businesses compared to startups. A study by Brinckmann, J., Grichnik, D., & Kapsa, D. (2010) found that planning benefits established businesses more as they have access to historical data and can make informed decisions based on actual performance ( Kreston Pedabo ). However, planning is still crucial for startups as it helps guide their initial steps and provides a roadmap for growth.

Planning for Success

The importance of planning cannot be overstated when it comes to achieving business success. Here are some key reasons why planning is essential:

Direction and Focus : A business plan provides a clear direction and focus for the organization. It outlines the company’s vision, mission, goals, and strategies, ensuring that all team members are aligned and working towards a common objective.

Resource Allocation : Planning helps allocate resources effectively. By analyzing financial projections and identifying potential risks, businesses can make informed decisions about resource allocation, ensuring that funds are allocated to areas that have the greatest potential for growth.

Risk Management : Through the planning process, potential risks and challenges can be identified and mitigated. This proactive approach allows businesses to develop contingency plans and strategies to minimize the impact of unforeseen circumstances.

Investor Appeal : A well-prepared business plan is often a prerequisite for attracting investors. Investors want to see a comprehensive plan that demonstrates a clear understanding of the business model, target market, and growth potential ( business plan for investors ). A robust plan increases the chances of securing funding and support for business growth.

Adaptability and Flexibility : A business plan is not set in stone. It should be regularly reviewed and updated to reflect changes in the market, industry, and internal factors. This allows businesses to adapt and pivot when necessary, ensuring they remain competitive and responsive to evolving customer needs.

By acknowledging the impact of planning on business growth, entrepreneurs and small business owners can prioritize the development and implementation of a comprehensive business plan. Planning provides a roadmap for success, increases the likelihood of survival, and positions businesses for sustainable growth in an ever-changing marketplace.

Business Planning for Startups

For startups, business planning plays a crucial role in setting a solid foundation for success. This section explores the success rates of startups and emphasizes the importance of planning in their journey.

Success Rates

Startup ventures face a significant level of risk and uncertainty, making it essential to have a well-thought-out business plan. Studies have shown that a considerable number of startups fail within the first few years of operation. For instance, in Nigeria, 61% of startups fail within the first nine years, and in the US, only five out of ten startups survive after five years.

However, having a comprehensive business plan can significantly increase the chances of success. Surprisingly, 70% of companies that last for five years are said to do so because they have a well-crafted business plan. Without a solid plan in place, the odds are not in favor of startups. Approximately 25% of enterprises without a business plan fail within the first two years of operations ( Kreston Pedabo ).

Importance of Planning

The importance of planning for startups cannot be overstated. Research conducted by the University of Oregon found that businesses that plan had a 30% higher growth rate compared to those that did not plan. While some startups may experience short-term success without a plan, those with a well-crafted plan tend to grow quicker and achieve greater overall success.

A business plan serves as a roadmap for startups, helping them define their goals, strategies, and financial projections. It provides a clear vision for the business and guides decision-making processes. With a plan in place, entrepreneurs can effectively allocate resources, identify potential challenges, and develop strategies to overcome them.

Additionally, a comprehensive business plan is often required when seeking funding from investors or financial institutions. It demonstrates the startup’s understanding of the market, competition, and potential risks, thereby instilling confidence in potential investors. For more information on creating a business plan tailored for investors, please visit our article on business plan for investors .

It is worth noting that while business planning is essential for startups, it is also advantageous for established businesses. Established businesses benefit from planning by leveraging existing data and informed strategies to drive growth and navigate challenges. Planning helps establish businesses make informed decisions and adapt to changing market conditions ( Kreston Pedabo ).

In conclusion, startups that embark on their entrepreneurial journey without a well-crafted business plan face higher odds of failure. Planning is crucial for setting clear goals, guiding decision-making, and securing financial support. By developing a comprehensive plan, startups can increase their chances of success and navigate the challenges that come their way.

Real-World Business Models

When it comes to running a successful business, choosing the right business model is crucial. Different industries and business types require different approaches to generate revenue and reach customers. In this section, we will explore three common real-world business models: the brick-and-mortar model, the direct-to-consumer model, and the subscription and freemium models.

Brick-and-Mortar Model

The brick-and-mortar model is one of the most traditional and widely recognized business models. It involves a physical storefront where businesses sell products or services directly to customers. Whether it’s a local bakery, a clothing boutique, or a hardware store, brick-and-mortar businesses tap into in-person customers and build brand awareness through exposure.

One of the key advantages of the brick-and-mortar model is the ability to provide a personalized and hands-on shopping experience. Customers can touch, feel, and try products before making a purchase, which can enhance their overall satisfaction. Additionally, having a physical presence in a community allows businesses to establish strong relationships with local customers.

However, brick-and-mortar businesses also face challenges such as high overhead costs, rent, and staffing expenses. Additionally, they must adapt to changing consumer behaviors, especially in an increasingly digital world. To stay competitive, many brick-and-mortar businesses are now also incorporating online sales channels to reach a wider customer base.

Direct-to-Consumer Model

The direct-to-consumer (D2C) model has gained significant popularity in recent years. This model allows businesses to sell their products or services directly to customers, bypassing third-party retailers like Amazon. By cutting out the middleman, businesses can have greater control over the entire customer experience and build direct relationships with their consumers.

The direct-to-consumer model offers several benefits, including higher profit margins and the ability to gather valuable customer data and feedback. It also allows businesses to maintain full control over their branding, marketing, and pricing strategies. However, it requires businesses to develop their customer base and establish brand recognition without the support of an established platform.

To succeed with the direct-to-consumer model, businesses often leverage e-commerce platforms and digital marketing channels to reach their target audience. They may also invest in strategies such as influencer marketing and social media advertising to build brand awareness and drive sales.

Subscription and Freemium Models

The subscription business model has gained traction in various industries, from meal kit delivery services to media streaming platforms. With this model, businesses charge customers a recurring fee for access to a product or service. The subscription model provides a predictable revenue stream and relies on building strong customer relationships and loyalty.

On the other hand, the freemium model offers consumers access to a basic version of a product or service for free, but charges for additional features or unlimited access. For example, The New York Times allows readers to access a limited number of articles for free before requiring a subscription. Spotify offers both a free version with ads and a premium ad-free version.

Both the subscription and freemium models rely on providing value to customers and enticing them to upgrade to a paid version for enhanced benefits. These models often require businesses to focus on customer retention and continuously deliver high-quality experiences to justify the ongoing payments.

By understanding these real-world business models, entrepreneurs and small business owners can make informed decisions about which model aligns best with their offerings and target audience. Each model comes with its own set of advantages and challenges, and finding the right fit can significantly impact the success and growth of a business.

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Business models versus business plans: quick guide.

Regardless of past experience and knowledge, starting a business can be challenging and, at times, feel overwhelming. There’s so much to learn—not only about how best to make and market a new product or service, but all the terminology that goes into the planning process. Terms like “business plan” and “business model” get tossed around a lot, but it’s not always clear what each term means. Is there much difference between them?

The short answer is “yes,” and for entrepreneurs and business owners, it’s critical to understand the distinction.

The Business Plan

A business plan offers a description of how your business operates, its objectives for growth and financial success, and how it aims to get there. Essentially, it articulates the why behind a business.

Key elements of a business plan include:

• Executive summary and mission statement
• Projected staffing and equipment needs
• Short- and long-term marketing strategy
• Financial statement, including anticipated startup expenses and capitalization
• Outline of management structure and operational processes

According to the U.S. Small Business Administration (SBA), a solid business plan “guides you through each stage of starting and managing your business .” It serves as a “roadmap for how to structure, run, and grow your new business.”

But this plan isn’t solely for the new owner’s use. It can be critical in the search for funding or to enlist a prospective business partner. As the SBA notes, “Your business plan is the tool you’ll use to convince people that working for you—or investing in your company—is a smart choice.”

The Business Model

A business plan serves as a detailed statement of purpose and operations. As the Business Plan Shop notes, a business model “is the mechanism through which the company generates its profits ,” defines “how the company is positioned within its industry’s value chain,” and the ways in which it works “with its suppliers, clients, and partners in order to generate profits.”

What goes into a business model? According to GoForth Institute, there are five key elements:

• A description of your product (or service’s) benefits and profile of a typical customer
• The place where the business fits in the value chain
• The estimated value your offering has for the target customer
• Sources of projected revenue and “cost drivers”
• An identifiable competitive advantage

All of these elements help the startup owner understand how the new business will make money.

Where things can potentially become confusing is in the array of prospective business models an entrepreneur can choose from. Among these models are:

• Manufacturer - Selling directly to customers or through a middleman
• Distributor - Purchasing products from manufacturers and reselling to retailers or general public
• Retailer – Buying products from wholesaler or distributor and selling to the public
• eCommerce – Selling products and services online
• Franchise – Employing a parent business’s model and brand (with payment of royalties) and selling to the public
• Brick-and-mortar – An office, store, or shop where customers interact face-to-face and make purchasers directly from retailer, wholesaler, or manufacturer

There are other business models to choose from as well, such as operating a home-based business, online marketplace, or a subscription service. Everything depends upon the type of product or service you want to sell, and which model is best designed to achieve that goal.

For a budding entrepreneur or even a seasoned serial business owner, understanding the distinction between a business plan and a business model can be daunting. The good news is, if this is a challenge you’re facing, you don’t have to do it alone.

The Alternative Board (TAB) serves as a valuable resource for business planning, strategy, and sales . TAB members are veteran business leaders and owners, with the skills and experience needed to help their fellow members build their business. Learn more about how a TAB Business Advisory Board can guide the way to new growth and profits today!

Read our 19 Reasons You Need a Business Owner Advisory Board

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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 concept:  A short description of an opportunity, including a description of your average customer; the benefit of your product or service to the customer; the product or service; and the way you’re going to get your product or service to the customer.
• Value chain position:  Your business’ position on the chain of activities through which products and services pass to get from you all the way to the end user.
• Calculating customer value:  An estimate of the value of the tangible benefits your customers will receive by purchasing your product or service.
• Revenue sources and cost drivers:  Identifying your sources of revenue, and activities that come at a cost.
• Competitive advantage:  The state when customers perceive your products or services to be superior to your competition.

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:

• Where are we now?
• Where do we want to be?
• How are we going to get there?

And is usually written for one or more of these five reasons:

• To test the feasibility of your business idea and work out any bugs on paper first.
• To develop strategies ahead of time for marketing, finance, operation and human resources, instead of when you’re in the fast-paced start-up stage.
• To get funding, such as a bank loan.
• To attract investors.
• To have a roadmap to follow for at least the first year in business.

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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The Differences Between a Business Plan & Business Model

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What is a strategic business plan, business plan vs. business model.

• The Importance of a Business Plan
• The Chief Elements of Business Models

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.

Business Plan vs. Business Model

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.

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.

Interdependence

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.

The Need to Adapt and Change

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.

• The Business Plan Shop: Business Model Vs. Business Plan
• Wikipedia: Business Model
• Harvard Business Review: What is a Business Model?
• Entrepreneur: An Introduction to Business Plans

John began his 25-year career in the editorial business as a newspaper journalist in his native Connecticut before moving to Boston in 2012. He started fresh out of college as a weekly newspaper reporter and cut his teeth covering news, politics, police, and even a visit from a waterskiing squirrel. He went on to work in the newsrooms of several busy daily newspapers, and developed a love for detailed storytelling, focusing on the lives and diverse tales that all people have to offer. Moving on to the business arena later in his career, John worked as a managing editor for a healthcare publishing company and a technology software firm. He’s used his background in broadcast journalism as a webinar moderator, voice-over specialist, and podcast narrator. John also holds a master’s degree as an elementary school teacher and spent 10 years working with and tutoring students of various ages and backgrounds, including multilingual students and students with special needs of all ages.

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A complete Guide on Business Model vs Business Plan

• August 19, 2020
• Entrepreneurship Venture Capital Funding

Introduction

Business Model and Business plan are interrelated to each other. Lets see a brief difference between business model vs business plan. Business Model acts as a centre for the business plan .

A business model is a framework used to design and depicts how a business might create and capture value. The business plan is a document explaining how a business might become profitable.

A business model is made to be tested while a business plan’s primary goal is to gain investments. If I talk about stages, designing a business model comes first, then we create a plan.

This plan describes strategies involved to build the business and match the plan with the business model.

In this blog, I will start with the difference then some key considerations involving why we should opt, how to write, and some examples of business models and business plans.

We would also be covering components of the business model that can be used while designing a business model canvas. The business model canvas is a tool which helps you to understand a business model in a clear and structured way.

What are the main differences between the business model and the business plan?

Most entrepreneurs start with a strong vision to work on a perfect ideal plan. Instead of chasing an ideal plan, begin with a written description. This description should include who you are, what your ideas are, and why you are in that particular business.

Let’s take an example: If you are selling jewellery online, e-commerce is your business model. Your business plan is to sell jewellery.

Business Plans can be long and time-consuming. So, we need to format the plan properly. A business plan is a document containing detailed future projections such as tactics, goals to cover.

Business Models are structured proposals of a business containing an outline that is easy and less time-consuming. A one-page business model explains how an organization is working with the main idea.

This makes a business model fast, concise, and portable. I will discuss the critical difference from two perspectives:

• External resources including stakeholders, investors, and other parties
• Internal resources including top management, owners, and shareholders

External Resources: Business model vs Business Plan?

If you want to attract investors and grow your business through external resources, a detailed plan is needed. This allows investors to understand the several parts of your business.

If I talk about the main ingredient of a business plan is a set of projections for three-five years. The interests of investors depend on whether your business model is scalable or not.

While investors will also want to know what kind of business model you want to build. The main idea is to show your business future projections and to address the kind of resources needed to get there through a business plan.

So, for external subjects to know about your business and invest in it, the business plan is the best tool.

Internal Resources: Business plan vs Business model?

To understand your business, a business model is one of the most effective. For instance, in a start-up phase, the business model canvas and the lean startup canvas are the most suited.

Each of those tools will help you to build a different kind of business. If you want to understand or design a business model that can help you grow, the business model frameworks are the most suited, vs business plan.

According to   Alan Gleeson , who is the General Manager of Palo Alto Software, Ltd recently answered the difference between business model & business plan in a guest post on TechCrunch : –

“It is worth clarifying the business model vs business plan. A business plan details the business opportunity in a document whereas a business model represents a one-page visual representation or a simple verbal description”.

So if you are a technology-based startup who is looking to raise venture capital, then your business plan should focus on the Venture Capital with a PowerPoint slide deck and an executive summary.

However, if you are a coffee shop looking for a modest investment then the information should include a simple business plan.

Modern business planning is agile, flexible, concise, and more about goal setting than bound physical documents.

This planning process brings numerous benefits for the entrepreneur, such as an ability to look at the operations, to ensure internal focus and cash flow management.

• Business Model Canvas vs Business Plan

Business Model Canvas and Business Plans are useful for an organization to grow. It depends on which stage of the project your company is working in.

Let us discuss the difference between the two and when they should be prepared for the growth of the business.

Business Model Canvas and Business Plan serve a very different purpose. If you are still checking and testing out different ways to roll out your business, BMC is the right place to start.

But, if you are looking for a loan from a bank or an investment for your business, a BMC is inadequate. Rather you should have a business plan. Business Model Canvas helps you, the founder, to figure out the business model and design it accordingly.

Business Plan is for an external stakeholder to analyze your business. The Business Model Canvas functions as a guide. It helps in quick communication between the owners of the business and its stakeholders.

So, let’s take an example of a startup business to understand it clearly. In the startup world, everything is highly changeable. Your business model or target audience can be changed in a month after you started.

And, can you imagine, you spent 3-5 weeks to write a full Business Plan & now you need to rewrite it again because some of the core points have changed? So, for a Startup business model canvas is highly preferred.

If you’re working on a project for more than one year and you’re thinking of asking for funding to an investor, you should work hard to write a great business plan, including an investor pitch.

• Business Model
• Purpose of Business Model

Business Models are necessary for the smooth functioning of every organization. They help in maintaining a close relationship with the customer.

Business Models focus on customer feedback that includes the problems and needs of the customers once the product or service is distributed to them.

How to write a Business Model?

A good Business Model describes the marketing, operations, and distribution strategies of a company. It also includes the analysis of the organizational structure and amending them to sustain a competitive edge.

1. Operational Outline- Design a pictorial view of business operations on a flip chart with circles and labels.

Define the interrelation between them to promote sales, distribute products, target customers, and revenue generation for your team as shown below.

2. Formatting Business Model – Format your business model on a template. You can include the details about different types of customers and how your products and services are valuable to them.

Prepare the total cost incurred for production, employees, and material. Further, prepare a  list of suppliers and partners involved in your business.

3. Operational Business Model – Adopt the “Bricks and Mortar” Business Model to attract local customers who want to choose the products and services provided by your store.

If the customers are from different geographical regions, then target the audience through the Internet. Also, plan to utilize company resources and maintain business profits. Focus on getting new customers and potential risks or threats to the business.

4. Additional Add up Values – Recognize the different methods for serving your customers with products and services. Maintain customer relations based on various segments and target potential customers.

Business Model Example

Let us discuss the different Business Model Examples in different segments.

1. Advertising- Advertising model includes content creation and displaying it in the visual form of advertisement to the readers and viewers. Examples are YouTube, New York Times.

2. Affiliate- Affiliate model uses links embedded in the content through the internet. Examples are TopTenReviews.com, TheWireCutter.com.

3. Brokerage- Brokerage models are mainly used by real estate agencies that involve brokerage transaction fees levied either to the buyer or seller or both by the brokers. Examples are century 21, Orbitz.

4. Crowd sourcing- A large number of people are contributing content for your site in exchange for access to other content. Examples are YouTube, Dell.

5. Freemium- Freemium provides free primary services and charges for premium services. Examples are LinkedIn, Mail chimp.

6. Franchise- Franchise is selling a methodology for starting and running a business. Examples are McDonald’s, Allstate.

Check Your Business Worth And Get The Highest Price For Your Business

Components of business model  canvas.

There are different components and elements of a business model. These are known as the main building blocks of a business which provides information regarding customers, finance, infrastructure & offers related to business.

1. Customer Segments- It defines the customer according to the segment based on the products and services offered to them.

2. Value Propositions- These add up the value to the products and services offered to the customer based on their performance, brand status, design, costing, accessibility, and newness.

3. Distribution Channels – They act as a medium between the customer and the organization. A quick, easy, and the most efficient channel is always for the distribution of products and services.

4. Customer Relationships- It helps in maintaining customer relationships according to segments to achieve financial success and stability.

5. Revenue Streams – This strategy provides a way in which a company can engage its customers to buy its products and services.

6. Key Resources- Key resources such as human, financial, intellectual, and physical provide value to the customers.

7. Key Activities – Relevant Key activities are necessary for every business as they help in maintaining revenue streams to make an efficient business model.

8. Partnerships- Partnerships with high-quality suppliers and partners reduce the risks to maintain efficient and streamlined operations.

9. Cost Structure – Cost structure is the total cost that will be incurred for the establishment of a particular business.

Business Model Canvas  

Business Model Canvas is a pictorial representation that provides a brief idea about your proposed business. They also include a visualizing description of business models and their values.

Business Model Canvas comprises all business components such as customer segments, value proposition, revenue streams, channels, Customer relationships, Key resources and activities, Partners, and Structure of Cost.

Business Plan

Purpose of the business plan.

The main purpose of a business plan is to focus on achieving business goals, secure outside financing, mapping growth, and including the right talent for the organization.

It acts as a blueprint for expanding and running a business in the right direction at every step. It also prepares for the future with clarity about the goals and achievements.

Every company should adopt a business plan as it acts as a decision-making tool by formatting the business goals and its intended audience.

How to write a business plan?  

Business Plan provides a road map for the growth and success of every business. It also helps to find investors and business partners. It  includes some components as

1. Executive Summary- It is the brief of the business plan that includes mission and statement, primary information, products and services, location, and employees.

2. Company Description- This includes detailed information about a company such as customers, business problems, nature of products, and services catered.

3. Market Analysis- It helps in understanding the target market, its trends, the potential for growth in the existing market.

4. Organization and Management- This depicts the organizational chart with vision and mission regarding the department and functioning of the company.

5. Marketing and Sales- Marketing involves different marketing strategies required in the business while the sales are responsible for covering the return on investments.

6. Funding Requests- Funding requests can be online or in a substantial manner.

7. Appendix and Glossary- Every business should provide appendix and glossary for the supporting documents and references to the data.

• Business Plan Examples

Let us discuss some business plan examples in the different sections of the business.

• Construction and Engineering
• Travel and Transport sector
• Hotels and Hospitality
• Children’s Education
• Computers and the Internet
• Consulting, Health, and Beauty
• Food and Farming, Medical and Healthcare
• Personal Services, Non-Profit Organizations
• Manufacturing and Online business.

For instance, let us consider a business plan for the Manufacturing sector. The manufacturing is mainly adopted by the companies who want to start new manufacturing, production, or fabrication business.

This plan helps in knowing the business profile and description, detailed investor information, risk factors involved. It also includes products, and services to be used, market research, sales and marketing strategies, operations, and financial analysis.

Types of Business Plan  

There are various business plans adopted by organizations depending on their nature of business.

1. Startup Business Plan- It is for the enterprises that want to start their business. This mainly includes market evaluations, products and services provided, financial analysis, and projected management team.

2. Internal Business Plan- These plans describe the operational costs and profitability, the company’s actual position, marketing, hiring, and technical costs.

3. Strategic Business Plan- This plan includes the company’s goals in the form of implementation schedule, objectives, and critical success factors and how to achieve them.

4. Feasibility Business Plan- It consists of the description of products and services, required capital, and target demographics.

5. Operations Business Plan- They are part of internal plans that include the company’s main operations with employee responsibilities.

6. Growth Business Plan- This plan provides an in-depth description of the proposed growth plan and investment for its potential investors.

So, the difference between a Business Model and a Business Plan is that they are both parts of an effective Strategic Planning process. A business model is all about VALUE!

What value are you creating, whom are you creating this value for, how are you delivering this value to said target?A great business plan is contingent on RESOURCES – time, infrastructure, manpower, technology, competences & capital.

They both help a business to grow. Using the right one means that your company can have a clearer process and better products and services.

As I said above, the business model is like a destination, and the planning is how you will reach your destination. So, let me add that the planning I recommend isn’t just a map or a route; it’s a GPS, real-time traffic and weather information.

And in that analogy, the business model is the destination. Hence, having an effective Strategic Plan is a powerful business advantage that dramatically increases the odds of success.

Alcor private equity and Venture capital firm  also empowers founders and businesses to grow their companies at all stages.

• Business model canvas
• Business Model Examples
• Business Model vs Business Plan
• business plan
• Components of Business Model
• Difference between business model and business plan
• global investors
• high-end AI platform
• How to Write a Business Model?
• How to write a business Plan?
• Pre-screening
• Purpose of Business Plan
• Risk Assessment
• Types of Business Plans
• Venture Capital Funding
• What is a Business Model Canvas
• What is a Business Plan

Share Dilution: Meaning, Calculation, Example, Diluted EPS & Protection

Mastering Entrepreneurial Skills: Transforming Ideas into Reality

B2B Marketplaces: The Next E-commerce Ventures to be Under Spotlight

Enterprise Software Pricing Models And Their Impact on Startups

10 Effective Strategies to Manage & Lead Technical Teams

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Difference between business model, business plan, business case

The business model

The business plan, the business case, the chronological order.

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