difference between business plan and model

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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 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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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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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

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: When And How To Use Them

A business model is a holistic framework to design how a business might create and capture value. A business plan is a document explaining how a business might become viable. Where a business model is made to be tested, a business plan’s primary goal is to gain investments. 

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The key difference between a business model and a business plan

It is easy to confuse a business model with a business plan . Yet those tools have specific functions, in some cases similar, in most other cases completely different.

Indeed, while a business model is a framework to understand the way an organization works, a business plan is a document that helps to understand the future strategy of an organization and its expected performance in a three to five years time frame.

While in some cases, a business plan can also serve the purpose of better understanding your own business, and in some other cases, the business model can be comprised within the business plan .

Indeed, as an investor, I want to know exactly how your business works or how you think it will work in the future. Keeping a distinction between those tools is critical.

In particular, I want to focus on the critical difference from two perspectives:

• external (investors, stakeholders, and other parties)
• internal (owners, top management, shareholders)

External:  business plan or business model?

If you’re looking for a tool whose aim is to show how attractive your business is, a business plan is the most suited for that.

Indeed, suppose you want to attract investors and grow your business via external resources.

In that case, a detailed business plan is the most effective way to allow those investors to understand the several parts of your business.

Also, the business plan is a way to show where you see the business in the future. Indeed, one key ingredient of a business plan is a set of projections for three-five years.

While investors will also want to know what kind of business model you want to build (depending on whether or not your business model will be scalable will make or break the interests of investors).

The primary tool to show where your business will be in the future and to address the kind of resources needed to get there is the business plan. In short, for external subjects to know about your business and invest in it, the business plan is the best tool.

Internal: business plan or business model?

Among the tools to leverage on to understand your business, a business model is one of the most effective.

Indeed, the business model is a framework (usually a one-page) that allows you to understand how your business works from several perspectives.

Depending on what kind of business you’re trying to build or where you want to steer your organization, you might want to look at a few tools, such as:

• FourWeekMBA Busines Model 
• Business Model Canvas
• Blitzscaling Business Model Innovation Canvas
• Value Proposition Canvas
• Lean Startup Canvas

Each of those tools will help you to build a different kind of business.

For instance, in a start-up phase, the business model canvas and the lean startup canvas are the most suited.

In a phase of scale-up, the lean startup is better suited than the business model canvas.

Instead, if you’re trying to blitzscale your business , the Blitzscaling Canvas will be your best companion.

In conclusion, if you’re looking for a way to understand better your business in the present or how to design a business model that can help you grow, the business model frameworks are the most suited to the business plan .

In some cases, though, a business plan might also work for that purpose, especially a one-page business plan.

Key takeaway and resources

A business plan is a tool that is most suited to shot external stakeholders where your business is headed and why they should finance or invest in its future.

The business model instead, is a framework that helps you assess how your business works from several angles and the kind of actions you can take in the now.

Below you can find an example on how to build a one-page business plan as well:

Key Highlights:

• Business Model vs. Business Plan: A business model is a comprehensive framework for creating and capturing value in a business, while a business plan is a document that outlines how a business can become viable. The primary goal of a business plan is often to secure investments.
• Key Difference: The main distinction between a business model and a business plan lies in their functions. A business model explains how an organization operates, while a business plan focuses on the future strategy and expected performance over three to five years.
• External Perspective: For external stakeholders like investors and partners, a detailed business plan is essential. It helps them understand various aspects of the business and provides projections for the future. Investors also want to know about the scalability of the business model.
• Internal Perspective: When looking to understand the current state of your business or design a business model, tools like the Business Model Canvas, Lean Startup Canvas, and others are more effective. These tools offer insights into how the business operates and can guide decision-making.
• Choosing the Right Tool: The choice between a business model and a business plan depends on your goals and the stage of your business. For startups, the Lean Startup Canvas and Business Model Canvas are useful. In a scale-up phase, Lean Startup tools might be more suitable, and for rapid growth , the Blitzscaling Canvas can be valuable.
• Key Takeaway: A business plan is best suited for presenting your business to external stakeholders and securing financing, while a business model is a framework for understanding your business from multiple angles and making informed decisions in the present.
• Resources: Various tools, such as the Business Model Canvas and Lean Startup Canvas, can help you analyze and improve your business model. A one-page business plan can also be effective in clarifying your business’s core problem, target customers, and distribution channels .

Case Studies

Case Study 1: Nike – Business Model vs. Business Plan

• Nike utilizes its business model to create, deliver, and capture value. It focuses on the core components of a business’s operations and revenue generation.
• When considering external stakeholders like investors, Nike might develop a detailed business plan to showcase its future strategies and financial projections.

Case Study 2: Coca-Cola – Business Model vs. Business Plan

• Coca-Cola employs digital marketing channels like social media and email marketing to better communicate its products and engage with consumers.
• Coca-Cola may use a business model framework to understand how it creates and delivers value through marketing , while a business plan could be used to outline future marketing strategies and financial goals.

Case Study 3: Amazon – Business Model vs. Business Plan

• Amazon uses technology not only for its e-commerce platform but also integrates customer feedback into its product design, enhancing its business model .
• In the process of attracting investors or lenders, Amazon might create a comprehensive business plan to demonstrate its long-term growth strategy , financial viability, and risk mitigation.

Case Study 4: Tesla – Business Model vs. Business Plan

• Tesla leverages technology to shape its electric vehicles, constantly improving features and performance based on user feedback and data collected from their vehicles.
• Tesla could use a business model to understand how it delivers value through innovation and customer feedback. Simultaneously, a business plan might outline its future growth strategies and financial projections.

Case Study 5: Airbnb – Business Model vs. Business Plan

• Airbnb operates a two-sided platform that connects hosts and travelers, creating interactions that generate value for both parties.
• To secure investments for expansion or growth , Airbnb may develop a business plan that outlines its financial outlook, expansion strategies, and risk management, while its business model emphasizes how interactions drive its value.

Case Study 6: Uber – Business Model vs. Business Plan

• Uber’s platform connects riders and drivers, creating a multi-sided marketplace driven by network effects .
• Uber could use a business model to understand the dynamics of its marketplace. When seeking investors or funding, it might present a comprehensive business plan highlighting its growth potential, financial projections, and strategies to address market challenges.

Case Study 7: Apple – Business Ecosystem vs. Business Plan

• Apple’s App Store has evolved into a thriving business ecosystem that benefits both the company and app developers.
• While the business ecosystem concept is central to Apple’s strategy , the company may use a business plan to outline its future ecosystem development, financial projections, and governance design for potential investors.

Case Study 8: Ethereum – Business Ecosystem vs. Business Plan

• Ethereum’s blockchain platform facilitates the creation of decentralized applications (dApps) and smart contracts within a larger business ecosystem .
• Ethereum might use a business model to understand how its ecosystem creates and captures value. For attracting investors or funding, a business plan could illustrate its growth strategies, financial outlook, and governance design.

Key Difference – Business Model vs. Business Plan

• A business model is a strategic framework for understanding how a business creates, delivers, and captures value. It focuses on the core components of a business’s operations and revenue generation.
• A business plan is a comprehensive document outlining a company’s goals, strategies, financial projections, and operational details, often used for fundraising and as a roadmap for the business.

Choosing the Right Tool

• The choice between a business model and a business plan depends on the goals and stage of the business. While a business model helps understand the present and guide innovation , a business plan is primarily for external stakeholders, showcasing future strategies and financial projections.

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Related Strategy Concepts:  Go-To-Market Strategy ,  Marketing Strategy ,  Business Models ,  Tech Business Models ,  Jobs-To-Be Done ,  Design Thinking ,  Lean Startup Canvas ,  Value Chain ,  Value Proposition Canvas ,  Balanced Scorecard ,  Business Model Canvas ,  SWOT Analysis ,  Growth Hacking ,  Bundling ,  Unbundling ,  Bootstrapping ,  Venture Capital ,  Porter’s Five Forces ,  Porter’s Generic Strategies ,  Porter’s Five Forces ,  PESTEL Analysis ,  SWOT ,  Porter’s Diamond Model ,  Ansoff ,  Technology Adoption Curve ,  TOWS ,  SOAR ,  Balanced Scorecard ,  OKR ,  Agile Methodology ,  Value Proposition ,  VTDF

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Business Model vs. Business Plan

You might be wondering what the difference is between a business plan and a business model. The truth is, they are different things with different purposes. 

The main difference between a business plan and business model is that a business plan outlines your goals and strategy to grow your company, while a business model shows you how to generate revenues. Read on to learn more about this subject, including what types of business models there are and how to figure out which type best suits your situation.  

What is a Business Model?

What is a Business Plan?

What Should Be Included in a Business Plan?

During the business planning process, especially if you are trying to attract investors, there are 10 essential elements of a business plan which you must include as follows:

• Executive Summary
• Company Description
• Customer Analysis
• Market Analysis
• Competitive Analysis
• Marketing Strategy & Plan
• Operations Plan
• Management Team
• Financial Plan (Performance & Forecasting)

For each of these sections, you should provide an in-depth description of your research, analysis, and expected financial performance. You can learn more about the components of a business plan and review our repository of 100+ business plan examples to help you get started on writing your own business plan.  

What Should Be Included in a Business Model?

A business model should include the details of every way in which your business makes money. It’s important not to leave anything out, even if it seems insignificant. Every dollar counts!   

How Does a Business Model Differ from a Business Plan?

Business models outline how your company generates revenues. On the other hand, business plans focus on the specifics of how the business will achieve sales and growth over a given period of time, typically five years. Business plans discuss your business model among other things and are critical if you want to gain investments to grow your business.  

The business model strategy is very different from a business plan. While they overlap a bit, the critical difference is that a business plan outlines the goals and business strategy while the basic business model shows you how to make money. 

Your needs will change over time so it’s important to be able to switch between these two documents when needed. For example, if your goal is long-term growth then you may want more information about what type of strategy would work best for this situation or which resources might help get there faster. On the other hand, if you’re looking for some immediate income then paying attention to the various types of models available could give you an idea of where to start with generating enough sales quickly without too much cost upfront.  

How to Finish Your Business Plan in 1 Day!

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With Growthink’s Ultimate Business Plan Template you can finish your plan in just 8 hours or less!

OR, Let Us Develop Your Plan For You

Since 1999, Growthink’s business plan consulting team has developed business plans for thousands of companies who have gone on to achieve tremendous success.

Click here to see how our professional business plan consultants can create your business plan for you.  

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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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Business Model vs Business Plan What’s the Difference?

Free Business Model Canvas Template

• January 2, 2024

Business plan, business model, strategies, financial forecasts, and whatnot!

Starting a business means encountering new terms every day, but not exactly knowing when to use what!

Two such terms are business plan and business model. People often use them interchangeably, and it’s okay if you do too. Today we’ll change that so you know which to use when.

In this article, we’ll conduct a thorough business plan vs. business model comparison to understand their meanings and know their purpose.

So, let’s kick-start this journey now.

What is a business model?

A business model is a mechanism that directs how you create, deliver, and attain value in the market; it’s the profit-generating plan of your company.

This involves identifying your value proposition, targeting specific customer segments, defining revenue streams, leveraging key resources, and forming strategic partnerships.

Simply put, it’s how you sell your product to make money.

Components of a business model

The essential elements of a business model are:

• Customer segments
• Value proposition
• Revenue streams
• Customer relationships
• Key activities
• Key resources
• Key partners
• Cost structure

What is a business plan?

A business plan is a comprehensive document that outlines your entire business operations. It covers everything from launching products and setting milestones to planning an exit strategy, detailing every step of your business journey. A business plan describes what a company does, its vision & goals, and its strategies.

Essentially, a business plan serves as a roadmap for how your business will operate, grow, and achieve success.

Components of a business plan

Here are the core components of a business plan:

• Executive summary
• Company description
• Products and services
• Market analysis
• Customers analysis
• Competitors analysis
• Marketing and sales plan
• Operations plan
• Financial plan

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Four key differences: business model vs. business plan

Now that you know the exact meaning of a business model and business plan, it’s time to understand the difference.

Your business model focuses on optimizing the internal and external company operations to earn maximum profits. It explains your relationship with dealers, distributors, service partners, customers, and target audience.

Conversely, your business plan focuses on how you set business goals, create strategies, make predictions, and manage labor to sustain and scale your business. It also outlines your relationship with your customers, competitors, industry, and the market.

2. Benefits

Adopting the right business model(s) help you:.

Gain a competitive edge

Incorporating a unique business model amazes your audience and attracts them to be your first-time customers. It also provides you with a competitive edge over other businesses in your industry.

Ensure sustainability and scalability

A business model pushes an entrepreneur to have monthly update meetings and plan what the next month should exactly look like. Many businesses shut down due to poor financial management, which is why a business model is required.

From economic storms to unexpected difficulties, a business model ensures both sustainability and scalability.

Inspires trust in investors

Investors know the failure rate of small businesses, which is why incorporating a clear business model provides a sense of security. They will also know that you have a strategy and what your profitability expectations are for the upcoming years.

Writing a good business plan helps you:

Test the viability of your business idea

A business plan defines the target customers and their willingness to pay for your product or service. This way, your business idea will be validated, helping you decide whether to move forward with it or not.

Acquire funding

If you want funds from banks, investors, or other parties, then you’ll require proper financial details like goals, plans, and projections. A good business plan will help you impress investors.

Plan for exit

A business plan includes strategies and a timeline to accomplish any task, which helps in planning your business’s exit too. While handing over your business or closing it directly, meeting the financial goals is also important—which are very specific in the business plan.

Other advantages of writing an ideal business plan include:

• Identifying market gaps and threats
• Organizing and planning business processes
• Forecasting financial estimates and market trends
• Creating strategies to achieve objectives

While adopting a business model

First, consider the scalability of your business, then measure the value you offer. List down your competitors, segment your customers, see the market potential, and then choose a business model.

Here are other points to consider:

• Aim to receive validation from prospective customers
• Modify assumptions to match customer preferences
• Focus on the current financial position

While creating a business plan

Answer a few questions first, like where you think your business will be in 10–15 years, what’s your expected income, or what are your projections.

• Aim to find factual information through research
• Support assumptions through data from customer analysis
• Focus on the current and future financial position

Business models

A business model outlines how a company creates, delivers, and captures value. Understanding different types of business models can help identify the best approach for their businesses, ensuring growth. Some of the types of business models are:

• Subscription model
• Freemium model
• E-commerce model
• Advertising model
• Franchise model

Business plans

Each type of business plan serves a unique role, whether it’s for a startup looking to enter the market, an existing business planning for growth, or a company looking to improve its operational efficiency. Here is an overview of the most common types of business plans:

• Startup business plan
• Lean business plan
• Traditional business plan
• Internal business plan

The bottom line

There’s no standard answer for business plan vs. business model; the choice entirely depends on your business’s specific needs and objectives.

Additionally, planning is an ongoing process. You can’t create a business plan or a business model and rely on that for years to come!

So, to keep your business model and business plan updated, explore a business plan app like Upmetrics . It has a business model canvas template, sample business plans, and an AI assistant to help you plan as many times as you need.

Build your Business Plan Faster

with step-by-step Guidance & AI Assistance.

Frequently Asked Questions

Can i write a business plan without a business model.

No, a business plan is like a roadmap for your business—but it also needs direction. This direction comes from a business model. A business model explains how you’ll make money by defining its target market, value proposition, revenue streams, cost structure, and distribution channels. So, writing a business plan after making a business model is advisable.

Is my business model enough to secure funding?

Well, no! For funding an investor would want to know everything about your business like the management team, competitive landscape, industry analysis, financial projections, and more. So, having a business plan for funding is necessary.

When should I create a business model and business plan?

Create a business model and a business plan when you’re starting a new business or launching a new product or service. However, you need to create or alter both documents if there are any shifts in the current business operations.

About the Author

Upmetrics Team

Upmetrics is the #1 business planning software that helps entrepreneurs and business owners create investment-ready business plans using AI. We regularly share business planning insights on our blog. Check out the Upmetrics blog for such interesting reads. Read more

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Business Plan Vs Business Model: Understanding The Key Differences

What if I told you that nearly 70% of businesses fail due to a lack of clear direction? Understanding the differences between a business plan and a business model can be pivotal in steering your venture towards success. Let’s delve into these fundamental yet often misunderstood elements of business strategy.

A business plan is a comprehensive document outlining a company’s goals, strategies, and methods of operation, often used to secure investment. In contrast, a business model is the framework for how a company creates, delivers, and captures value, focusing on the mechanisms of revenue generation. Knowing the distinction can streamline your focus and potentially elevate your business above the competition.

Business Plan vs Business Model: An Overview

A business plan and a business model are essential, yet distinct components of a company’s strategy. A business plan is a detailed document that outlines a company’s goals, strategies, market research, and financial forecasts. It acts as a roadmap for the business, guiding its growth and operations. On the other hand, a business model describes how a company creates, delivers, and captures value. It’s the blueprint for how a business makes money.

One key difference between the two is their purpose and focus. A business plan covers a broad range of topics, including marketing strategies, target audience, and financial projections. This comprehensive approach helps attract investors and manage business activities. Meanwhile, a business model zeros in on the core process of revenue generation. It answers critical questions like what value the company offers and how it will be delivered to customers.

There’s also a difference in formality. A business plan is typically a written document, often dozens of pages long. It’s used to secure funding and guide the company’s strategy in the long term. In contrast, a business model can often be summarized in a single page or a simple diagram. Key elements of a business model can often be illustrated through frameworks like the Business Model Canvas, which includes sections for key partners, activities, and revenue streams.

Both elements are essential for a successful venture. While the business plan provides a detailed roadmap and strategic direction, the business model ensures that the company’s value proposition carries through to financial success. By understanding and leveraging both, entrepreneurs can structure their businesses more effectively. Each plays a unique role in guiding a company towards its goals.

Definition of a Business Plan

A business plan is a formal document that outlines a company’s goals and the strategies it will use to achieve them. It’s a roadmap for success, detailing each step the business will take along the way. This plan typically includes sections on marketing, financial planning, and operational guidelines. Having a business plan helps companies stay focused on their objectives and adjust tactics as needed. Investors often require a business plan to understand a company’s potential.

Business plans are also used to forecast future growth and determine financial needs. They project income, expenses, and profitability over a period. These documents are essential for budgeting and financial planning. Common elements of a business plan include an executive summary, market analysis, and financial projections. A well-crafted business plan can be a critical tool for a company’s success.

A good business plan answers three main questions: What does the business aim to do, how will it achieve that, and why is it sure to succeed? It should clearly state the target market and how the business intends to reach it. Including detailed financial data and projections helps demonstrate feasibility. Furthermore, a business plan outlines the competitive landscape, highlighting how the business will stand out. This detailed planning aids in risk management .

While creating a business plan may seem daunting, it offers numerous benefits. It forces entrepreneurs to think through every aspect of their business idea. By doing so, they identify potential challenges and develop strategies to overcome them. Additionally, a business plan communicates the business vision to stakeholders. This can be critical for gaining support and investment, ensuring the business gets off to a strong start.

Definition of a Business Model

A business model is a framework that describes how a company creates, delivers, and captures value. It outlines the core aspects of the business, including its value proposition, customer segments, and revenue streams. Essentially, it answers the question: “How does the business make money?” Business models help companies understand their path to profitability. They are essential for identifying opportunities and challenges in the marketplace.

Unlike a business plan, which is often a detailed document, a business model can be summarized on a single page. One popular tool for this is the Business Model Canvas. This tool helps entrepreneurs map out key areas like key partners, activities, and customer relationships in a clear and concise manner. Here’s a simplified breakdown of a business model using the Business Model Canvas framework:

Business models are dynamic and can change as the market evolves. Companies often have to adapt their models to stay competitive. Adjusting elements like pricing strategies or customer engagement methods can help sustain profitability. Successful businesses continuously refine their models to better meet customer demands and market conditions. This flexibility is key to long-term success.

Key Components of a Business Plan

A well-constructed business plan includes several key components that provide a clear roadmap for the company’s future. One of the most crucial elements is the executive summary. This section offers a snapshot of the business, summarizing important details like the mission statement, products or services, and an overview of financial projections. It’s typically the first part investors read, so it needs to be compelling and concise. Capturing attention early can be critical for securing funding.

The market analysis section is also pivotal. This part delves into the industry landscape, examining market trends, target customer demographics, and competitors. Reliable data and research are essential here to validate the business idea. Investors look closely at this section to assess the market potential and competitive edge. By understanding the market, a company can better strategize its entry and growth paths.

Another important component is the marketing and sales strategy. This outlines how the company plans to attract and retain customers. Tactics such as digital marketing , sales promotions, and customer loyalty programs might be included. The plan should also detail the sales process, from acquiring leads to closing sales. Effective marketing and sales strategies can significantly boost a company’s success.

Financial projections are indispensable in a business plan. These projections typically include income statements, cash flow statements, and balance sheets. Potential investors and stakeholders use these figures to evaluate the company’s financial health and profitability. Accurate and realistic financial statements can build credibility and trust. They offer a forecast of the business’s financial future and help in making informed decisions.

An operations plan outlines the day-to-day activities that keep the business running. This includes information on inventory management, production processes, and human resources. It ensures that all aspects of the business are aligned and streamlined for efficiency. A robust operations plan can improve productivity and operational capacity. It’s an essential part of the overall business strategy.

Finally, the business plan should cover the management team and organization structure. This section introduces the key players in the company and their roles. Highlighting the team’s expertise and skills can give investors confidence in the management’s ability to execute the plan. An organizational chart may be included to show the hierarchy and departmental responsibilities. Strong leadership is often a critical factor in a company’s success.

Key Components of a Business Model

A business model is composed of several key components that help a business create, deliver, and capture value. One of the most important elements is the value proposition. This defines what makes the product or service unique and why customers would choose it over competitors. It’s the core offering that meets the customers’ needs and solves their problems. A clear value proposition can set the business apart in a crowded market.

Another crucial component is customer segments. This refers to the specific groups of people or organizations that the business aims to serve. Identifying these segments helps tailor marketing efforts and product development. Understanding your consumers’ needs, preferences, and behaviors can aid in delivering better value. Targeted strategies can lead to more effective customer acquisition and retention.

Revenue streams are essential for understanding how a business earns money. This includes various ways through which the company generates income. Possible revenue streams can range from product sales to service fees and subscription models. Diversifying revenue streams can make a business more resilient. Here are some common revenue streams:

• Product sales
• Subscription fees
• Service charges
• Advertising revenue

Key activities are the actions that a business undertakes to operate successfully. These activities can include production, marketing, and sales operations. Identifying key activities helps focus efforts on what truly drives the business. Effective management of these activities is critical to operational efficiency. Streamlined processes can result in better performance.

A business model also includes key partners. These are external entities that help the business succeed. They can be suppliers, distributors, or strategic alliances. Building strong relationships with key partners can provide additional resources and capabilities. Collaboration with partners can lead to innovation and growth opportunities.

Lastly, the cost structure outlines the major expenses required to run the business. Understanding the cost structure helps in budgeting and financial planning. Major cost areas might include manufacturing, labor, and marketing. Keeping costs under control is essential for profitability. Analyzing costs can also identify areas for efficiencies and savings.

The Role of Business Model in a Business Plan

The business model plays a vital role within a business plan. It serves as the foundation for understanding how a company generates revenue and ensures long-term viability. By clearly defining the value proposition, customer segments, and revenue streams , the business model helps align the entire business strategy. It explains the economic logic behind the business. This alignment is crucial for strategic planning and execution.

The business model provides insights that are essential for financial planning. When a business plan includes a well-defined business model, it helps in creating accurate financial projections. Investors and stakeholders can understand how revenue will be generated. This transparency increases investor confidence and enhances the feasibility of the business plan. Financial viability becomes easier to demonstrate.

Additionally, the business model guides the development of marketing and sales strategies. It identifies the target customer segments and how the product or service will meet their needs. This information is critical for devising effective marketing campaigns. A coherent business model ensures that marketing efforts are focused and efficient. This targeted approach can lead to higher market penetration.

The integration of the business model in the business plan also aids in operational planning. It outlines key activities and partnerships necessary for delivering value. Knowing what activities are crucial allows for better resource allocation and process management. This operational roadmap helps in maintaining efficiency and effectiveness. By streamlining operations, the business can achieve its goals more effectively.

A well-defined business model also aligns the team and stakeholders around a common vision. It provides a clear understanding of how the business will succeed, making it easier to communicate goals and strategies. This shared vision fosters collaboration and motivation. Stakeholders can see their role in the bigger picture. Such alignment is often key to achieving long-term success.

Why Understanding the Differences Matters for Entrepreneurs

Understanding the differences between a business plan and a business model is crucial for entrepreneurs. A well-crafted business plan serves as a roadmap, detailing specific goals, strategies, and financial forecasts. This helps in organizing thoughts and aligning team efforts toward common objectives. Meanwhile, a solid business model focuses on how the company makes money. It provides clarity on revenue streams and customer value propositions.

An entrepreneur who recognizes these distinctions can develop stronger pitches to investors . Investors look for comprehensive business plans that outline long-term potential and growth strategies. They also seek clear business models that demonstrate profitability. By clearly presenting both elements, entrepreneurs can build confidence among potential backers. This increases the likelihood of securing investment.

Furthermore, understanding these differences aids in strategic decision-making. Business plans help identify long-term goals and required resources, while business models offer insights into short-term operations and revenue generation. Knowing when to focus on which aspect allows for better agility in responding to market changes. It ensures that both immediate needs and future aspirations are addressed adequately.

The distinction also assists in effective resource allocation. A detailed business plan reveals areas requiring significant investment or attention, like marketing or product development. On the other hand, a focused business model highlights efficient paths to generate income quickly. By balancing both perspectives, entrepreneurs can manage their resources more effectively.

A clear understanding of these elements fosters better teamwork within an organization. When everyone understands the company’s long-term strategy (business plan) alongside day-to-day operations (business model), it promotes alignment and collaboration. Team members know what they are working towards and how their efforts contribute to overall success. This unified approach can drive higher productivity.

This comprehension helps mitigate risks associated with running a new venture. By having clear plans for various scenarios outlined in both documents, entrepreneurs can navigate challenges more easily. Being prepared reduces uncertainties and allows smoother operational transitions during difficult times.

Frequently Asked Questions

This section covers key questions that entrepreneurs often ask about business plans and business models. Understanding these concepts can provide clarity and support for launching and growing a successful business.

1. What are the main components of a business plan?

A business plan typically includes an executive summary, market analysis , company description, organization structure, marketing strategies, and financial projections. Each part serves to outline the company’s strategy, goals, and how it plans to achieve them.

The executive summary provides a snapshot of the plan’s key elements. Financial projections include income statements and cash flow forecasts to show feasibility. These components help guide operations and attract investors.

2. Why is a business model important for startups?

A well-defined business model helps startups understand their path to profitability by outlining how they will generate revenue and deliver value to customers. It serves as a blueprint for operational activities and decision-making processes.

This model enables entrepreneurs to identify their value proposition, customer segments, revenue streams, key activities, partners, and cost structures. Clear understanding aids in attracting investors by demonstrating viability and strategic planning capabilities.

3. Can a company have more than one business model?

Yes, companies can operate multiple business models simultaneously to diversify their revenue streams or target different customer segments. For example, a media company might generate revenue from both subscriptions and advertising.

This approach helps businesses mitigate risk by not relying on a single source of income. Employing various models allows companies to adapt to changing market conditions while exploring new growth opportunities.

4. How do you choose between different business models?

The choice of a business model depends on the industry context, target audience preferences, available resources, and competitive landscape. Entrepreneurs need to assess which model aligns best with their value proposition and customer needs.

Evaluating case studies of successful companies in similar markets can provide insights into potential models. Testing various approaches through pilot projects or limited releases can also help determine the most effective strategy before full-scale implementation.

5. How does a strong business model contribute to long-term success?

A strong business model ensures consistent revenue generation by effectively addressing customer needs through unique value propositions. It provides clarity on essential operational activities required for delivering this value efficiently.

This structured approach facilitates better resource allocation leading towards sustainable growth over time while enabling quick adaptations when necessary according during industry shifts or technological advancements ensuring continuous relevance within target markets.

Understanding the differences between a business plan and a business model is essential for any entrepreneur aiming for success. While a business plan provides a detailed roadmap and strategic direction, the business model focuses on the specific ways to generate revenue. Both elements, though distinct, work together to guide a company towards its goals.

By mastering both concepts, entrepreneurs can better attract investors, allocate resources effectively, and navigate market challenges. This comprehensive approach helps in building a strong, sustainable business. Entrepreneurs who can integrate both elements seamlessly into their strategy are well-prepared to achieve long-term success.

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Business Model vs Business Plan – What Is The No. 1 Difference

• by IdeaBuddy Team
• April 19, 2024
• 6 minute read

Table of Contents Hide

What should your business model include , the importance of choosing the right business model, what is a business plan , what should your business plan include , business model vs business plan: the difference, business model vs business plan: conclusion.

Whether you are new to the world of entrepreneurship and business or you already have solid experience dealing with business terminology, there is no harm in refreshing your knowledge and making sure you know how to differentiate between a business model vs business plan .

Although both are essential, they serve different purposes and contain distinct information that can determine the success of your business, so in this article we will aim to cover everything you should know about these two terms that stand behind business model vs business plan syntax so you can cross them off from your entrepreneurial to-do list!

So, is there a winner in the business model vs business plan race, or are they simply complementary parts of every business? Let’s find out and explain these two ingredients needed to kick off your business.

What is a business model?

When thinking about what stands between a business model vs business plan, you probably already know that the characteristic of business models is that there are multiple models that can be used in a business, and they always depend on the type of the product a company has.

Some of the most common business models are affiliate , product as a service , subscription model , franchise , and others.

A business model is basically the strategic blueprint that defines how your company creates, delivers, and, most importantly, how it is going to make profit in the future.

In simpler terms, it outlines how your business plans to make money and achieve its goals , describing what products or services it will offer, the target market it aims to capture, and the expected expenses and revenues.

Remember: a clear and detailed business model is the foundation of every successful venture. It’s not just about having a great idea, but about carefully mapping out how you’ll bring that idea to life and create value.

Your business model should include a compelling value proposition that determines your offerings and makes clear why customers should prefer them. You need to define your customer segments to tailor your approaches effectively, ensuring you understand who you’re serving and what they truly need.

Channels describe how you’ll reach your customers, while customer relationships detail the type of interactions you intend to maintain with them, whether through personalized service, automated systems, or community engagement.

Revenue streams outline how your business will earn money, be it through direct sales, subscriptions, or other creative monetization strategies. In your business plan, you should also provide clarity on key activities (what actions are crucial to deliver on your promise), key resources (what you need to operate), and key partnerships (who you’ll ally with to enhance your capabilities).

Finally, a thorough understanding of your cost structure will ensure that your business model is not only viable but also financially sustainable. Each of these elements works together to provide a comprehensive overview that will guide your business from startup to success.

Your business model sets the stage for introducing a structured, detailed business plan. So, let’s see how choosing the right business model for your business actually helps you:

Selecting the right business model is critical to the success of your business, as it defines the framework through which your business will operate and flourish. Here’s why the strategic choice of the right business model is fundamental:

• It gives you a competitive advantage : by adopting a business model that matches your business’s strengths and market needs, your business can distinguish itself from competitors.
• Enhances flexibility and resilience : The right business model provides a structure that supports growth and facilitates quick adaptation to market changes or internal demands.
• Helps you attract investment : A well-created business model can help demonstrating to investors that your business has a clear plan for revenue generation and long-term viability.

Now that we have a better understanding of the basics of the business model, it’s time to examine the other business ingredient – the business plan. You will learn in more depth the correlation between business model vs business plan, and understand how they overlap.

Just as there are various business models to suit different types of products and services, there are also multiple frameworks for business plans tailored to diverse business objectives. Common types of business plans include traditional , lean startup , and operations plans , each serving different strategic purposes.

A business plan is essentially a comprehensive document that details how your company plans to achieve its goals . It goes beyond the strategic outline provided by your business model to specify the operational steps, financial projections, and marketing strategies your business will employ. It describes in detail what your business will do, who your customers will be, and how you plan to succeed financially .

In simpler terms, a business plan not only maps out the products or services you will offer but also elaborates on the target market, the business structure, the team that will lead your venture, and the financial investments involved. It helps you anticipate any potential challenges and elaborate a plan on how you would address them, ensuring your business navigates towards its strategic goals effectively.

Remember: a clear and well-thought-out business plan is indispensable for translating the vision of your business model into a roadmap that guides every aspect of your business. It’s not just about having an innovative idea, but about methodically planning how to bring that idea into reality and secure its success in the marketplace.

As we mentioned before, a good business plan is a must if you are looking to turning your strategic vision into actionable steps! Here are some key components that your business plan should contain:

• Executive Summary : The summary should capture the main aspects of your business, such as mission statement, business model, key products or services, leadership team, and a brief financial overview. 
• Company Description : Provide detailed information about your business, the problems it aims to solve, and the market needs it addresses.
• Market Analysis : Demonstrate a thorough understanding of your industry, market trends, demographics, and competition.
• Organisation and Management : Describe your company’s organisational structure, including details of the ownership, profiles of your management team, and the qualifications of your board of directors.
• Services or Products List : Explain what you’re selling or what service you’re offering.
• Marketing and Sales Strategy : Outline how you plan to attract and retain customers.
• Funding : If you are seeking financing, you should specify the amount of funding needed over the next five years and give a brief explanation on how you plan to use these funds.
• Financial Plan : Introducing the financial data, such as profit and loss, cash flow forecast, balance sheet and other projections can help both you and potential investors get a clear view on the direction and resources needed to succeed.

Each of these components need to work together to provide a comprehensive and detailed overview of your business.

As you develop your business plan, consider using tools like IdeaBuddy to streamline the process and ensure that every aspect of your plan is well-crafted and aligned with your business goals.

Understanding the difference between a business model vs business plan can help you more effectively communicate the core of your business to stakeholders and guide your strategic decisions. The business model focuses on the conceptual aspects of the business, showing the big picture of how value is created and delivered, while the business plan details the operational and financial specifics needed to achieve those goals.

Here’s why understanding the difference matters:

• Focus and Clarity : While the business model offers a high-level view of your strategic direction, the business plan provides the details of exactly how you’ll achieve this.
• Execution vs. Strategy : The business model is your strategy for how you’ll succeed, while the business plan is about execution—how you turn your strategic visions into operational realities.
• Adaptability and Scalability : With a well-defined business model, you can adapt to changes without losing sight of your core objectives. The business plan allows you to scale these efforts, detailing specific actions, timelines, and resources needed as you grow.

We hope that now you understand the distinction and importance that stand behind the business model vs business plan buzzword. Let’s recap one more time: while the business model outlines the strategic blueprint for how your company will create, deliver, and capture value, the business plan details the specific steps and resources necessary to execute and achieve the goals set forth by your business model.

We hope this helps. For more information about the business model vs business plan topic, read the following articles:

Suggested read: What is a business model?

Suggested Read: Why do you need a business plan?

For those ready to dive deeper into the topic of business model vs business plan, or perhaps start a business from scratch, we have crafted an in-depth guide for all the steps of the way as you build your business – check it out here! 💡

IdeaBuddy Team

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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]

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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 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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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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What Is a Business Plan?

Understanding business plans, how to write a business plan, common elements of a business plan, the bottom line, business plan: what it is, what's included, and how to write one.

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

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A business plan is a document that outlines a company's goals and the strategies to achieve them. It's valuable for both startups and established companies. For startups, a well-crafted business plan is crucial for attracting potential lenders and investors. Established businesses use business plans to stay on track and aligned with their growth objectives. This article will explain the key components of an effective business plan and guidance on how to write one.

Key Takeaways

• A business plan is a document detailing a company's business activities and strategies for achieving its goals.
• Startup companies use business plans to launch their venture and to attract outside investors.
• For established companies, a business plan helps keep the executive team focused on short- and long-term objectives.
• There's no single required format for a business plan, but certain key elements are essential for most companies.

Investopedia / Ryan Oakley

Any new business should have a business plan in place before beginning operations. Banks and venture capital firms often want to see a business plan before considering making a loan or providing capital to new businesses.

Even if a company doesn't need additional funding, having a business plan helps it stay focused on its goals. Research from the University of Oregon shows that businesses with a plan are significantly more likely to secure funding than those without one. Moreover, companies with a business plan grow 30% faster than those that don't plan. According to a Harvard Business Review article, entrepreneurs who write formal plans are 16% more likely to achieve viability than those who don't.

A business plan should ideally be reviewed and updated periodically to reflect achieved goals or changes in direction. An established business moving in a new direction might even create an entirely new plan.

There are numerous benefits to creating (and sticking to) a well-conceived business plan. It allows for careful consideration of ideas before significant investment, highlights potential obstacles to success, and provides a tool for seeking objective feedback from trusted outsiders. A business plan may also help ensure that a company’s executive team remains aligned on strategic action items and priorities.

While business plans vary widely, even among competitors in the same industry, they often share basic elements detailed below.

A well-crafted business plan is essential for attracting investors and guiding a company's strategic growth. It should address market needs and investor requirements and provide clear financial projections.

While there are any number of templates that you can use to write a business plan, it's best to try to avoid producing a generic-looking one. Let your plan reflect the unique personality of your business.

Many business plans use some combination of the sections below, with varying levels of detail, depending on the company.

The length of a business plan can vary greatly from business to business. Regardless, gathering the basic information into a 15- to 25-page document is best. Any additional crucial elements, such as patent applications, can be referenced in the main document and included as appendices.

Common elements in many business plans include:

• Executive summary : This section introduces the company and includes its mission statement along with relevant information about the company's leadership, employees, operations, and locations.
• Products and services : Describe the products and services the company offers or plans to introduce. Include details on pricing, product lifespan, and unique consumer benefits. Mention production and manufacturing processes, relevant patents , proprietary technology , and research and development (R&D) information.
• Market analysis : Explain the current state of the industry and the competition. Detail where the company fits in, the types of customers it plans to target, and how it plans to capture market share from competitors.
• Marketing strategy : Outline the company's plans to attract and retain customers, including anticipated advertising and marketing campaigns. Describe the distribution channels that will be used to deliver products or services to consumers.
• Financial plans and projections : Established businesses should include financial statements, balance sheets, and other relevant financial information. New businesses should provide financial targets and estimates for the first few years. This section may also include any funding requests.

Investors want to see a clear exit strategy, expected returns, and a timeline for cashing out. It's likely a good idea to provide five-year profitability forecasts and realistic financial estimates.

2 Types of Business Plans

Business plans can vary in format, often categorized into traditional and lean startup plans. According to the U.S. Small Business Administration (SBA) , the traditional business plan is the more common of the two.

• Traditional business plans : These are detailed and lengthy, requiring more effort to create but offering comprehensive information that can be persuasive to potential investors.
• Lean startup business plans : These are concise, sometimes just one page, and focus on key elements. While they save time, companies should be ready to provide additional details if requested by investors or lenders.

Why Do Business Plans Fail?

A business plan isn't a surefire recipe for success. The plan may have been unrealistic in its assumptions and projections. Markets and the economy might change in ways that couldn't have been foreseen. A competitor might introduce a revolutionary new product or service. All this calls for building flexibility into your plan, so you can pivot to a new course if needed.

How Often Should a Business Plan Be Updated?

How frequently a business plan needs to be revised will depend on its nature. Updating your business plan is crucial due to changes in external factors (market trends, competition, and regulations) and internal developments (like employee growth and new products). While a well-established business might want to review its plan once a year and make changes if necessary, a new or fast-growing business in a fiercely competitive market might want to revise it more often, such as quarterly.

What Does a Lean Startup Business Plan Include?

The lean startup business plan is ideal for quickly explaining a business, especially for new companies that don't have much information yet. Key sections may include a value proposition , major activities and advantages, resources (staff, intellectual property, and capital), partnerships, customer segments, and revenue sources.

A well-crafted business plan is crucial for any company, whether it's a startup looking for investment or an established business wanting to stay on course. It outlines goals and strategies, boosting a company's chances of securing funding and achieving growth.

As your business and the market change, update your business plan regularly. This keeps it relevant and aligned with your current goals and conditions. Think of your business plan as a living document that evolves with your company, not something carved in stone.

University of Oregon Department of Economics. " Evaluation of the Effectiveness of Business Planning Using Palo Alto's Business Plan Pro ." Eason Ding & Tim Hursey.

Bplans. " Do You Need a Business Plan? Scientific Research Says Yes ."

Harvard Business Review. " Research: Writing a Business Plan Makes Your Startup More Likely to Succeed ."

Harvard Business Review. " How to Write a Winning Business Plan ."

U.S. Small Business Administration. " Write Your Business Plan ."

SCORE. " When and Why Should You Review Your Business Plan? "

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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.

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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

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