Company Description/Overview
Products/Services Offered
Market Analysis
Marketing and Sales Strategies
Operations and Management
Financial Plan
Appendices
In simple terms, a business model is how the business will make money. Selling ice to eskimos, for instance, is a bad business model. Selling team jerseys to rabbit sports fans, on the other hand, is a solid business model.
The components of a business model are best illustrated by Swiss entrepreneur Alexander Osterwalder’s Business Model Canvas, which is a visual representation with nine sections. Four sections represent internal elements of a business that enable it to function and are related to costs.
Four other sections represent external elements that enable the business to bring in revenue and are related to the customer. The ninth section is the business’ value proposition.
The value proposition is at the heart of your business model. Your value proposition, which should be no more than two sentences long, needs to answer the following questions:
Key activities are all the activities required to run the business and create the proposed value. These can include product development and distribution and any other necessary activities.
The cost structure is a sum of all you’ll need to spend to make the business function. It’s the costs you’ll incur to run the business and bring in revenue.
Key partners are external partners involved in delivering value, such as vendors and suppliers, or maybe a bank.
Key resources are any necessary practical elements that come with a cost. These might include your office space, employees, and equipment like computers.
Revenue streams are the ways in which you receive payment from customers. You may have more than one revenue stream, such as via direct sales and subscriptions.
Customer segments are the groups of people to whom you provide goods or services. In other words, your target market. Maybe your products are aimed at younger women, for instance, or older men. Whatever your target segments, you should build customer personas of each group so that you know how and where to reach them with your marketing.
Customer relationships refer to how you interact with your customers to deliver value. Your interactions may be online only, by phone, in-person, or all of the above.
Channels refer to how you reach your customers, such as social media, internet search, direct sales calls, trade shows, and so on.
If you’re just starting a business, the Business Model Canvas is a great way to understand and examine your business model. One thing to remember is that the elements you put in your Canvas will be based on assumptions that will at some point be tested in the market and adapted as needed.
Another thing to remember is that you do not need to do a Business Model Canvas. It’s merely an exercise that can help provide insight into your business model.
A business plan is a detailed document that describes how the business will function in all facets. The key is in the “plan” part of the name. It will specify how you’ll launch your business, gain customers, operate your company, and make money. A business plan, however, is not a static document .
The initial version will be based largely on assumptions, supported by research. As you run your business you’ll constantly learn what works and what does not and make endless tweaks to your plan.
Thus, creating a business plan is not a one-time action – it’s a dynamic and continuous process of crafting and adapting your vision and strategy.
You’ll present your business plan to potential backers, though in recent years some investors have begun to embrace the Business Model Canvas as a tool to assess a business’ potential.
A strong business plan includes eight essential components .
The executive summary is the initial section of your business plan , written last, summarizing its key points. Crucial for capturing investors’ and lenders’ interest, it underscores your business’s uniqueness and potential for success. It’s vital to keep it concise, engaging, and no more than two pages.
This section provides a history of your company, including its inception, milestones, and achievements. It features both mission (short-term goals and driving force) and vision statements (long-term growth aspirations). Objectives, such as product development timelines or hiring goals, outline specific, short-term targets for the business.
Detail the product or service you’re offering, its uniqueness, and its solution to market problems. Explain its source or development process and your sales strategy, including pricing and distribution channels. Essentially, this section outlines what you’re selling and your revenue model.
Remember, although the financial section might seem daunting, it is pivotal for understanding the economic feasibility of your business. Proper financial planning helps in making informed decisions, attracting investors, and ensuring long-term sustainability. Don’t hesitate to engage financial experts or utilize tools and software to ensure accuracy and comprehensiveness in this section.
The appendices section of a business plan is a repository for detailed information too extensive for the main document. This can include resumes of key personnel, full market research data, legal documents, and product designs or mockups. By placing this data in the appendices, it keeps the main plan concise while allowing stakeholders access to deeper insights when needed. Always ensure each item is clearly labeled and referenced at the relevant point in the main document.
As you can see, business models and business plans have some similarities, but in the main they are quite different. Your business model explains the foundational concept behind your business, while a business plan lays out how you’ll put that model into action and build a business.
When you’re starting a business, it’s best to have both, as the work of getting them done involves learning about your business from every angle. The knowledge you’ll gain is likely to be invaluable, and could even be the difference between success and failure.
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Updated May 10, 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.
You may have heard the term “business model” before. Every company has one.
Your business model is just a description of how your business will generate revenue. In other words, it’s a snapshot of the ways your business will be profitable.
Writing a business plan is one way of explaining a company’s business model. The business model canvas takes a different approach.
A business model canvas is a one-page template that explains your business model and provides an overview of your:
While the business model is a statement of fact, the business model canvas is a strategic process—a method for either documenting or determining your business model.
It’s meant to be quickly and easily updated as a business better understands what it needs to be successful over time. This makes it especially useful for startups and newer businesses that are still trying to determine their business model.
You can think of a business model canvas as a condensed, summarized, and simplified version of a business plan. It’s a great way to quickly document an idea and get started on the planning process.
The business plan is a way to expand on the ideas from the canvas and flesh out more details on strategy and implementation.
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The simplest way to think about your business model canvas is to map it out visually. A business model canvas covers nine key areas:
[Want an even simpler alternative? Try downloading our free one-page plan template and start building your plan in less than 30 minutes.]
To get a better sense of how a business model canvas documents business strategy, consider a company like Netflix. The streaming company’s business model is based on generating subscription revenue through its content library and exclusive content.
If Netflix executives were to create a business model canvas, it would map out how the company leverages key resources, partnerships, and activities to achieve its value proposition and drive profitability. The business model is the destination.
The great thing about a business model canvas is that you can quickly document business ideas and see how a business might work at a high level. As you do more research, you’ll quickly refine your canvas until you have a business idea you think will work.
From there, you expand into a full business plan.
If a business model canvas captures what a company looks like when it’s operating successfully, then a business plan is a more detailed version along with a company’s blueprint for getting there.
Think of your business plan as a process of laying out your goals and your strategies for achieving them.
The business plan is more detailed, and changes over time. It examines each aspect of your business, from operations to marketing and financials.
The plan often includes forward-looking forecasts of a company’s projected financial performance. These are always educated guesses. But these forecasts can also be used as a management tool for any growing business.
Comparing actual results to the forecast can be a valuable reality check, telling a business if they’re on track to meet their goals or if they need to adjust their plan.
A business plan is also a must for companies hoping to receive a bank loan , SBA loan , or other form of outside investment . Anyone putting up funds to help you grow will want to see you’ve done your homework.
So a business plan is how you not only prepare yourself, but also show your audience that you’re prepared.
While there are several different types of business plans meant for different uses, well-written plans will cover these common areas:
Avoid the trap of using the two terms interchangeably. As we’ve shown, the two have different focuses and purposes.
The business model canvas (or our one-page plan template ) is a great starting point for mapping out your initial strategy. Both are easy to iterate on as you test ideas and determine what’s feasible.
Once you have a clearer sense of your idea, you can expand the canvas or one-page plan into a business plan that digs into details like your operations plan, marketing strategy, and financial forecast.
When you understand how – and when – to use each, you can speed up the entire planning process. That’s because the business model canvas lays out the foundation of your venture’s feasibility and potential, while the business plan provides a roadmap for getting there.
The work of business planning is about connecting the dots between the potential and the process.
Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.
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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.
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.
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:
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:
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.
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:
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.
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:
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.
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:
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.
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.
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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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.
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.
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.
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:
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:
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.
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.
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.
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.
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.
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Do you want to know the difference between a and a business plan? If YES, here is a detailed comparison and analysis and how each is used. A business plan and a business model look amazingly similar like two peas in a pod, but they are equally different, just like two peas in a pod. They are both part of each other but play different roles thus making the line between them seem dim.
A business plan and a business model both contain , customer retention strategy, revenue generation strategies, and overall, they are used to outline the vision of the company. So what then differentiates a business plan from a business model and how can you make a clear distinction of both?
What is a business model.
A business model is a company’s outlined plan for making profit. It identifies the products or services the business will sell, the target market it has identified , and the expenses it anticipates. A business model also shows the destination of the business, how it is meant to work, and what it is meant to become.
A business model ascertains how your business makes money. It identifies the services that your customers value and shows how funds are generated for the services your business renders to your customers. A small business can have more than one method of generating income, and it is the duty of the business model to simplify the money process by focusing on the largest income generator.
For instance, a gas station sells gas to customers, but it also provides other services such as a car wash, lube station, etc. The business model only recognizes the majority income generator, which is the sale of gas. Therefore, the business model will reflect the sale of gas to the customer, which generates income at the time of the customer’s purchase.
The business model summarily simplifies and makes revenue-generation easy to understand by focusing on the key generator, highlights exactly how you intend to acquire, retain, and service your customers. The business model can come in different distinct models like:
The business model is basically at the center of the business plan, as it describes how the company is positioned within its industry’s value chain, and how it organises its relations with its suppliers, clients, and partners in order to generate profits. The business plan translates this positioning in a series of strategic actions and quantifies their financial impact.
A business plan is a formal written document that contains business goals, the methods on how these goals can be attained, and the time frame within which these goals need to be achieved. A business plan acts like a GPS. It shows you the roadmap of how you intend to get to your destination as a business person.
It highlights the market opportunities you want to take advantage of, the existing competition, the strength and experience of your team, a detailed description of the products and services you intend to offer, and a roadmap that shows exactly how you intend to execute your plans in the market.
A business plan is a document presenting the company’s strategy and expected financial performance for the years to come.
The business plan provides the details of your business. It takes the focus of the business model and builds upon it. It explains the equipment and staff needed to meet the details of the business model. It also explains the marketing strategy of your small business, or how your business will attract and retain customers, and deal with the competition.
Furthermore, the business plan explains the financial stability of your small business at a particular point in time, as well as in the forecasted future. Overall, the business plan supports the business model and explains the steps needed to achieve the goals of that model
The business plan pays close attention to your goals, projects the cash flow, profits or losses, and ultimately shows how long and what would be required to enable the business break-even.
A sample structure of a business plan is seen below:
Some of the major differences between a business plan and a business model are outlined thus;
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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.
Aspect | ||
---|---|---|
A is a strategic framework that outlines how a business creates, delivers, and captures value. It focuses on the core components of a business’s operations and revenue generation. | A is a comprehensive document that outlines a company’s goals, strategies, financial projections, and operational details. It is often used for fundraising and as a roadmap for the business. | |
The primary purpose of a business model is to describe the of how a business will make money and create value for customers. | A business plan serves as a that provides guidance on how a business intends to operate and grow. It is often used for attracting investors or lenders. | |
Key components of a business model include the . | A business plan typically includes sections on the . | |
A business model emphasizes , simplifying complex business operations into key building blocks. | A business plan delves into , including market research, competition analysis, financial forecasts, and strategic milestones. | |
Business models are often and adaptable to changes in the market and business environment. Entrepreneurs can pivot easily based on customer feedback or market shifts. | Business plans can be and may require extensive updates when the business encounters unexpected challenges or opportunities, potentially leading to delays. | |
Business models are typically developed and iterated upon , helping entrepreneurs validate their ideas quickly and efficiently. | Business plans are usually created when the business is or when a more detailed operational roadmap is required for established businesses. | |
Business models are useful for , often at the startup or early stages of a venture. | Business plans are commonly used for for established businesses. | |
Business models are often represented using visual tools like the , which provides a quick overview of key components. | Business plans are primarily presented as with detailed narratives and financial tables. | |
Business models encourage as they allow entrepreneurs to explore various ways to create and capture value. | Business plans may prioritize over rapid innovation, potentially leading to slower adaptability. | |
Investors may appreciate a clear and compelling business model that demonstrates a . | Investors often require a comprehensive business plan to evaluate the of a business. | |
Business models can evolve and adapt to market changes, allowing businesses to stay relevant over the long term. | Business plans may become outdated and less relevant once a business is operational, often requiring frequent updates. | |
Developing a business model typically and is suitable for resource-constrained startups. | Creating a comprehensive business plan can be in terms of time and expertise, often involving multiple team members or consultants. | |
A business model provides and helps in making decisions that align with the core value proposition and revenue generation. | A business plan serves as a for executing strategies, including marketing, operations, and financial management. | |
Business models can be presented in a that quickly conveys the essence of the business’s value proposition. | Business plans typically involve , which can be lengthy and text-heavy. | |
ROI on developing a business model can be , as it provides a clear understanding of how the business intends to create value and generate revenue. | ROI on creating a business plan may be if it successfully attracts investors or lenders and helps secure funding. |
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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:
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.
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:
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.
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:
Case Study 1: Nike – Business Model vs. Business Plan
Case Study 2: Coca-Cola – Business Model vs. Business Plan
Case Study 3: Amazon – Business Model vs. Business Plan
Case Study 4: Tesla – Business Model vs. Business Plan
Case Study 5: Airbnb – Business Model vs. Business Plan
Case Study 6: Uber – Business Model vs. Business Plan
Case Study 7: Apple – Business Ecosystem vs. Business Plan
Case Study 8: Ethereum – Business Ecosystem vs. Business Plan
Key Difference – Business Model vs. Business Plan
Choosing the Right Tool
Business Engineering
Tech Business Model Template
Web3 Business Model Template
Asymmetric Business Models
Business Competition
Technological Modeling
Transitional Business Models
Minimum Viable Audience
Business Scaling
Market Expansion Theory
Speed-Reversibility
Asymmetric Betting
Growth Matrix
Revenue Streams Matrix
Revenue Modeling
Pricing Strategies
Cynefin Framework
SWOT Analysis
Personal SWOT Analysis
Pareto Analysis
Failure Mode And Effects Analysis
Blindspot Analysis
Comparable Company Analysis
Cost-Benefit Analysis
Agile Business Analysis
SOAR Analysis
STEEPLE Analysis
Pestel Analysis
DESTEP Analysis
Paired Comparison Analysis
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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So, you’ve got an idea and you want to start a business —great! Before you do anything else, like seek funding or build out a team, you'll need to know how to write a business plan. This plan will serve as the foundation of your company while also giving investors and future employees a clear idea of your purpose.
Below, Lauren Cobello, Founder and CEO of Leverage with Media PR , gives her best advice on how to make a business plan for your company.
Build your dream business with the help of a high-paying job—browse open jobs on The Muse »
According to Cobello, a business plan is a document that contains the mission of the business and a brief overview of it, as well as the objectives, strategies, and financial plans of the founder. A business plan comes into play very early on in the process of starting a company—more or less before you do anything else.
“You should start a company with a business plan in mind—especially if you plan to get funding for the company,” Cobello says. “You’re going to need it.”
Whether that funding comes from a loan, an investor, or crowdsourcing, a business plan is imperative to secure the capital, says the U.S. Small Business Administration . Anyone who’s considering giving you money is going to want to review your business plan before doing so. That means before you head into any meeting, make sure you have physical copies of your business plan to share.
The four main types of business plans are:
Internal business plans, strategic business plans, one-page business plans.
Let's break down each one:
If you're wondering how to write a business plan for a startup, Cobello has advice for you. Startup business plans are the most common type, she says, and they are a critical tool for new business ventures that want funding. A startup is defined as a company that’s in its first stages of operations, founded by an entrepreneur who has a product or service idea.
Most startups begin with very little money, so they need a strong business plan to convince family, friends, banks, and/or venture capitalists to invest in the new company.
Internal business plans “are for internal use only,” says Cobello. This kind of document is not public-facing, only company-facing, and it contains an outline of the company’s business strategy, financial goals and budgets, and performance data.
Internal business plans aren’t used to secure funding, but rather to set goals and get everyone working there tracking towards them.
As the name implies, strategic business plans are geared more towards strategy and they include an assessment of the current business landscape, notes Jérôme Côté, a Business Advisor at BDC Advisory Services .
Unlike a traditional business plan, Cobello adds, strategic plans include a SWOT analysis (which stands for strengths, weaknesses, opportunities, and threats) and an in-depth action plan for the next six to 12 months. Strategic plans are action-based and take into account the state of the company and the industry in which it exists.
Although a typical business plan falls between 15 to 30 pages, some companies opt for the much shorter One-Page Business Plan. A one-page business plan is a simplified version of the larger business plan, and it focuses on the problem your product or service is solving, the solution (your product), and your business model (how you’ll make money).
A one-page plan is hyper-direct and easy to read, making it an effective tool for businesses of all sizes, at any stage.
Every business plan is different, and the steps you take to complete yours will depend on what type and format you choose. That said, if you need a place to start and appreciate a roadmap, here’s what Cobello recommends:
Before writing your business plan, you’ll want to do a thorough investigation of what’s out there. Who will be the competitors for your product or service? Who is included in the target market? What industry trends are you capitalizing on, or rebuking? You want to figure out where you sit in the market and what your company’s value propositions are. What makes you different—and better?
The purpose of your business plan will determine which kind of plan you choose to create. Are you trying to drum up funding, or get the company employees focused on specific goals? (For the former, you’d want a startup business plan, while an internal plan would satisfy the latter.) Also, consider your audience. An investment firm that sees hundreds of potential business plans a day may prefer to see a one-pager upfront and, if they’re interested, a longer plan later.
Every business plan needs a company description—aka a summary of the company’s purpose, what they do/offer, and what makes it unique. Company descriptions should be clear and concise, avoiding the use of jargon, Cobello says. Ideally, descriptions should be a few paragraphs at most.
A business plan should be centered around the company’s goals, and it should clearly explain how the company will generate revenue. To do this, Cobello recommends using actual numbers and details, as opposed to just projections.
For instance, if the company is already making money, show how much and at what cost (e.g. what was the net profit). If it hasn’t generated revenue yet, outline the plan for how it will—including what the product/service will cost to produce and how much it will cost the consumer.
How will you promote the business? Through what channels will you be promoting it? How are you going to reach and appeal to your target market? The more specific and thorough you can be with your plans here, the better, Cobello says.
What will you do with the money you raise? What are the first steps you plan to take? As a founder, you want to instill confidence in your investors and show them that the instant you receive their money, you’ll be taking smart actions that grow the company.
Creating a business plan is in some ways akin to building a legal case, but for your business. “You want to tell a story, and to be as thorough as possible, while keeping your plan succinct, clear, interesting, and visually appealing,” Cobello says. “Supporting documents could include financial projects, a competitive analysis of the market you’re entering into, and even any licenses, patents, or permits you’ve secured.”
A business plan is an individualized document—it’s ultimately up to you what information to include and what story you tell. But above all, Cobello says, your business plan should have a clear focus and goal in mind, because everything else will build off this cornerstone.
“Many people don’t realize how important business plans are for the health of their company,” she says. “Set aside time to make this a priority for your business, and make sure to keep it updated as you grow.”
You might be wondering what the difference is between a business plan and a business model. The truth is, they are different things with different purposes.
The main difference between a business plan and business model is that a business plan outlines your goals and strategy to grow your company, while a business model shows you how to generate revenues. Read on to learn more about this subject, including what types of business models there are and how to figure out which type best suits your situation.
During the business planning process, especially if you are trying to attract investors, there are 10 essential elements of a business plan which you must include as follows:
For each of these sections, you should provide an in-depth description of your research, analysis, and expected financial performance. You can learn more about the components of a business plan and review our repository of 100+ business plan examples to help you get started on writing your own business plan.
A business model should include the details of every way in which your business makes money. It’s important not to leave anything out, even if it seems insignificant. Every dollar counts!
Business models outline how your company generates revenues. On the other hand, business plans focus on the specifics of how the business will achieve sales and growth over a given period of time, typically five years. Business plans discuss your business model among other things and are critical if you want to gain investments to grow your business.
The business model strategy is very different from a business plan. While they overlap a bit, the critical difference is that a business plan outlines the goals and business strategy while the basic business model shows you how to make money.
Your needs will change over time so it’s important to be able to switch between these two documents when needed. For example, if your goal is long-term growth then you may want more information about what type of strategy would work best for this situation or which resources might help get there faster. On the other hand, if you’re looking for some immediate income then paying attention to the various types of models available could give you an idea of where to start with generating enough sales quickly without too much cost upfront.
Don’t you wish there was a faster, easier way to finish your business plan?
With Growthink’s Ultimate Business Plan Template you can finish your plan in just 8 hours or less!
Since 1999, Growthink’s business plan consulting team has developed business plans for thousands of companies who have gone on to achieve tremendous success.
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Why do some business owners have to face a failure while the other gets a great business success? You might sometimes wonder and ask yourself. Let us help you understand this. Other than business plan there is a term called “business model” is often used interchangeably. However, they found to have distinct concepts in the world of entrepreneurship and business development. Before embarking on a new venture, understanding the Business model vs business plan is essential for any entrepreneur. Both terms serve different purposes and have distinct scopes that help business owner become successful in their entrepreneurial journey.
So if you want your business to be successful, come up with a business plan and a business model. Although these two terms cannot coexist, likewise implementing these terms could not be possible for you until you get them deeply clear. A thoroughly drafted business plan is a document that outlines the goals, and financial projections of a company over a particular period. Comparatively, when talking about a business model, is a document that dives deeper into how a business drives, delivers and captures value.
Let’s now understand these two terms separately and then closely look into the key difference that makes them equally unique and valuable for every successful business.
It is a written form document that describes how a company establishes, delivers, and captures value. It explains the core aspects of how a business operates, including its revenue streams, target customer segments, distribution channels, value proposition, and cost structure.
Imagine a business plan as a roadmap guiding you to navigate the operational and financial activities. It is a document that talks about your business objectives, strategies, and functions of a business in detail. It typically involves sections such as executive summary, company description, market analysis, organization and management structure, marketing strategy, product or service description, funding requirements, and financial projections.
Comparing a business plan and a business model lets you identify how these two categories in businesses work and may help foresee the differences among them to avoid making mistakes in your future business.
Business models describe how a business manages to deliver products and services to customers. They focus on the fundamental logic of how a company intends to follow sales funnels, and marketing strategies and sustain its operations over time. Whereas, business plans are more comprehensive explanations of every facet of a business that focuses on the specific steps and tactics a company will take to achieve its goals. It provides a direction about how the business will be launched, operated, and grown.
Business Model contains the overarching strategy and framework that guides the entire business. It’s more conceptual and has a high-level view of a company or business tendency. A business plan, on the other hand, turns a thorough synopsis of the enterprise into several tactical measures, such as target markets, financial predictions, operational plans, and short- and long-term goals.
Business plans primary goal is to persuade external parties such as potential investors and other stakeholders. For example, demonstrating a business plan to raise funds, apply for grants, or update investors on business progress.
Alternatively, business models are primarily designed for executives and internal members within a company. These schemes aim to help team members coordinate activities like producing a product, delivering, and capturing value in economic, social, cultural, or other contexts.
Business model is found to be more flexible and adaptable to changes in the market or business environment. It’s meant to be dynamic and evolve due to being at the center of the business plan.
On the other hand, a Business Plan tends to be more rigid and static, as it’s often used as a formal document for obtaining funding or as a roadmap for initial business operations.
The business owners can use the Business model to understand the fundamental mechanics of how a business will be operated and generate value. It helps the owner in decision-making and identifying opportunities for innovation or optimization.
In comparison business plan is typically utilized for external purposes such as securing funding from investors or loans from financial institutions, or for internal planning and communication purposes.
In general, the business model and business plan are completely different notions. The business model serves as the mechanism, defining the core components that generate the company’s revenue streams and sustainable operations. In contrast business plan is a written document presenting the future of a business. It’s a document that not only gets a business concept on paper but also outlines the company strategy and people’s roles that will be involved to lead the business to success for the years to come.
Although both the business model and the business plan are essential parts of a successful business. Therefore, all businesses must have a well-thought-out business plan along with an exceptional business model supporting them to consistently do hard work to win the competitive market landscape.
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In the business world, understanding the distinction between a business model and a business plan is paramount.
While a business model serves as a blueprint for value creation and revenue generation, a business plan offers a comprehensive roadmap for achieving company goals.
This article explores the purpose, scope, similarities, and differences between these essential tools, providing practical applications and real-world examples.
By grasping when and how to utilize business models and plans, businesses can effectively communicate their vision, attract investors, and ensure long-term success.
Key Takeaways
Definition and Components
A business model encompasses the various components that quantifiably outline how a company creates, delivers, and captures value. Strategic analysis is a crucial aspect of developing a business model, as it involves understanding the market, competition, and identifying opportunities for differentiation.
Value proposition development is another key component, as it defines the unique value that a company offers to its customers. This involves identifying customer needs, crafting a compelling value proposition, and aligning it with the company's capabilities and resources.
Purpose and Scope
The purpose and scope of a business model is to outline how a company intends to create and capture value, guiding its fundamental strategy and revenue generation. It plays a crucial role in decision-making by providing a clear framework for understanding the key elements of value creation and revenue generation.
The advantages of a business model include its simplicity, flexibility, and adaptability to changes in the market or business environment. However, it also has limitations, such as its high-level and abstract nature, which may make it less suitable for detailed operational planning.
Despite these limitations, a well-defined business model can serve as a guidepost for strategic decision-making and help align the company's activities with its overall goals and objectives.
Flexibility and Stage of Development
When considering the flexibility and stage of development, it is important to recognize that business models can be more easily adapted and adjusted in response to market or business environment changes. Business models are designed to be adaptable in changing markets, allowing companies to evolve and adjust their strategies as needed.
This flexibility is crucial for businesses, especially in today's rapidly changing and competitive landscape. On the other hand, business plans tend to be more rigid and may require updates or revisions when circumstances change.
Business models are typically developed in the early stages of a business to clarify the fundamental strategy, while business plans are usually created when seeking external funding or when the business is preparing for significant growth or expansion.
Similarities and Differences
In the comparison of business model and business plan, it is important to highlight the similarities and differences between these two essential tools for business development.
However, there are some key differences. Business models focus on value creation, revenue generation, and cost structure, while business plans are more comprehensive and detailed, incorporating financial projections and operational plans.
Understanding these similarities and differences is crucial for businesses to ensure strategic alignment and successful implementation.
While business models offer flexibility and adaptability in response to market changes, business plans provide a detailed framework for operational and financial management.
Applications and Examples
Examples of the applications and uses of business models and business plans include:
Examples of business models include:
Examples of business plans include:
Real-world case studies include:
Importance in Business Development
The importance of business models and business plans in business development lies in their ability to provide a strategic roadmap for achieving long-term success. These tools offer several benefits and limitations for strategic decision making:
Benefits:
Limitations:
Key Considerations for Using Them
When considering the use of business models and business plans, it is important to carefully evaluate their applicability and effectiveness in achieving the organization's objectives. Two key considerations in this evaluation process are timing considerations and strategic alignment.
Timing considerations involve determining when to develop and use a business model or business plan. For example, a business model may be developed in the early stages of a business to clarify the fundamental strategy, while a business plan may be created when seeking external funding or preparing for significant growth.
Strategic alignment refers to ensuring that the business model or business plan is in line with the organization's overall strategic goals and objectives. It is essential to assess whether the proposed model or plan supports the company's mission, vision, and long-term strategy.
To summarize these considerations, the table below provides a comparison of timing considerations and strategic alignment for business models and business plans:
Considerations | Business Models | Business Plans |
---|---|---|
Timing | Early stages | Growth/Expansion |
Strategic Alignment | Fundamental Strategy | Mission/Vision/Strategy |
Frequently Asked Questions What Are Some Common Mistakes to Avoid When Developing a Business Model or Business Plan?
Common mistakes when developing a business model or plan include neglecting market research, underestimating competition, overestimating revenue projections, and failing to adapt to changing circumstances. Important factors to consider are feasibility, scalability, and market demand.
How Often Should a Business Model or Business Plan Be Updated?
The updating frequency of a business model or business plan depends on the specific circumstances and needs of the business. Regular updates are beneficial as they ensure alignment with market changes and help maintain a strategic focus.
What Are the Key Factors to Consider When Choosing Between a Business Model or Business Plan?
Factors to consider when choosing between a business model or business plan include the stage of development, flexibility needed, and the level of detail required. It is important to assess the purpose and scope of each tool in order to make an informed decision.
How Do Business Models and Business Plans Differ for Different Industries or Sectors?
Different industries and sectors have different approaches to business models and business plans in the digital age. The impact of technology on these strategies is significant, as it requires businesses to adapt and innovate to stay competitive.
Can a Business Model and Business Plan Be Used Together, or Is One More Important Than the Other?
When considering the importance of a business model and integrating a business plan, it is crucial to understand that both play complementary roles in a company's success. The business model outlines the core strategy for value creation and revenue generation, while the business plan provides a detailed roadmap for achieving the company's goals and objectives. Therefore, it is essential to use them together to ensure a comprehensive approach to business development and long-term success.
In conclusion, understanding the difference between a business model and a business plan is crucial for successful business development.
A business model outlines the core elements of revenue generation and cost structure.
A business plan, on the other hand, provides a detailed roadmap for achieving goals.
Both tools play a vital role in attracting investors, guiding day-to-day operations, and ensuring long-term success.
By utilizing these essential tools effectively, businesses can communicate their vision and achieve their desired outcomes.
How Does Getir Make Money? The Getir Business Model In A Nutshell
UPS Business Model
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It’s very common to make confusion on what’s the difference between Business Model and Business Plan. But, in fact, they are similar only in name. Their functions and purposes are quite different and, actually, complementary. While the business model refers to a one-page representation of how a company creates, delivers, and captures value, the business plan is an in-depth description on a long textual document form about how your company is structured and plan to achieve strategic and financial objectives. This business plan is a document that contains every data of the business – usually including its model. Let’s separate them both, to make it simple.
Your company’s business model is all about the way a company creates, delivers, and captures value. For example, a restaurant franchise is a business model. A Software-as-a-Service is another one. A razor-and-blade , a subscription company , a Freemium internet tool, a e-commerce marketplace . Each of that is a business model, with its own peculiarities. What it’s commonly mistaken with the business plan is not the business model itself. It’s, indeed, the business modeling tool . And this tool provides a base to design a business model. It’s, in fact, by modeling your business through this kind of tool that you’ll be able to identify your they main construction blocks of a business, who they relate to each other and combine to form a unique strategy. It’s with the business model tool that you may identify the key resources for your business to succeed, which key activities it must perform, who it has to interact with, and by which means and channels . Usually, this business model tool is a framework, made up of a single page, that allows you to recognize your own business under several perspectives. According to the type of business, you may take a look at different modeling options, such as Business Model Canvas , Value Propositions Canvas, Lean Canvas , and others. Each of them fits a different purpose. For example, if your business is brand new, the Business Model Canvas is likely to be the better option. On the other hand, for early validation of your startup, the Lean Canvas must be the most appropriate. And, to pivot your product, it’s a good idea to check the Value Proposition Canvas. In short, if you aim to understand your business better, from inside, or make predictions for growing your venture, then your need to work on your business model, not make a business plan. So, now, let’s check what the business plan is for.
A business plan is a written document that contains detailed information of the business, product/service, market, and the entrepreneur vision for the company’s future. It is basically the most accurate portrait of the field, products and services, customers, competitors, suppliers, all the operational and financial goals of the company, its marketing and sales strategy. Its purpose is to display the strengths and weaknesses of the business and to project the gains and losses of the organizations, in order to identify the viability and sustainability of the idea. The business plan is often a long document, made up of several pages. In general, it contains:
The goal of the business plan is to determine whether your idea is sustainable or not. It also shows the weaknesses to be repaired, as well as the strengths to be potentialized. It is a kind of script, to reduce the chance of failure. The business plan is a core document if you are looking for partners, in order to demonstrate profitability. Its focus is, indeed, to provide executives, investors, and any other stakeholders a full overview of the business. So, it is especially important when you are seeking loans, sources of financing, and investments. It is the best way to demonstrate that your business is trustworthy and solid enough for credit.
the difference between Business Model and Business Plan lies in key points like how they should be developed, where should the focus be, how to organize ideas and what are their main objectives.
Business Models and Business Plans are important documents to help you plan and organize your business strategy. It can be either a document for early-stage companies that need to validate hypothesis or big companies that need to plan ahead, capture investment or even make an IPO .
Whatever the case is, it is very important to understand that these are different terms, with different purposes and have different tools to develop them. To summarize here, the key terms that are commonly confused between each other:
Business model – provides a rationale for how a business creates, delivers and captures value, and examines how the business operates, its underlying foundations, and the exchange activities and financial flows upon which it can be successful. Business Plan – a formal document that typically describes the business and industry, market strategies, sales potential, and competitive analysis as well as the company’s long-term goals and objectives. Revenue Model – Outlines the ways in which your company will make money (e.g. revenue streams). Did you better understand the difference between Business Model and Business Plan? Comment below!
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Very interesting. Concise and comprehensive at the same time.
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Business plan, business model, strategies, financial forecasts, and whatnot!
Starting a business means encountering new terms every day, but not exactly knowing when to use what!
Two such terms are business plan and business model. People often use them interchangeably, and it’s okay if you do too. Today we’ll change that so you know which to use when.
In this article, we’ll conduct a thorough business plan vs. business model comparison to understand their meanings and know their purpose.
So, let’s kick-start this journey now.
A business model is a mechanism that directs how you create, deliver, and attain value in the market; it’s the profit-generating plan of your company.
This involves identifying your value proposition, targeting specific customer segments, defining revenue streams, leveraging key resources, and forming strategic partnerships.
Simply put, it’s how you sell your product to make money.
The essential elements of a business model are:
A business plan is a comprehensive document that outlines your entire business operations. It covers everything from launching products and setting milestones to planning an exit strategy, detailing every step of your business journey. A business plan describes what a company does, its vision & goals, and its strategies.
Essentially, a business plan serves as a roadmap for how your business will operate, grow, and achieve success.
Here are the core components of a business plan:
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Now that you know the exact meaning of a business model and business plan, it’s time to understand the difference.
Your business model focuses on optimizing the internal and external company operations to earn maximum profits. It explains your relationship with dealers, distributors, service partners, customers, and target audience.
Conversely, your business plan focuses on how you set business goals, create strategies, make predictions, and manage labor to sustain and scale your business. It also outlines your relationship with your customers, competitors, industry, and the market.
Adopting the right business model(s) help you:.
Gain a competitive edge
Incorporating a unique business model amazes your audience and attracts them to be your first-time customers. It also provides you with a competitive edge over other businesses in your industry.
Ensure sustainability and scalability
A business model pushes an entrepreneur to have monthly update meetings and plan what the next month should exactly look like. Many businesses shut down due to poor financial management, which is why a business model is required.
From economic storms to unexpected difficulties, a business model ensures both sustainability and scalability.
Inspires trust in investors
Investors know the failure rate of small businesses, which is why incorporating a clear business model provides a sense of security. They will also know that you have a strategy and what your profitability expectations are for the upcoming years.
Test the viability of your business idea
A business plan defines the target customers and their willingness to pay for your product or service. This way, your business idea will be validated, helping you decide whether to move forward with it or not.
Acquire funding
If you want funds from banks, investors, or other parties, then you’ll require proper financial details like goals, plans, and projections. A good business plan will help you impress investors.
Plan for exit
A business plan includes strategies and a timeline to accomplish any task, which helps in planning your business’s exit too. While handing over your business or closing it directly, meeting the financial goals is also important—which are very specific in the business plan.
Other advantages of writing an ideal business plan include:
First, consider the scalability of your business, then measure the value you offer. List down your competitors, segment your customers, see the market potential, and then choose a business model.
Here are other points to consider:
Answer a few questions first, like where you think your business will be in 10–15 years, what’s your expected income, or what are your projections.
A business model outlines how a company creates, delivers, and captures value. Understanding different types of business models can help identify the best approach for their businesses, ensuring growth. Some of the types of business models are:
Each type of business plan serves a unique role, whether it’s for a startup looking to enter the market, an existing business planning for growth, or a company looking to improve its operational efficiency. Here is an overview of the most common types of business plans:
There’s no standard answer for business plan vs. business model; the choice entirely depends on your business’s specific needs and objectives.
Additionally, planning is an ongoing process. You can’t create a business plan or a business model and rely on that for years to come!
So, to keep your business model and business plan updated, explore a business plan app like Upmetrics . It has a business model canvas template, sample business plans, and an AI assistant to help you plan as many times as you need.
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Can i write a business plan without a business model.
No, a business plan is like a roadmap for your business—but it also needs direction. This direction comes from a business model. A business model explains how you’ll make money by defining its target market, value proposition, revenue streams, cost structure, and distribution channels. So, writing a business plan after making a business model is advisable.
Well, no! For funding an investor would want to know everything about your business like the management team, competitive landscape, industry analysis, financial projections, and more. So, having a business plan for funding is necessary.
Create a business model and a business plan when you’re starting a new business or launching a new product or service. However, you need to create or alter both documents if there are any shifts in the current business operations.
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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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Sculpting success in the realm of commerce hinges on two critical blueprints: the business model and the business plan . As if peering through a dual-lens, one unveils the anatomy of value creation, while the other charts a course for achieving it. This isn’t about mere documents; it’s the lifeblood of strategic foresight and operational vision.
Here’s the crux: although they waltz together in strategic symbiosis, these entities each spin a unique narrative of your venture’s voyage. One sketches the architecture of your enterprise, laying bare the revenue streams and value proposition.
The other, a meticulous roadmap, presents meticulous market analysis, financial projections, and the operational plan set to navigate the turbulent tides of commerce.
By journey’s end, you’ll not just differentiate between the two but harness their combined power.
Delve into concepts like competitive advantage, customer segmentation, and scalability. Decode the mesmerizing narrative behind a robust strategic planning foundation. Sales forecasting, funding requirements, investor pitch decks.
A framework for creating economic value and capturing a portion of that value. | A formal document detailing a business’s objectives, strategies, target market, and financial forecasts. | |
To define how a company creates, delivers, and captures value in economic, social, cultural, or other contexts. | To guide management in running the business and to persuade external parties, like investors, to fund the business. | |
– Value proposition – Customer segments – Channels – Revenue streams – Cost structure | – Executive summary – Market analysis – Organization and management plan – Sales strategies – Financial projections | |
Typically more flexible, subject to adjustment as the company grows or market conditions change. | Tends to be a more rigid document, often used for a specific purpose, like seeking investment or a bank loan. | |
Primarily internal; used by founders and management to understand and operate the business. | Both internal management and external stakeholders, including investors, banks, and potential partners. |
The business model is the foundation of a company, while the business plan is the structure. So, a business model is the main idea of the business together with the description of how it is working.
The business plan goes into detail to show how this idea could work. A business model can also be considered the mechanism that a company has to generate profits. At the same time, the business plan also does its part in being the way a company can present its strategy. It is also used to show the financial performance that is expected for the near future.
Comparing how business models and business plans work to help you in different ways is important. A business model can help you be sure that the company is making money. It helps to identify services that customers value. It also shows the reciprocation of funds for the activity that a business renders to its customers.
Any business can have different ways of generating income, but the goals of the business model should aim to simplify the money process. It does this by focusing on the large income generators.
So, we now understood that a basic business model is a gateway to show how an organization is functioning. A business plan is a document that shows the strategy of an organization together with the expected performance details.
We can find the details of a company when we check its business plan. What it does is offer more info about the business model. It does this by explaining the teams needed to meet the demand of the business model. It explains the equipment needed, as well as resources that need to be obtained to start creating. Explaining the marketing goals , and how the business is going to attract and retain more customers over the competition , will be part of the model.
Another interesting thing when it comes to comparing business models and business plans is that they cannot function without each other. Just remember this, the business model is going to be the center of the business plan.
When comparing using a business model versus a business plan, we also need to understand each one better to draw some final conclusions. One of the first goals of a company could be to define its business model.
The business plan is going to be the detailed part that includes all the information and steps like Mayple’s marketing plan template, organization, products or services, sales plan, business proposal for investors , and so on. Some useful questions that you can use when developing your business plan are:
What is a strategic business plan, business plan vs. business model.
Every successful business starts with a concept, a plan and a product or service that customers are willing to pay money to obtain. Business strategies are never conducted in a vacuum, however, and for a business to be successful, there must be a business plan and a business model generated. These two terms are unfortunately used interchangeably, but in reality, they are two very different documents that cannot exist without one another. It is essential that a business owner understand the use of a business model vs a business plan.
At its simplest, a business plan is a written description of the future of a business. It's a document that not only gets a business concept on paper but also outlines the people and steps that will be involved to lead the business to success. The business plan is where you discuss the industry and the need for a particular product or service, the business structure and how you will achieve success.
The business plan also talks about the market in which the business will operate, lays out the competition and what the plans are to position the business as a leader. Lastly, the business plan lays out the ever-important financial plan, discussing things such as income and cash flow, loans and obligations and when and how investors can expect to see a return.
A business model, on the other hand, is a business's rationale and plan for making a profit. If the business plan is a road map that describes how much profit the business intends to make in a given period of time, the business model is the skeleton that explains how that money will be made. A model covers everything from how a company is valued within an industry to how it will interact with suppliers, clients and partners to generate profits.
There are several different kinds of business models. A software company, for instance, might be based on a subscription model, which generates revenue from customers that renew subscriptions annually for a license to use the software. An example of an accessories model would be a razor company or computer printer company that guarantees future income through the sale of razor blades and printer cartridges.
While it's true that a business plan and business model are two separate documents, the reality is that the business plan cannot live without the business model. While a business plan can describe the structure of a business's financial goals, the business model explains how the money will flow - from customer generation to marketing to sales, and finally, to customer retention. The business model must have room to grow and adapt. Consequently, if the business model changes, so must the business plan.
One of the most prominent examples of a business model changing is currently occurring in the computer software industry. About 10 years ago, the way to purchase software programs was to go to the store and buy a CD-ROM to download the application and license to your computer. Today, the advent of cloud-based subscription services makes it possible for customers to download software and renew licenses remotely over the internet.
This transition to the Software as a Service (SaaS) subscription model has caused many businesses to change their plans. Companies affected by this shift include computer companies that no longer need to build machines with CD-ROM drives in them and software companies that no longer need to make or sell software in physical form.
As a result, software companies have had to change their business plans, including costs and infrastructure costs for cloud storage and bandwidth, as well as maintain a cloud operations team 24 hours a day, seven days a week. These ongoing efforts can increase costs and reduce margins, but they're a necessary adaptation to changing customer needs and market technology with the new business model.
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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Have you ever written a business plan? Did you enjoy the process? Or maybe you’re one of the lucky few who have never had to write one.
Most people hate writing business plans.
They take too long to write. You end up making up most of the answers. And worst of all, the people who make you write these plans (i.e., investors) don’t even take the time to read them — opting instead for shorter versions like the 1-page executive summary, 10-page slide deck, or 30-second elevator pitch.
But a no-plan alternative isn’t the solution either.
It would be akin to building a house without a blueprint. While carrying your core business model assumptions in your head alone might seem like the fastest alternative, you must beware of the reality distortion fields that plague entrepreneurs.
Reasonably smart people can rationalize anything, but entrepreneurs are especially gifted at this.
Most entrepreneurs start with a strong initial vision and a Plan A for realizing that vision. Unfortunately, most Plan A’s don’t work.
Instead of chasing a mythical perfect plan, you need a well-documented starting point and a systematic process for going from your Plan A to a plan that works before running out of resources.
This is where the 1-page business model comes in.
While writing a business plan can be a good exercise for the entrepreneur, it takes too long and, more importantly, falls short of its true purpose: Facilitating conversations with people other than yourself.
The problem with business plans isn’t the planning but the format.
Additionally, since most Plan As is likely to be proven wrong anyway, you need something less static and rigid than a business plan.
Compared to business plans, creating a 1-page business model is:
Fast Instead of taking weeks or months, you can outline multiple business models in an afternoon.
Concise Because your business model has to fit on a single page, you must pick your words carefully and get to the point. This is great practice for distilling the essence of your business.
Portable A single-page business model is much easier to share with others, which means it will be read by more people and be more frequently updated.
Here is what a 1-page business model looks like:
The image above shows the Lean Canvas format, which is my adaptation of Alex Osterwalder’s Business Model Canvas.
If you’ve ever written a business plan before, you should immediately recognize most of these boxes.
I liken these boxes to lego building blocks. You can use the same basic building blocks to build both simple and complex models.
Like lego blocks, the canvas also invites an element of play and creativity which is healthy for achieving breakthrough innovation.
But most importantly, the lightweight nature of the canvas is ideally suited for the innovator’s journey, which is best characterized more as a search than the execution of a working business model. This requires a multi-faceted plan of attack (to avoid ending up on a local maximum) and an agile mindsight that can quickly adapt and evolve with on-the-ground learning.
How many people keep their business models updated? Doing so with a Lean Canvas is not only quick but an effective way for telling your business model progress story to a room full of external stakeholders (aka advisors and investors).
Intrigued? Take the 20-minute business model challenge at http://leancanvas.com
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The Difference Between a Business Model and a Business Plan
By Samantha Garner, GoForth Institute
When you’re getting ready to start your small business, you might have heard that you should start with a business plan, or a business model. That’s great! But what are they, exactly, and how are they different from one another?
Business model
The business model is a blueprint for the business, outlining how you’re going to run your business, and how you’re going to make money.
There are five components in a business model:
Business plan
Where a business model is a blueprint, a business plan is a roadmap. A business plan is a formal written document that includes a description of the business you want to run, your business goals, and the plan for reaching those goals.
A business plan is a detailed document that contains sections such as: Marketing Plan, Startup Expenses and Capitalization, Management and Organization, Products and Services, and Operational Plan.
A business plan is usually developed around the answers to three common questions:
And is usually written for one or more of these five reasons:
Do you need both a business model and a business plan?
A business model and a business plan work in tandem. You need a good foundation and planning before you invest your time and money. To get started, check out our free One-Page Business Plan .
Samantha Garner is GoForth Institute's Director, Communications. Contact Samantha by email: [email protected]
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Understanding business models, evaluating successful business models, how to create a business model.
Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.
The term business model refers to a company's plan for making a profit . It identifies the products or services the business plans to sell, its identified target market , and any anticipated expenses . Business models are important for both new and established businesses. They help companies attract investment, recruit talent, and motivate management and staff.
Businesses should regularly update their business model or they'll fail to anticipate trends and challenges ahead. Business models also help investors to evaluate companies that interest them and employees to understand the future of a company they may aspire to join.
Investopedia / Laura Porter
A business model is a high-level plan for profitably operating a business in a specific marketplace. This plan helps the company to identify the best way to go about doing its business while also serving to attract investors and talent.
A primary component of the business model is the value proposition . This is a description of the goods or services that a company offers and why they are desirable to customers or clients; it should ideally be stated in a way that differentiates the product or service from its competitors.
A new enterprise's business model should also cover projected startup costs and financing sources, the target customer base for the business, marketing strategy , a review of the competition, and projections of revenues and expenses. The plan may also define opportunities in which the business can partner with other established companies. For example, the business model for an advertising business may identify benefits from an arrangement for referrals to and from a printing company.
Successful businesses have business models that allow them to fulfill client needs at a competitive price and a sustainable cost. And they are subject to change. Many businesses revise their business models periodically to reflect changing business environments and market demand .
When evaluating a company as a possible investment, the investor should find out exactly how it makes its money. This means looking through the company's business model. Fortunately, it's not hard to find. Most companies outline their business model on their website and in their annual reports .
Admittedly, the business model may not tell you everything about a company's prospects. Investors need to fill in the blanks, look beyond the sales pitch, and recognize that sensitive information or any flouting of rules of ethics to gain an advantage won't be mentioned. The investor who understands the business model, even on a basic level, can make better sense of the financial data.
A common mistake many companies make when they create their business models is to underestimate the costs of funding the business until it becomes profitable. Counting costs up to the introduction of a product is not enough. A company has to keep the business running until its revenues exceed its expenses.
One way analysts and investors evaluate the success of a business model is by looking at the company's gross profit . Gross profit is a company's total revenue minus the cost of goods sold (COGS) . Comparing a company's gross profit to that of its main competitor or its industry sheds light on the efficiency and effectiveness of its business model. Gross profit alone can be misleading, however. Analysts also want to see cash flow or net income —that is, gross profit minus operating expenses, which is an indication of just how much real profit the business is generating.
The two primary levers of a company's business model are pricing and costs. A company can raise prices, and it can find inventory at reduced costs. Both actions increase gross profit.
Many analysts consider gross profit to be more important in evaluating a business plan. A good gross profit suggests a sound business plan. In that case, if expenses are out of control, the management team could be at fault, and the problems are correctable. As this suggests, many analysts believe that companies that run on the best business models can run themselves.
When evaluating a company as a possible investment, find out exactly how it makes its money—not just what it sells but how it sells it. That's the company's business model.
There isn't one type of business model. Not all companies are the same and each has different ways of making money. Business models can vary considerably. An aerospace company such as Boeing, for example, may operate similarly to a peer such as Airbus but won't share much in common in terms of how it makes money with, say, a shoe store or bar.
Direct sales, franchising , advertising-based, and brick-and-mortar stores are all examples of traditional business models. There are hybrid models as well, such as businesses that combine internet retail with brick-and-mortar stores or with sporting organizations like the NBA .
Below are some common types of business models; note that the examples given may fall into multiple categories.
One of the more common business models most people interact with regularly is the retailer model. A retailer is the last entity along a supply chain. They often buy finished goods from manufacturers or distributors and interface directly with customers.
Example: Costco Wholesale
A manufacturer is responsible for sourcing raw materials and producing finished products by leveraging internal labor, machinery, and equipment. A manufacturer may make custom goods or highly replicated, mass-produced products and can sell what it makes to distributors, retailers, or directly to customers.
Example: Ford Motor Company
Instead of selling products, fee-for-service business models are centered around labor and providing services. A fee-for-service business model may charge an hourly rate or a fixed cost for a specific agreement. Fee-for-service companies are often specialized, offering insight that may not be common knowledge or may require specific training.
Example: DLA Piper LLP
Subscription-based business models strive to attract clients in the hopes of luring them into long-time, loyal patrons. This is done by offering a product that requires ongoing payment, usually in return for a fixed duration of benefit. Though largely offered by digital companies for access to software, subscription business models are also popular for physical goods such as monthly reoccurring agriculture/produce subscription box deliveries.
Example: Spotify
Freemium business models attract customers by introducing them to basic, limited-scope products. Then, with the client using their service, the company attempts to convert them to a more premium, advance product that requires payment. Although a customer may theoretically stay on freemium forever, a company tries to show the benefit of becoming an upgraded member.
Example: LinkedIn/LinkedIn Premium
Some companies can reside within multiple business model types at the same time for the same product. For example, Spotify (a subscription-based model) also offers a free version and a premium version.
If a company is concerned about the cost of attracting a single customer, it may attempt to bundle products to sell multiple goods to a single client. Bundling capitalizes on existing customers by attempting to sell them different products. This can be incentivized by offering pricing discounts for buying multiple products.
Example: AT&T
Marketplaces receive compensation for hosting a platform for business to be conducted. Although transactions could occur without a marketplace, this business model attempts to make transacting easier, safer, and faster.
Example: eBay
Affiliate business models are based on marketing and the broad reach of a specific entity or person's platform. Companies pay an entity to promote a good, and that entity often receives compensation in exchange for their promotion. That compensation may be a fixed payment, a percentage of sales derived from their promotion, or both.
Example: social media influencers such as Lele Pons, Zach King, or Chiara Ferragni
Aptly named after the product that invented the model, this business model aims to sell a durable product below cost to then generate high-margin sales of a disposable component needed to use that product. Also referred to as the " razor and blade model ", razor blade companies may give away expensive blade handles with the premise that consumers need to continually buy razor blades in the long run.
Example: HP (printers and ink)
"Tying" is an illegal razor blade model strategy that requires the purchase of an unrelated good prior to being able to buy a different (and often required) good. For example, imagine Gillette released a line of lotion and required all customers to buy three bottles before they were allowed to purchase disposable razor blades.
Instead of relying on high-margin companion products, a reverse razor blade business model tries to sell a high-margin product upfront. Then, to use the product, low or free companion products are provided. This model aims to promote that upfront sale, as further use of the product is not highly profitable.
Example: Apple (iPhones + applications)
The franchise business model leverages existing business plans to expand and reproduce a company at a different location. Often food, hardware, or fitness companies, franchisers work with incoming franchisees to finance the business, promote the new location, and oversee operations. In return, the franchisor receives a percentage of earnings from the franchisee.
Example: Domino's Pizza
Instead of charging a fixed fee, some companies may implement a pay-as-you-go business model where the amount charged depends on how much of the product or service was used. The company may charge a fixed fee for offering the service in addition to an amount that changes each month based on what was consumed.
Example: Utility companies
A brokerage business model connects buyers and sellers without directly selling a good themselves. Brokerage companies often receive a percentage of the amount paid when a deal is finalized. Most common in real estate, brokers are also prominent in construction/development and freight.
Example: Re/Max
There is no "one size fits all" when making a business model. Different professionals may suggest taking different steps when creating a business and planning your business model. Here are some broad steps someone can take to create a plan:
Instead of reinventing the wheel, consider what competing companies are doing and how you can position yourself in the market. You may be able to easily spot gaps in the business model of others.
Joan Magretta, the former editor of the Harvard Business Review , suggests there are two critical factors in sizing up business models. When business models don't work, she states, it's because the story doesn't make sense and/or the numbers just don't add up to profits.
Complicated business models can put off investors and hinder a company's growth. People are less eager to invest in a company they don't understand. Moreover, some business models can be less profitable and at risk of being compromised. What works one year, isn't guaranteed to continue doing so in the future.
Take the airline industry. For years, major carriers such as American Airlines, Delta, and Continental built their businesses around a hub-and-spoke structure , in which all flights were routed through a handful of major airports. By ensuring that most seats were filled most of the time, the business model produced big profits.
However, a competing business model arose that made the strength of the major carriers a burden. Carriers like Southwest and JetBlue shuttled planes between smaller airports at a lower cost. They avoided some of the operational inefficiencies of the hub-and-spoke model while forcing labor costs down. That allowed them to cut prices, increasing demand for short flights between cities.
As these newer competitors drew more customers away, the old carriers were left to support their large, extended networks with fewer passengers. The problem became even worse when traffic fell sharply following the September 11 terrorist attacks in 2001 . To fill seats, these airlines had to offer more discounts at even deeper levels. The hub-and-spoke business model no longer made sense.
Consider the vast portfolio of Microsoft. Over the past several decades, the company has expanded its product line across digital services, software, gaming, and more. Various business models, all within Microsoft, include but are not limited to:
A business model is a strategic plan of how a company will make money. The model describes the way a business will take its product, offer it to the market, and drive sales. A business model determines what products make sense for a company to sell, how it wants to promote its products, what type of people it should try to cater to, and what revenue streams it may expect.
Best Buy, Target, and Walmart are some of the largest examples of retail companies. These companies acquire goods from manufacturers or distributors to sell directly to the public. Retailers interface with their clients and sell goods, though retailers may or may not make the actual goods they sell.
There are various types of business models. Examples include subscription models, bundling, and franchising. Business models can sometimes also be loosely defined by industry. For example, manufacturers produce their own goods and may or may not sell them directly to the public, whereas retailers buy goods to later resell to the public.
There are many steps to building a business model, and there is no single consistent process among business experts. In general, a business model should identify your customers, understand the problem you are trying to solve, select a business model type to determine how your clients will buy your product, and determine the ways your company will make money. It is also important to periodically review your business model; once you've launched, evaluate your plan and adjust your target audience, product line, or pricing as needed.
A company isn't just an entity that sells goods. It's an ecosystem that must have a plan on who to sell to, what to sell, what to charge, and what value it is creating. A business model describes what an organization does to make a profit. After building a business model, a company should have a stronger direction on how it wants to operate and what its financial future appears to be.
U.S. Federal Trade Commission. " Tying the Sale of Two Products ."
Harvard Business Review. " Why Business Models Matter ."
Bureau of Transportation Statistics. " Airline Travel Since 9/11 ."
Microsoft. " Segment Information ."
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Looking to secure funding for your business? Here’s how your personal score could affect business credit and the differences between the two.
A good business credit score opens your business up to more opportunities—and not just in terms of funding and cash flow .
Your business’s credit score can influence a supplier's decision to work with you and the terms they’ll offer. A wholesale distributor, for example, might be more lenient on their repayment terms if you have a history of paying off credit on time. You could also secure more favorable interest rates with lenders if you’re backed by a strong business credit file.
If you don’t currently have a great business credit history, it can be tempting to secure funding in your own name using a personal credit account. This guide shares the potential risks of doing so, alongside the key differences between personal vs. business credit.
Personal and business credit works in a similar way, but the main difference is the entity that is reliable. You’re personally responsible for any individual accounts opened in your name, whereas the company is accountable for debts acquired in the business’ name. You protect your personal assets by securing business credit instead of personal credit.
Businesses are also more likely to make expensive high-volume purchases—think machinery, rent, inventory, product development , and marketing costs—and for this reason, they tend to have higher credit limits.
The biggest difference between personal and business credit is how the funds are typically spent. A business might use funding to pay for business expenses like inventory , machinery, travel, office supplies, or legal fees.
Individuals can use a credit card in their own name to pay for the same things, but you’ll be personally liable for any debt. More common uses of personal credit include paying bills or purchasing items like furniture, cars, or clothing.
Your personal credit history considers all of your finances. The report will include personal information (like your full name, home address, and social security number) plus any loans or credit accounts, such as a mortgage, car loan, bank overdraft, or personal credit card.
A business’ credit history, however, only covers the financial background of the business. It’ll include the industry classification, credit risk score, and history of lending in the business’ name. Things like equipment financing agreements, a business credit card, and lines of credit will show in your business credit report.
Hard credit checks show on both types of credit reports. Too many of these can signal that you’re exploring too many lending options and have a negative impact on your likelihood of securing credit.
Credit bureaus score personal credit scores on a scale of 300 to 850 because there are more factors that influence an individual’s score. Businesses, however, have theirs measured on a scale of 0 to 100. Anything above 75 is considered a good business credit score .
Equifax, Experian, and TransUnion are the three major credit bureaus that lenders use for both personal and business lending. Dun & Bradstreet, however, focuses on business credit histories.
Consumers tend to have more protection when they’re buying things using personal credit cards. Although some lenders might extend the Credit Card Act , which protects people who use personal credit, it generally doesn’t apply to business credit cards.
Much like personal loans, some small business loans also require a guarantor. This is a person who will step in and repay the debt if you (or the business) become unable to.
Business credit is attached to the company. If you're unable to pay for a loan, you can close down the business and write it off, provided the loan doesn’t have a guarantor. Only your business’s assets—such as your retail stores, inventory, and assets—can be reclaimed.
Individuals, however, have less protection against unpayable debts. You’re personally liable for any repayments; if you can’t make them, the debt can’t be written off. Personal assets such as your home, car, and valuable possessions may be at stake.
It’s free to check your personal credit score through reporting agencies like Equifax or Experian. Businesses, on the other hand, must pay a fee to access theirs, which can range between $40 and $50 per report.
Private information is also more protected in a personal credit report. Anyone who pays the access fee can see your business’ credit score—they don’t have to be a director or an employee of the company.
Despite the differences between personal credit and business credit, there are similarities that both options share. The first is that any loan requires a credit check. Lenders will want to make sure that you can repay the money you’re lending, so they may run a credit check on you or the business before agreeing to lend you.
Most credit card companies also offer rewards for business spending . Whether it’s a percentage of your spend back in points or discounts on partner brands, these offers can compound in the long term—even if you’re collecting them through a personal credit card.
There’s a chance that you might be responsible for any debt accumulated. Check whether the funding requires a guarantor before agreeing to take on debt—even if the loan itself is in your business’ name.
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Building business credit is a long-term play, but there are some quick wins that will help raise your business credit score as a startup:
Personal credit files aren’t the best lever to rely on when you’re looking to secure credit for your business. By building a great credit history and score in your business name, you’ll open the company up to more opportunities—without being personally liable for any debts (provided the business loan doesn’t require a guarantor).
If you’re looking to secure funding for your small business, Shopify Capital can help. Access funding that you’ll repay as a percentage of daily sales, so you’ll never have to worry about missing a repayment.
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Shopify Capital makes it possible to get access to funding in as fast as two business days, if approved, and use it for inventory, marketing, and more. Automatically make payments as a percentage of your daily sales.* No compounding interest. No schedules. No surprises.
Is there a difference between personal credit and business credit.
Businesses tend to have higher credit limits than individuals, and there’s also a fee to access your credit reports. However, you’re personally responsible for any debts acquired through personal credit. It’s free to access your personal credit reports.
Not all lenders look at your personal score when evaluating whether they’ll loan money to your LLC, but it is an option—particularly if the business is newly registered or has a low credit score.
Businesses have their own credit score that isn’t attached to your personal credit score. The way either score is graded also differs: businesses are graded on a scale of 0 to 100, whereas individual scores are graded between 300 and 850.
Some small business owners use a personal credit card to buy things for their business, but remember that you’ll be personally liable for any debts—even if the goods you’ve purchased are for business use.
* Shopify partners with Stripe Payments Company and Celtic Bank for Shopify Credit. Card products are issued by Celtic Bank pursuant to a license from Visa U.S.A. Inc. See Issuing Bank Terms and Shopify Credit Program Terms . "Cashback" refers to rewards earned as a percentage discount on eligible purchases. Earn 3% cashback as a statement credit on up to US$100,000 of annual eligible purchases in your monthly top spend category—either marketing, fulfillment, or wholesale, and 1% cashback thereafter. Earn 1% cashback on the other two spend categories. Restrictions apply. See Rewards Program Terms for details.
*Shopify Capital loans must be paid in full within 18 months, and two minimum payments apply within the first two 6 month periods.
Available in select countries. Offers to apply do not guarantee financing. All funding through Shopify Capital is issued by WebBank in the United States.
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Effective business strategies must be carefully crafted. They also must be precisely implemented to ensure they meet their intended goals. This requires that both business administration and business management are working at an optimal level.
For those who are looking to pursue a business career driven by leadership, it’s important to know the differences between business administration and business management, as well as the differences as they relate to business degrees , that is, business administration versus business management degrees.
Both business administration and business management are critical to an organization’s operations, and the decisions made by people within these areas can influence the organization’s direction. Professionals working in both areas require a fundamental understanding of essential business concepts. Because of this, business administration and business management degree programs may have similar courses covering key concepts such as business law, human resources administration, change management, and accounting.
The primary difference between business administration and business management is their core function. Business administration focuses on building and developing organizational strategies that keep a business running efficiently. Those in administrative roles develop growth and stability strategies and set strategic goals. These goals are often created in conjunction with specific departments such as finance, marketing, or human resources (HR). The specific strategies they design depend on the department. For example, an HR strategy may involve a company reorganization or staff hiring.
Business management, on the other hand, focuses on the execution of strategies. Those in management roles often are leaders within the company, and they seek ways to optimize the organization’s resources so that its goals may be reached efficiently. They also are often tasked with guiding the organization’s workforce toward reaching the goal.
Because business administration and business management focus on different components of business operations, the degree programs associated with the two are also different. Knowing the differences when it comes to business administration versus business management degrees can help aspiring business students decide which degree path suits them best.
The time it takes to complete a business administration or a business management program depends on the type of degree. A bachelor’s degree program, such as a Bachelor of Business Administration (BBA) or a Bachelor of Science (BS) in Management and Ethics , typically takes four years to complete.
If a student pursues an advanced degree in addition to an undergraduate degree, like a Master of Business Administration (MBA) or a Master of Arts in Leadership (MAL) with a business management concentration, they can typically expect to add an average of two more years to the completion time.
While there is some crossover, there are key differences between a business administration program’s curriculum and a business management program’s curriculum.
At the undergraduate level, business administration program coursework centers on administrative functions like strategic management. Some programs may also offer concentrations that allow students to focus on a specific type of business administration, such as data analytics or healthcare management.
In graduate programs, business administration students typically dig deeper into broader concepts that tie into large-scale business strategy, like marketing analysis and global economics. These programs also typically offer concentrations, such as management accounting and international business management.
Undergraduate business management coursework places greater emphasis on leadership functions such as people management, personal goal setting, and entrepreneurship. Some programs at this level may offer concentrations in areas such as communication and management information systems.
At the graduate level, the leadership focus is intensified through courses devoted to leadership theory, training and development, and nonprofit leadership.
Business administration and business management degree programs prepare individuals for different business roles. This naturally can lead to different career outcomes.
Those who earn an undergraduate degree in business administration can pursue roles such as the following:
Earning a graduate degree in business administration can lead to more advanced roles, including the following:
On the business management side, earning an undergraduate degree prepares students to pursue roles such as the following:
Students who earn a graduate degree in business management can be prepared to take on advanced roles, including the following:
There are also differences between business administration and business management salaries, though both are competitive. Earning a degree in either area can lead individuals toward well-paying jobs. According to March 2024 data from Payscale, the median annual salary of those with an undergraduate degree in business management is $70,000, while the median annual salary of those with a bachelor’s degree in business administration is $79,000.
At the graduate level, the median annual salary of individuals with a graduate degree in business management is $91,000, according to March 2024 Payscale data, and the median annual salary of those with a master’s degree in business administration is $97,000.
A close look at business administration versus business management degree programs shows they both provide students with the knowledge and skills they’ll need to play a critical role in an organization’s growth and stability. They both also can lead to a business career that is immensely satisfying.
Enrolling in one of the online or on-campus business programs at Mid-America Christian University (MACU) can help you prepare to pursue your chosen career path in business. Our flexible programs provide expert instruction and personalized support to help you become an impactful and confident professional in the world of business. We seek to transform our students into effective servant leaders who make the ethical decisions necessary to move organizations forward while making the world a better place.
Learn how MACU can help you plan for a bright future.
By: Author Tony Martins Ajaero
Home » Starting a Business » Choose a Business Model
Do you want to know the difference between a <a class="wpil_keyword_link" title="Business model" Business model and a business plan? If YES, here is a detailed comparison and analysis and how each is used. A business plan and a business model look amazingly similar like two peas in a pod, but they are equally different, just like two peas in a pod. They are both part of each other but play different roles thus making the line between them seem dim.
A business plan and a business model both contain <a class="wpil_keyword_link" title="marketing strategies" marketing strategies, customer retention strategy, revenue generation strategies, and overall, they are used to outline the vision of the company. So what then differentiates a business plan from a business model and how can you make a clear distinction of both?
What is a business model.
A business model is a company’s outlined plan for making profit. It identifies the products or services the business will sell, the target market it has identified, and the expenses it anticipates. A business model also shows the destination of the business, how it is meant to work, and what it is meant to become.
A business model ascertains how your business makes money. It identifies the services that your customers value and shows how funds are generated for the services your business renders to your customers. A small business can have more than one method of generating income, and it is the duty of the business model to simplify the money process by focusing on the largest income generator.
For instance, a gas station sells gas to customers, but it also provides other services such as a car wash, lube station, etc. The business model only recognizes the majority income generator, which is the sale of gas. Therefore, the business model will reflect the sale of gas to the customer, which generates income at the time of the customer’s purchase.
The business model summarily simplifies and makes revenue-generation easy to understand by focusing on the key generator, highlights exactly how you intend to acquire, retain, and service your customers. The business model can come in different distinct models like:
The business model is basically at the center of the business plan, as it describes how the company is positioned within its industry’s value chain, and how it organises its relations with its suppliers, clients, and partners in order to generate profits. The business plan translates this positioning in a series of strategic actions and quantifies their financial impact.
A business plan is a formal written document that contains business goals, the methods on how these goals can be attained, and the time frame within which these goals need to be achieved. A business plan acts like a GPS. It shows you the roadmap of how you intend to get to your destination as a business person.
It highlights the market opportunities you want to take advantage of, the existing competition, the strength and experience of your team, a detailed description of the products and services you intend to offer, and a roadmap that shows exactly how you intend to execute your plans in the market.
A business plan is a document presenting the company’s strategy and expected financial performance for the years to come.
The business plan provides the details of your business. It takes the focus of the business model and builds upon it. It explains the equipment and staff needed to meet the details of the business model. It also explains the marketing strategy of your small business, or how your business will attract and retain customers, and deal with the competition.
Furthermore, the business plan explains the financial stability of your small business at a particular point in time, as well as in the forecasted future. Overall, the business plan supports the business model and explains the steps needed to achieve the goals of that model
The business plan pays close attention to your goals, projects the cash flow, profits or losses, and ultimately shows how long and what would be required to enable the business break-even.
A sample structure of a business plan is seen below:
Some of the major differences between a business plan and a business model are outlined thus;
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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 ...
By learning what exactly a business plan and business model are and how they work, you can gain a deeper understanding of the fundamentals of business operations. In this article, we explain the differences between a business model versus a business plan and provide common examples of business models.
Ensuring coherence between the business model and business plan. Maintaining coherence between your business model and your business plan is necessary. For example, if a retail store decides to shift from a traditional brick-and-mortar model to an e-commerce model, this change of business model would need to be reflected in the business plan.
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 ...
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 ...
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.
Business Plan Development: Once the business model has been validated, entrepreneurs can use it as a starting point to develop a detailed business plan. The plan will expand on the core elements ...
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 ...
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 ...
Aspect Business Model Business Plan; Definition: A Business Model is a strategic framework that outlines 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 that outlines a company's goals, strategies, financial projections, and operational details.
Although a typical business plan falls between 15 to 30 pages, some companies opt for the much shorter One-Page Business Plan. A one-page business plan is a simplified version of the larger business plan, and it focuses on the problem your product or service is solving, the solution (your product), and your business model (how you'll make money).
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 ...
Few Major Differences between the Business Model & Business Plan. ... In general, the business model and business plan are completely different notions. The business model serves as the mechanism, defining the core components that generate the company's revenue streams and sustainable operations. In contrast business plan is a written ...
In conclusion, understanding the difference between a business model and a business plan is crucial for successful business development. A business model outlines the core elements of revenue generation and cost structure. A business plan, on the other hand, provides a detailed roadmap for achieving goals.
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 ...
Four key differences: business model vs. business plan. Now that you know the exact meaning of a business model and business plan, it's time to understand the difference. 1. Focus. Your business model focuses on optimizing the internal and external company operations to earn maximum profits. It explains your relationship with dealers ...
Both internal management and external stakeholders, including investors, banks, and potential partners. The business model is the foundation of a company, while the business plan is the structure. So, a business model is the main idea of the business together with the description of how it is working. The business plan goes into detail to show ...
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 ...
The problem with business plans isn't the planning but the format. Additionally, since most Plan As is likely to be proven wrong anyway, you need something less static and rigid than a business plan. Compared to business plans, creating a 1-page business model is: Fast. Instead of taking weeks or months, you can outline multiple business ...
Business plan. Where a business model is a blueprint, a business plan is a roadmap. A business plan is a formal written document that includes a description of the business you want to run, your business goals, and the plan for reaching those goals. A business plan is a detailed document that contains sections such as: Marketing Plan, Startup ...
In simple terms, a business model is how a company makes money, and the business model canvas is a tool to help entrepreneurs find a coherent business model for their business (or for new products or services). A business model can be broken down into two parts: The first part deals with what a business is about.
Business Model: A business model is a company's plan for how it will generate revenues and make a profit . It explains what products or services the business plans to manufacture and market, and ...
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 vehicle that gets you there. A model covers ...
IESE's Christoph Zott and co-author Raphael Amit from the Wharton School map the overlaps between the lean startup method and business model design more generally in their paper "Business models and lean startup," and argue that combining both approaches could produce a powerhouse framework for entrepreneurs and managers. Leaning into lean
The biggest difference between personal and business credit is how the funds are typically spent. A business might use funding to pay for business expenses like inventory, machinery, travel, office supplies, or legal fees. Individuals can use a credit card in their own name to pay for the same things, but you'll be personally liable for any debt.
Creating a business continuity plan can enable your firm to navigate periods of disruption with as little negative impact as possible. Having a plan in place can be reassuring both to your employees and your clients who may have concerns about what would happen to their assets should a disaster or emergency occur.
The primary difference between business administration and business management is their core function. Business administration focuses on building and developing organizational strategies that keep a business running efficiently. Those in administrative roles develop growth and stability strategies and set strategic goals.
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.
An international roaming outage is leaving customers of the three major US mobile carriers in the dark, making it difficult or impossible for American customers who are currently out of the ...
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