Business Model vs Business Plan

What is a business model versus a business plan

Well, the business plan first has traditionally been used to lay out all of the important elements that goes into operating a business

Generally, someone should be able to read a business plan and fully understand everything that goes into operating the business

Now, that's not to say the person would have the skill or ability to carry out the functions described in the business plan, but the individual would have a very good understanding of all of the activities that go into the creation of the value proposition, the delivery of that value proposition, the marketing of it, the financing of it, etc

It is an explanatory picture that goes into a great bit of detail about the key elements of the business, such as your concept, what is the value proposition, your market sizes that you're serving and the segments that exist in that market and the target market that you're targeting

operations, the individual value driving tasks that are carried out at every stage of the process

from design construction training all the way to delivery of the value proposition through supply chains and follow customer service management all of those things All of that goes into operations Then there will be projections about the revenue potential or the thoughts about what revenue

will occur and when over a given time period and the cost drivers that happen, the fixed

cost and variable costs that take place along the growth of the business venture over a

given time period. Business plans generally look out as much as three years, and you'll have your financing sources

Where are you going to get the money or where do you propose to get the money to cover the expenses to get started until revenue is adequate to support the business

All of these things. So think of the business plan as an in-depth document that explains every small facet of the business

The business model is not that. The business model is more of a high-level picture of the business, and someone looking

at a business model may not fully understand exactly how the business operates, but someone

who's well-versed in business language and has some understanding of the business would

be able to look at a business model and readily determine how a business delivers value and

receives back value. Basically, how the business operates and makes money. They wouldn be able to say that they understand everything that happens along in the process but they will be able to identify key activities That is what are the key value drivers such as what are the important relationships in the business what are the important distribution channels who are the

key partners who are the key customers or target markets there that you're focusing on what are the

key resource requirements or dependencies of the business as part of the value delivery process

While the business plan can go on for pages and pages and pages with detailed written explanations and charts and everything, a business model is generally depicted on one page with various quadrants, if you will, that outline key elements of the business

Now, probably the most famous demonstration of the business model is the business model canvas

But business models can be displayed in any way. If I have a lawn business where I rake leaves, then my business model may be fairly straightforward

I may be able to identify the key elements that I have, which is a rake or a leaf blower

My key customers or clients, who are they if I have readily identified clients in the neighborhood

What are my marketing channels if that's word of mouth or posters that I put on light poles in the neighborhood

Now this is a simple example just to show you some of the various things

Where if I were to do the same thing for a business plan I would write out how I going to finance the purchase of the rake how long the rake is going to last when am I going to incur more expenses for a new rake what are the variable costs that incur with each new job that I acquire

how am I going to go about soliciting new clients in grave detail during the offseason

what will be the variations in my revenue that happen when leaves aren't falling, things of that nature

Now, this is just a simple example to demonstrate the difference between the business plan

Think of the business plan as a novel that really breaks down the various components of the business where the model is more of a picture book that shows some of the key elements that relate to the value delivery process

Now both of these are extremely useful for different things. The business plan, if you're going to get a loan, you're definitely going to need to show this to the loan officer to give them an understanding of what the business means to gain their confidence in lending money

If you're just trying to demonstrate to key partners how you operate your business or if you're using it as part of a pitch to help some financier understand the nature of the business that you're seeking investment for and later you'll provide additional detail, for example, through the business plan, then you would use the business model as a summary, as a general depiction of what the business is and how it runs

So these are the differences between the business plan and the business model and generally some summary differences of how they're used