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||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. It is often used for fundraising and as a roadmap for the business.|
|Purpose||The primary purpose of a business model is to describe the fundamental logic of how a business will make money and create value for customers.||A business plan serves as a detailed blueprint that provides guidance on how a business intends to operate and grow. It is often used for attracting investors or lenders.|
|Components||Key components of a business model include the value proposition, customer segments, revenue streams, channels, key resources, and cost structure.||A business plan typically includes sections on the executive summary, company description, market analysis, marketing strategy, financial projections, and operational plan.|
|Focus||A business model emphasizes the core aspects of value creation and capture, simplifying complex business operations into key building blocks.||A business plan delves into comprehensive details, including market research, competition analysis, financial forecasts, and strategic milestones.|
|Flexibility||Business models are often more flexible 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 rigid and may require extensive updates when the business encounters unexpected challenges or opportunities, potentially leading to delays.|
|Timing||Business models are typically developed and iterated upon early in the business development process, helping entrepreneurs validate their ideas quickly and efficiently.||Business plans are usually created when the business is seeking external funding or when a more detailed operational roadmap is required for established businesses.|
|Use Cases||Business models are useful for conceptualizing and testing business ideas, often at the startup or early stages of a venture.||Business plans are commonly used for attracting investors, securing loans, or presenting a comprehensive growth strategy for established businesses.|
|Visual Representation||Business models are often represented using visual tools like the Business Model Canvas, which provides a quick overview of key components.||Business plans are primarily presented as text-based documents with detailed narratives and financial tables.|
|Focus on Innovation||Business models encourage innovation and experimentation as they allow entrepreneurs to explore various ways to create and capture value.||Business plans may prioritize risk mitigation and detailed planning over rapid innovation, potentially leading to slower adaptability.|
|Investor Appeal||Investors may appreciate a clear and compelling business model that demonstrates a strong value proposition and revenue potential.||Investors often require a comprehensive business plan to evaluate the financial viability, growth strategy, and risk mitigation of a business.|
|Longevity||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.|
|Resource Requirements||Developing a business model typically requires fewer resources and is suitable for resource-constrained startups.||Creating a comprehensive business plan can be resource-intensive in terms of time and expertise, often involving multiple team members or consultants.|
|Execution Guidance||A business model provides strategic direction and helps in making decisions that align with the core value proposition and revenue generation.||A business plan serves as a step-by-step guide for executing strategies, including marketing, operations, and financial management.|
|Presentation Format||Business models can be presented in a concise and visual format that quickly conveys the essence of the business’s value proposition.||Business plans typically involve detailed narratives and financial projections, which can be lengthy and text-heavy.|
|Return on Investment (ROI)||ROI on developing a business model can be relatively high, 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 realized over the long term if it successfully attracts investors or lenders and helps secure funding.|
The key difference between a business model and a business plan
Indeed, while a strategy of an organization and its expected performance in a three to five years time frame.is a framework to understand the way an organization works, a business plan is a document that helps to understand the future
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 plan.can be comprised within the
Indeed, as an investor, I want to know exactly how your business works or how you think it will work in the future. Keeping a distinction between those tools is critical.
In particular, I want to focus on the critical difference from two perspectives:
- external (investors, stakeholders, and other parties)
- internal (owners, top management, shareholders)
External: business plan or business model?
If you’re looking for a tool whose aim is to show how attractive your business is, a business plan is the most suited for that.
Indeed, suppose you want to attract investors and grow your business via external resources.
In that case, a detailed business plan is the most effective way to allow those investors to understand the several parts of your business.
Also, the business plan is a way to show where you see the business in the future. Indeed, one key ingredient of a business plan is a set of projections for three-five years.
While investors will also want to know what kind of business model you want to build (depending on whether or not your will be scalable will make or break the interests of investors).
The primary tool to show where your business will be in the future and to address the kind of resources needed to get there is the business plan. In short, for external subjects to know about your business and invest in it, the business plan is the best tool.
Internal: business plan or business model?
Among the tools toon to understand your business, a is one of the most effective.
Indeed, the business model is a framework (usually a one-page) that allows you to understand how your business works from several perspectives.
Depending on what kind of business you’re trying to build or where you want to steer your organization, you might want to look at a few tools, such as:
- FourWeekMBA Busines Model
- Business Model Canvas
- Blitzscaling Business Model Innovation Canvas
- Value Proposition Canvas
- Lean Startup Canvas
Each of those tools will help you to build a different kind of business.
For instance, in a start-up phase, the lean startup canvas are the most suited.canvas and the
In a phase of scale-up, the lean startup is better suited than the 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 that can help you grow, the business model frameworks are the most suited to the business plan.
In some cases, though, a business plan might also work for that purpose, especially a one-page business plan.
Key takeaway and resources
A business plan is a tool that is most suited to shot external stakeholders where your business is headed and why they should finance or invest in its future.
The business model instead, is a framework that helps you assess how your business works from several angles and the kind of actions you can take in the now.
Below you can find an example on how to build a one-page business plan as well:
- Business Model vs. Business Plan: A business model is a comprehensive framework for creating and capturing value in a business, while a business plan is a document that outlines how a business can become viable. The primary goal of a business plan is often to secure investments.
- Key Difference: The main distinction between a business model and a business plan lies in their functions. A business model explains how an organization operates, while a business plan focuses on the future strategy and expected performance over three to five years.
- External Perspective: For external stakeholders like investors and partners, a detailed business plan is essential. It helps them understand various aspects of the business and provides projections for the future. Investors also want to know about the scalability of the business model.
- Internal Perspective: When looking to understand the current state of your business or design a business model, tools like the Business Model Canvas, Lean Startup Canvas, and others are more effective. These tools offer insights into how the business operates and can guide decision-making.
- Choosing the Right Tool: The choice between a business model and a business plan depends on your goals and the stage of your business. For startups, the Lean Startup Canvas and Business Model Canvas are useful. In a scale-up phase, Lean Startup tools might be more suitable, and for rapid growth, the Blitzscaling Canvas can be valuable.
- Key Takeaway: A business plan is best suited for presenting your business to external stakeholders and securing financing, while a business model is a framework for understanding your business from multiple angles and making informed decisions in the present.
- Resources: Various tools, such as the Business Model Canvas and Lean Startup Canvas, can help you analyze and improve your business model. A one-page business plan can also be effective in clarifying your business’s core problem, target customers, and distribution channels.
Connected Business Frameworks
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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