The business model is the mechanism through which the company generates its profit while the business plan is a document presenting the company’s strategy and expected financial performance for the years to come.
A business plan describes what your company does. In this document, your business outlines its long-term operational and financial objectives along with a plan for how it intends to achieve them. A business model outlines where and how you intend to run your enterprise. The model you choose is detailed in your business plan.
The difference between “business plan” and “business model”
What is a business plan?
A business plan is a document that outlines a company’s justification for doing business, marketing approach, and anticipated financial results for the near future. Business plans are frequently used to provide an overview of a company to potential investors, lenders, shareholders, and other interested parties. They are therefore typically thorough documents that cover topics like the:
What is a business model?
The framework a business uses to produce profits and increase its value is known as a business model. It refers to the setting in which a business is managed and the manner in which its clients are served by its goods or services. In order to generate revenue, it describes how a company fits into the value chain of its industry and the organizational structure of its relationships with partners, clients, and suppliers. Some of a company’s fundamental components of a business model include:
Business model vs. business plan: what are the differences and similarities?
The company’s and the business plan’s foundation is the business plan, while the business plan’s structure The business model is essentially the overarching idea of a company. Following this notion, the business plan develops a much more thorough and detailed description of the business idea.
Both business models and business plans, despite their differences, are essential elements when launching and operating a business. Furthermore, they are both dynamic, which means that they are continuously evaluated and changed over the course of the business.
Examples of a business model
Some of the more common types of business models include:
Commission
A business that follows this business model acts as a middleman between buyers and sellers, taking a cut of every transaction that it assists. Despite the fact that this business model typically needs less funding, it is typically also slightly less profitable.
Advertising
The company’s objective with this business model is to generate revenue from the sale of advertising space. Online advertising has grown significantly in popularity even though more conventional, physical methods are still effective. With online advertising, there are three different distinctions:
Production
Due to the fact that the business merely sells the services or goods it produces, this is the most fundamental type of business model. A business must make sure it can make enough money from this business model to pay for the costs of producing, storing, and distributing its goods and services.
Franchise
Franchises grant customers access to their business model in exchange for a predetermined portion of the customer company’s future sales.
Subscription
With a subscription business model, a company generates revenue by periodically billing customers, also referred to as subscribers. The main benefit of this model is that businesses can typically predict their future revenue with high levels of accuracy.
FAQ
How does a business model differ from a business plan?
A well-written business plan provides a road map for operations, financial planning, and marketing. The creation, delivery, and capture of value by an organization in economic, social, cultural, or other contexts are described by a business model.
Is business plan and model same?
A business’s potential for profitability is described in the business plan. A business plan’s main objective is to attract investments, whereas a business model is designed to be tested. If I were to break it down into stages, developing a business model would be the first.
