What makes a business model different from a business plan? Any entrepreneur who embarks on writing a business plan will eventually want to make this distinction.
Contrary to what has been said on the subject, a business model does not replace a business plan and vice versa. They are both complementary and necessary when starting a business.
WHAT IS A BUSINESS MODEL?
The business model boils down to the operating logic of a business, designed as an open system. It takes into account elements internal and external to the company such as human, material and technological resources, expertise, customers, potential partners and distribution and communication channels. The business model is both the foundation and the backbone of a business. It is he who will structure the entire business project. The various activities and initiatives of the company will revolve around the chosen business model.
Michael Lewis offers a straightforward definition of the business model – how a company goes about making money. This definition has the merit of clearly indicating the purpose of a business model, that is to say to generate yield, income or profit.
WHAT IS A BUSINESS PLAN?
The business plan is a document that has two main reasons for being: (1) to allow the entrepreneur to carry out a planning exercise and (2) to communicate the essentials of the business plan to the parties stakeholders. Let’s take a look at them in more detail.
First, writing a business plan is a planning exercise for the entrepreneur (s) behind the project. Writing a business plan allows the entrepreneurial team to identify and properly prepare the key activities for starting the business. This planning exercise has been shown to be correlated with the success of a business start-up.
The business plan is also a communication tool. It allows partners and funders to soak up the project quickly. Thus, in a few pages, the business plan allows a project uninitiated to fully understand it. It provides details on the business opportunity, its potential for profitability, the history of the project and the key activities that the entrepreneurial team will focus on in the future. In other words, the business plan provides a summary of the project to stakeholders.
WHERE TO START ?
It was mentioned that the business model was both the foundation and the backbone of the business project. It is therefore logical that its design precedes the writing of a business plan. The first step is therefore to develop a business model and then it will be possible to develop a business plan that will provide more details about the project.
While a business model outlines the business to be created, a business plan outlines the details of the project. The business model is therefore concerned with the value creation system as a whole, while the business plan focuses on the key activities to be carried out by the company.
We can therefore say that the business model is concerned with the What? while the business plan focuses on the How? Since it provides a general portrait of the company as a value creation system, the business model requires few details. It is for this reason that it can be developed using simple matrices such as My National Bank Business Model. I recommend that you use this outline to build your own business model.
With that, I wish you good design and drafting work towards starting your own business!