The terms “plan” and “business model” are sometimes used interchangeably. The differences between the two concepts, however, are significant. A plan is a series of steps you intend to take in order to achieve your goals while a business model is how your company plans to generate revenue or profits.
A plan typically includes a marketing strategy and financial projections, while a business model focuses on how the company will make money. A marketing plan might include strategies to grow the customer base for an existing product or create demand for a new one. A business model explains how the company plans to get paid once that happens. For example, you could increase demand by selling a premium version of your product at a higher price or selling complementary products.
A business model often includes a cost analysis, where you outline all the expenses associated with creating and promoting your product or service, as well as what it will take to make a profit. For example, if you want to sell widgets for $5 each, you’ll need to estimate how many widgets to make, as well as the raw materials and labour costs. You would then subtract those costs from the sales price to arrive at your profit margin per item. The business perspective that others see will depend on what you choose to share with them.
Planning and business modelling are important aspects of business that should be considered by any business owner. Business planning helps you set goals, determine the resources you need to reach those goals and becomes a blueprint for achieving your objectives.
Key Differences between a Plan and a Business Model
A plan typically focuses on achieving a goal within one fiscal year, whereas a business model is more long-term (i.e., it describes how you will generate revenue for the next five to 10 years).
A business model is how your company plans to generate revenue or profits.
A plan focuses on implementing specific actions, whereas a business model is an ongoing process that does not typically change once it’s implemented.
Once your plan is implemented, it may require continual fine-tuning to keep pace with the company’s needs, whereas a business model is more static and typically does not change once it has been implemented.
5) Resources Required
A plan identifies your needs for physical, financial and human resources in order to successfully implement what you intend to do. These requirements may vary depending on whether your goal is to start a new business (start-up), expand an existing business (expansion), or achieve a specific objective in your existing business (operational).
A plan requires physical materials, such as machinery, equipment or materials. A business model can provide you with a vision for your company’s products and services but does not typically require specific resources to implement the plan.
A business plan provides you with a road map for achieving your goals. It is also an essential tool in obtaining financing, so it must include projections of financial statements and sales figures to convince investors that your company will be profitable. A business model is more static than a plan because the purpose of the former is to describe how you will generate revenue over the long term, which requires a certain amount of fixed resources.
However, both are important aspects of business that should be considered by any business owner. Business planning helps you set goals, determine the resources you need to reach those goals and become a blueprint for achieving your objectives. Developing a plan will also help you identify gaps in your business model.