When it’s time to put your business idea into a more concrete form, a business plan or model will be used. But are these the same thing, or are they completely different?
How Will Your Business Make Money?
To answer this question effectively, you will need a business model. The business model will be what spotlights those products or services you offer that your customers will find to be of value. It will also reveal the ins and outs of what kinds of funds your business will receive as a result of the provision of your products or services to customers.
Even if your business will have more than one means of generating revenue, the purpose of the business model is to place the focus on only that method which generates the most income for you. For example, if you plan to run a store that sells several items in addition to services, and the sale of individual items generates the most revenue, your business model will have a focus on the individual items your store sells. As well, your business model will demonstrate the fact that your wide selection of inventory benefits your customers as well as your bottom line.
Your Business’s Inner Workings
Where the details of your business will be provided to potential investors, a business plan is the document you will need. Essentially, your business plan will have its basis in your business model, and so can be built upon it. The business plan will outline all necessary information about how your business will operate. Some of this information includes the number and skill level of any staff, the types and amounts of equipment your business will need and use, and your marketing plan.
The marketing plan of your business will essentially be your strategy for attracting new customers and retaining repeat business. As well, the business plan will outline how you plan to deal with your competitors. A big focus of a business plan is the financial stability of a venture. It provides a snapshot of your business’s financial health both at a particular time, as well as a few years down the road.
Simply stated, your business plan will support the information you included in your business model, but takes things a step further by explaining the process you will follow to attain the objectives you outlined in your business model.
The Two Act as One Technically, the business model and business plan are two separate documents. However, they are interdependent. Your business model offers an explanation with regard to how money will flow into your business, while your business plan will outline a plan or structure for obtaining this cash flow. Similarly, if one document has to be updated, so should the other. However, updating can occur over one section, and not necessarily the entire document. For example, a change in your business model may need to be reflected in particular categories in your plan, such as equipment or marketing.
Facilitation of Change
No business model or plan is ever static or finished because change is always occurring. And in updating both of these documents at the same time, your business will be better able to adapt when customer demand increases or decreases, or changes in your industry occur. As well, in changing your documents when needed, you can assure that your business doesn’t waste resources or time; it can be adapted to necessary change quickly and immediately.
Writing your business model and business plan require an intimate understanding of your business’s inner workings, something that can be difficult to define. Where this is the case, the assistance of a business plan professional can provide plenty of benefits.