Business Model vs. Business Plan

You might be wondering what the difference is between a business plan and a business model. The truth is, they are different things with different purposes. 

The main difference between a business plan and business model is that a business plan outlines your goals and strategy to grow your company, while a business model shows you how to generate revenues. Read on to learn more about this subject, including what types of business models there are and how to figure out which type best suits your situation.
 

What is a Business Model?

A business model describes how a company makes money. Money can be made by selling products or services, renting out real estate, asking for donations, and much more. Business models are often highly customized to fit the individual needs of the company.
 

What is a Business Plan?

In contrast, business plans outline the business idea, goals, and strategies of a company for achieving those goals. While your business plan discusses how you will make money, it also details where you want your business to be in the future, why that would benefit your target consumers, and what steps need to take place in order to get there. A business plan is also vital for potential investors if you are seeking funding.
 

What Should Be Included in a Business Plan?

During the business planning process, especially if you are trying to attract investors, there are 10 essential elements of a business plan which you must include as follows:

1. Executive Summary
2. Company Description
3. Customer Analysis
4. Market Analysis
5. Competitive Analysis
6. Marketing Strategy & Plan
7. Operations Plan
8. Management Team
9. Financial Plan (Performance & Forecasting)
10. Appendix

For each of these sections, you should provide an in-depth description of your research, analysis, and expected financial performance. You can learn more about the components of a business plan and review our repository of 100+ business plan examples to help you get started on writing your own business plan.
 

 

What Should Be Included in a Business Model?

A business model should include the details of every way in which your business makes money. It’s important not to leave anything out, even if it seems insignificant. Every dollar counts! 
 

 

How Does a Business Model Differ from a Business Plan?

Business models outline how your company generates revenues. On the other hand, business plans focus on the specifics of how the business will achieve sales and growth over a given period of time, typically five years. Business plans discuss your business model among other things and are critical if you want to gain investments to grow your business.
 

Conclusion

The business model strategy is very different from a business plan. While they overlap a bit, the critical difference is that a business plan outlines the goals and business strategy while the basic business model shows you how to make money. 

Your needs will change over time so it’s important to be able to switch between these two documents when needed. For example, if your goal is long-term growth then you may want more information about what type of strategy would work best for this situation or which resources might help get there faster. On the other hand, if you’re looking for some immediate income then paying attention to the various types of models available could give you an idea of where to start with generating enough sales quickly without too much cost upfront.
 

 

OR, Let Us Develop Your Plan For You

Since 1999, Growthink’s business plan consulting team has developed business plans for thousands of companies who have gone on to achieve tremendous success.

Click here to see how our professional business plan consultants can create your business plan for you.
 

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