What is the difference between business model and business plan?

In any building we have a foundation and a structure. No structure can stand without foundation. By the same token there is no purpose of having a foundation without structure. This logic applies to foundation of business model and structure of business plan. Here are few pointers for your reading pleasure:

Business model is the foundation of a business. The purpose of a business is to create, deliver and capture value. Business model talks about position of a firm in a particular industry and indicates the type of model it chooses. For example, a business in laundry products will choose manufacturing and distribution in vertical manner. An automotive parts manufacturer, however, making product to a particular buyer acquiring similar companies to expand its sales volume is in horizontal business model.

Business model does not stop there but continues the journey of value chain describing its relationship with suppliers & partners in acquiring resources, managing staff & system in operational area and channels & distribution in sales area and finally segmented customers to whom the product is sold and revenue generated.

Business plan  is the structure of activities of a business in producing value and obtaining value. This entails how cost structure and revenue structure play out in a business. The business plan describes nature of its business, what it seeks to produce and market where it operates and how it sells and finally how it garners its revenue.

However, a business plan is not an imaginative document but prepared after careful analysis of customers, segmentation and market. In effect it is a forecast of events and record of operating and financial results over a future period. Necessarily, a business plan Includes, among other things, time, activities, expected results, resources required and finally a budget.

As a comprehensive document setting forth activities in operations, marketing, finance and administration a business plan serves as an agenda for business action and as an evaluation tool of its performance later on. Results achieved are compared with the budgeted figures to measure the degree of success or otherwise of a firm.

    
Cheers!

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist