The Differences between a Business Model and a Business Plan

Posted by Barbara Tomlinson

1 By How to write a business plan

 Planning and plans are part of the daily life of any successful entrepreneur, whether it’s about creating marketing or customer retention strategies, whether it’s about developing new products / services and generating new sources to come.

The business model refers to how the company creates and gives value to the customer. The business model concept is commonly used in management activity as a way to analyze and understand the business logic of a company. Once the business model is created and detailed, there is the basis for developing the business plan.

A business plan describes what the company does, being a written document detailing the operational, financial and marketing objectives and how they are to be achieved.

The business model


Essentially, the business model is how the company plans to generate revenue showing how a company creates value for customers who, in turn, bring revenue and profit to the company. Franchise is a business model, as are portals, content providers, virtual stores, etc. In the case of traditional business, the business model is simple and does not require detailed explanations: the restaurant sells food, the shopkeeper sells vegetables, the hotels sell accommodation, etc. In the case of digital businesses, more details are needed on how revenue is generated.

A business model must meet three criteria: be simple, relevant, and easy to understand.

The emphasis on business models is on how the company generates value for the customer and differentiates itself from competition.

Business plan
The business plan is a communication tool that provides a detailed overview of the whole business. It is based on the business model, explaining what resources are needed in terms of activities, equipment, personnel, and the implementation of the business model. All business plan is the one that presents the marketing strategy , the ways to attract and retain customers, who are the competitors and how the competition will be approached on the market. Also, the business plan details financial aspects, start-up costs , investment objectives, sales forecasts . The structure and content of the business plan differs depending on the type of business and people who are going to read it (management team, investors, bankers, etc.).

In short, the business plan supports the business model and explains the steps needed to reach the goals set in the business model, so any changes to the model will cause changes in the business plan.

Both the business model and the business plan should be seen as dynamic and not static, so that, depending on the changes in the market and the overall business evolution, it is necessary to periodically review them.