what is difference between business model and business plan

Economic model of a company, the business model corresponds to the financial structure planned by a company in order to create wealth. For an entrepreneur who wishes to create his own business, it is essential to master the notions of business plan and business model.

Definition of the business model

The business model is the economic model of a company. It is the financial structure planned by a company in order to create wealth. It will take into account the inflows and outflows of money. The business model is the representation of a company’s strategy for achieving revenue. It will therefore highlight the financial, technological or human means to achieve this objective. It will also take over the clientele, partners, communication and marketing costs.

Definition of the business plan

A business plan is the business plan of a company. It is a document presenting figures of the financial situation of the company and its forecast activity. Its purpose is to describe the business project, explain and formalize the economic model.

Business model, business plan: the difference?

While the business plan is a forecast, the business model has a more concrete vocation because it establishes the economic functioning of the company. It will therefore be easier to modify a business plan than a business model. There are also many free or paid business plan tools on which to rely for the constitution of it.

What is the business model for?

The business model must answer 3 questions:

  • What market is the company targeting?
  • How is the added value of the company obtained and at what price?
  • To whom and how much does the company sell its added value?

In addition, the objective of the business model is to validate the business project. Indeed, it allows the entrepreneur to be sure that he has imagined a viable economic concept, that the product or service he is offering will benefit from a potential market, and that this product or service will be able to stand out from the others. It also allows him to define the scope of his project, its management and its strategy.

How to make a business model?

The presentation of the business model may differ depending on the interlocutors to whom it is addressed, but also depending on the nature of the project. Although the establishment of the business model seems complex, it must be written simply and synthetically. Thus, it can be in the form of a more or less important text, and be accompanied by tables or graphs.

Business model and business plan: the objectives?

The business model will allow you to have a concrete vision of your project. You will thus be able to better understand your market share, highlight your added value, determine your needs and your offer, etc. In addition, your business model is also of interest to your partners (banks, investors, suppliers, etc.). It will allow them to be reassured and to be able to project themselves.

Similarly, the business plan will make it possible to predict many essential characteristics such as technical, human and financial needs, the objectives to be achieved or even different scenarios to achieve your business model. It will also help support your project management or inform banks, etc.

What is a business model made of?

To create your business model, you have to ask yourself what the internal organization of your company will be:

  • How your company will charge: the offer and positioning of your products/services.
  • How your business will produce: what are the needs and costs necessary to create wealth.

What does a business plan consist of?

The business plan is the description of the company in all its aspects. It includes the following different elements:

  • The presentation of the project leader;
  • The presentation of the project;
  • Market research and its conclusions;
  • The commercial strategy;
  • The choice of legal structure;
  • The business model and the financial elements that will materialize with the forecast.

In conclusion,

the business plan and the business model are intrinsically linked. They are both decisive for the success of the project. This is why, it matters to me, supports you during these crucial stages.