The Differences Between a Business Plan & Business Model

 

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Every successful small business owner has engaged in some sort of business planning. Whether you are identifying your newest marketing strategy or planning a customer retention campaign, your business strategies must be geared around your business plan and business model to generate overall success.

Business Model

Your small business’ business model ascertains how your business makes money. It identifies the services that your customers value and shows the reciprocation of funds for the services your small business renders to your customers. Of course, your small business may have more than one method of generating income. Still, the business model simplifies the money process by focusing on the largest income generator. For instance, a grocery store sells many items. It may also provide additional services, such as lottery and check cashing. The business model only recognizes the majority income generator, which is the sale of grocery inventory. Therefore, the business model will reflect the sale of groceries to the customer, which generates income at the time of the customer’s purchase. The customer benefits from the wide selection of inventory and your small business enjoys the profits of the wide inventory selection.

Business Plan

The business plan provides the details of your business. It takes the focus of the business model and builds upon it. It explains the equipment and staff needed to meet the details of the business model. It also explains the marketing strategy of your small business, or how your business will attract and retain customers, and deal with the competition. Furthermore, the business plan explains the financial stability of your small business at a particular point in time, as well as in the forecasted future. Overall, the business plan supports the business model and explains the steps needed to achieve the goals of that model.

Interdependency

The business plan is completely dependent upon the business model. The business model explains the flow of money within the company and the business plan the structure needed to obtain that flow of money. If you change the business model, you will also need to change the business plan. Although the entire business plan may not require change, you may have to address changes in staff, equipment, location or marketing. These changes may also require changes within the financials if additional purchases or other drastic changes are required.

Change

Change is a common force in the business world. Small businesses must be able to adapt to the changes of the industry and the demands of its customers. Failure to adapt to this change can result in the loss of customers and decreased profit margins. It is important that your decisions regarding change align to your business model to avoid wasting time and resources. In addition, it is important that you update your business plan to reflect your small business’ changes. Updating your business plan will not only help to keep you on track with your business’ goals and missions, it will help you to benchmark your business’ progress, and develop new or revised strategies towards success.