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Business Model vs Business Plan

Updated: Mar 30, 2023

When it comes to starting a new business, many entrepreneurs may confuse the terms "business model" and "business plan," or may use them interchangeably. However, these two concepts are quite distinct and play different roles in the success of a startup.






A business model refers to the way a company generates revenue and creates value for its customers. It's essentially the blueprint for how a business will operate, how it will make money, and how it will deliver products or services to customers. A business model defines the target market, the pricing strategy, the revenue streams, and the distribution channels.


On the other hand, a business plan is a formal document that outlines a company's goals and strategies, including its marketing, financial, and operational plans. It typically includes an executive summary, a company overview, a market analysis, a description of products or services, a marketing and sales strategy, and a financial plan. A business plan is typically created for investors, banks, or other stakeholders to evaluate the viability of the business.


In essence, a business model is the foundation of a startup's operations, while a business plan is a roadmap to achieving the goals set forth in the business model. A business model can exist without a business plan, but a business plan cannot exist without a business model.


For startups, it's essential to develop a clear and concise business model early on to ensure the viability of the business idea. A well-defined business model can help a startup focus on delivering value to customers while generating revenue. A business plan, on the other hand, is typically developed later in the startup process and serves as a tool for communicating the company's vision and strategy to potential investors and partners.


In summary, a business model and a business plan are two distinct concepts that are both important for the success of a startup. A business model defines how a company creates value and generates revenue, while a business plan outlines how to get there - the strategies and goals for achieving that vision.


 

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