The term ‘’business model’’ refers to your secret sauce for creating, delivering and capturing value. Writers such as Alexander Osterwalder popularized the concept of business model generation in the past decade through their books and concepts.
Essentially, your business model is about how you make money or more technically, your revenue streams and cost structures. It is the foundation of a company and the main idea of the business together with the description of how it is working. It is therefore, the logic that informs the operations of the business and how it creates value for its stakeholders as well as the choices it makes. The development of a business model requires some “design” work. Thus, being creative is often critical.
In developing a framework for the business model, the following must be put into consideration;
- Clear value proposition
- Clientele
- Customer relationship
- Partners
- Revenue model
- Cost structure
- Resources
- Key operational and managerial activities
- Sales, logistics and communication channels
- Key assumptions
- Scalability
On the other hand, a business plan is a set of documents which spells out the company’s business idea, the feasibility of the plans and proof that the outcomes will satisfy the expectation of the various parties involved. It is basically the structure of the business and details showing how the various business ideas could come to life .
Business plans vary according to the nature of the organisation, the target audience and the purpose of writing the plan. Therefore in writing a business plan, the following must be put into consideration:
- Organisation’s overview or background
- Market information
- Financial information
- Operations plan
- Business controls
- Competitive business strategy
So while these two concepts are very important in business, a business model serves as the blueprint, the business plan is the roadmap. In other words, the business plan has direct ties to the business model of any organisation.
