differentiate between business model and business plan

We earn commissions if you shop through the links below.  Read more

Business Plan vs. Business Model

Back to Business Plans

Written by: Carolyn Young

Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.

Edited by: David Lepeska

David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.

Published on February 19, 2023 Updated on December 11, 2023

If you’re starting a business , you have a business model, whether you know it or not. A business model is the foundation of any business idea; it basically outlines how the concept offers value and potential for growth. Essentially, a solid business model ensures that the business will make money. 

A business plan , on the other hand, is the business owner’s plan to put that model into action. It’s much more detailed and includes financial projections, objectives, management decisions and further steps. 

Still unsure? Have no fear, this handy guide lays out the differences between a business plan and a business model so that you know exactly what you and your business need to succeed.  

• Business Model

In simple terms, a business model is how the business will make money. Selling ice to eskimos, for instance, is a bad business model. Selling team jerseys to rabbit sports fans, on the other hand, is a solid business model. 

The components of a business model are best illustrated by Swiss entrepreneur Alexander Osterwalder’s Business Model Canvas, which is a visual representation with nine sections. Four sections represent internal elements of a business that enable it to function and are related to costs. 

Four other sections represent external elements that enable the business to bring in revenue and are related to the customer. The ninth section is the business’ value proposition. 

Value Proposition

The value proposition is at the heart of your business model. Your value proposition, which should be no more than two sentences long, needs to answer the following questions:

• What are you offering
• Whose problem does it solve
• What problem does it solve
• What benefits does it provide
• How is it better than competitor products

Key Activities

Key activities are all the activities required to run the business and create the proposed value. These can include product development and distribution and any other necessary activities.  

Cost Structure

The cost structure is a sum of all you’ll need to spend to make the business function. It’s the costs you’ll incur to run the business and bring in revenue. 

Key Partners

Key partners are external partners involved in delivering value, such as vendors and suppliers, or maybe a bank. 

Key Resources

Key resources are any necessary practical elements that come with a cost. These might include your office space, employees, and equipment like computers. 

Revenue Streams

Revenue streams are the ways in which you receive payment from customers. You may have more than one revenue stream, such as via direct sales and subscriptions.

Customer Segments

Customer segments are the groups of people to whom you provide goods or services. In other words, your target market. Maybe your products are aimed at younger women, for instance, or older men. Whatever your target segments, you should build customer personas of each group so that you know how and where to reach them with your marketing.

Customer Relationships

Customer relationships refer to how you interact with your customers to deliver value. Your interactions may be online only, by phone, in-person, or all of the above. 

Channels refer to how you reach your customers, such as social media, internet search, direct sales calls, trade shows, and so on. 

To Summarize

If you’re just starting a business, the Business Model Canvas is a great way to understand and examine your business model. One thing to remember is that the elements you put in your Canvas will be based on assumptions that will at some point be tested in the market and adapted as needed. 

Another thing to remember is that you do not need to do a Business Model Canvas. It’s merely an exercise that can help provide insight into your business model.  

• Business Plan

A business plan is a detailed document that describes how the business will function in all facets. The key is in the “plan” part of the name. It will specify how you’ll launch your business, gain customers, operate your company, and make money. A business plan, however, is not a static document . 

The initial version will be based largely on assumptions, supported by research. As you run your business you’ll constantly learn what works and what does not and make endless tweaks to your plan.

Thus, creating a business plan is not a one-time action – it’s a dynamic and continuous process of crafting and adapting your vision and strategy. 

You’ll present your business plan to potential backers, though in recent years some investors have begun to embrace the Business Model Canvas as a tool to assess a business’ potential. 

A strong business plan includes eight essential components .

1. Executive Summary 

The executive summary is the initial section of your business plan , written last, summarizing its key points. Crucial for capturing investors’ and lenders’ interest, it underscores your business’s uniqueness and potential for success. It’s vital to keep it concise, engaging, and no more than two pages.

2. Company Description/Overview

This section provides a history of your company, including its inception, milestones, and achievements. It features both mission (short-term goals and driving force) and vision statements (long-term growth aspirations). Objectives, such as product development timelines or hiring goals, outline specific, short-term targets for the business.

3. Products or Services Offered

Detail the product or service you’re offering, its uniqueness, and its solution to market problems. Explain its source or development process and your sales strategy, including pricing and distribution channels. Essentially, this section outlines what you’re selling and your revenue model.

4. Market Analysis 

• Industry Analysis : Research your industry’s growth rate, market size, trends, and future predictions. Identify your company’s niche or sub-industry and discuss adapting to industry changes.
• Competitor Analysis : Examine main competitors , their unique selling points, and weaknesses. Highlight your competitive advantages and strategies for maintaining them.
• Target Market Analysis : Define your target market , their demographics, needs, and wants. Discuss how and where you’ll reach them and the potential for market shifts based on customer feedback.
• SWOT Analysis : Break down your company’s strengths, weaknesses, opportunities, and threats. Detail your unique attributes, potential challenges, market opportunities, and external risks, along with strategies to address them.

5. Marketing and Sales Strategies

• Marketing and Advertising Plan : Use insights from your target market analysis to decide advertising channels, emphasizing platforms that best reach your audience, like TikTok over Instagram. Develop a concise value proposition to be central to all marketing, detailing how your product addresses specific needs.
• Sales Strategy and Tactics : Define where and how you’ll sell, such as online, in-store, or through direct sales calls. Sales tactics should highlight the customer’s needs, presenting your solution without overly aggressive promotion.
• Pricing Strategy : Decide on pricing based on market positioning, whether you aim to be a discount or luxury option. Ensure prices cover costs and yield profit, and position your product in a manner that aligns with the chosen price range. Justify your chosen pricing strategy in this section.

6. Operations and Management 

• Operational Plan : Outline daily, weekly, and monthly operations, specifying roles, tasks, and quality assurance methods. Include supplier details and order schedules, ensuring clarity on key business functions and responsibilities.
• Technology Plan : For tech-based products, detail the development plan, milestones, and staffing. For non-tech companies, describe the technology tools and software you’ll employ for business efficiency.
• Management and Organizational Structure : Define who’s in charge, their roles, and their backgrounds. Discuss your management strategy and forecast the development of your organizational hierarchy.
• Personnel Plan : List current and future hires, specifying their roles and the qualifications necessary for each position. Highlight the significance of each role in the business’s operations.

7. Financial Plan 

• Startup Costs : Clearly detail every anticipated cost before starting operations. This will be vital for understanding the initial investment required to get the business off the ground.
• Sales Projections : Estimate monthly sales for the first year, with an annual forecast for the next two years.
• Profit and Loss Statement : An overview of revenue minus costs, resulting in either a profit or loss.
• Cash Flow Statement : Provides clarity on the business’s liquidity by showing cash inflows and outflows over a specific period.
• Balance Sheet : Displays the company’s net worth by detailing its assets and liabilities.
• Break-even Analysis : Understand at which point revenues will cover costs, helping to predict when the business will start making a profit.
• Funding Requirements and Sources : Enumerate the required capital and the sources of this funding. This should also include the purpose for which these funds will be used at different stages.
• Key Performance Indicators (KPIs) : Identify the metrics vital for measuring the company’s performance. Use these indicators to spot challenges, understand where improvements can be made, and pivot strategies as necessary. Ensure that each KPI aligns with the business’s objectives and offers actionable insights for growth.

Remember, although the financial section might seem daunting, it is pivotal for understanding the economic feasibility of your business. Proper financial planning helps in making informed decisions, attracting investors, and ensuring long-term sustainability. Don’t hesitate to engage financial experts or utilize tools and software to ensure accuracy and comprehensiveness in this section.

8. Appendices

The appendices section of a business plan is a repository for detailed information too extensive for the main document. This can include resumes of key personnel, full market research data, legal documents, and product designs or mockups. By placing this data in the appendices, it keeps the main plan concise while allowing stakeholders access to deeper insights when needed. Always ensure each item is clearly labeled and referenced at the relevant point in the main document.

As you can see, business models and business plans have some similarities, but in the main they are quite different. Your business model explains the foundational concept behind your business, while a business plan lays out how you’ll put that model into action and build a business. 

When you’re starting a business, it’s best to have both, as the work of getting them done involves learning about your business from every angle. The knowledge you’ll gain is likely to be invaluable, and could even be the difference between success and failure. 

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Save my name, email, and website in this browser for the next time I comment.

Subscribe to Our Newsletter

Featured resources.

Crafting the Perfect Business Plan: A Deep Dive with Upmetrics’ Vinay Kevadiya

Carolyn Young

Published on October 13, 2023

In the first segment of our conversation with Vinay Kevadiya, the visionary behind Upmetrics, we explored the platform’s origins and itsunique ...

LivePlan Software Review

Published on September 15, 2023

When you’re starting a business, a business plan is essential whether you’re going to obtain financing or not. Creating a business plan helpsyou ...

What to Include in Your Business Plan Appendix?

Published on September 13, 2023

Launching a business involves countless tasks, and one of the crucial early hurdles is writing a business plan. Many entrepreneurs who aren’tlooki ...

No thanks, I don't want to stay up to date on industry trends and news.

Business Plan vs Business Model Canvas Explained

6 min. read

Updated December 15, 2023

It might be stating the obvious, but planning and preparation are keys to success in business.

After all, entrepreneurs put in hard work to develop their product, understand the market they plan to serve, assess their competitive landscape and funding needs, and much more.

Successful business owners also take time to document their strategies for guiding the growth of their companies. They use these strategies to take advantage of new opportunities and pivot away from threats.

Two common frameworks for documenting strategies – the business model canvas and the business plan – are also among the easiest to get confused.

Though they can complement each other, a business model canvas and a business plan are different in ways worth understanding for any entrepreneur who’s refining their business concept and strategy.

Let’s start by digging deeper into what a business model canvas is. 

• What is a business model canvas?

You may have heard the term “business model” before. Every company has one. 

Your business model is just a description of how your business will generate revenue. In other words, it’s a snapshot of the ways your business will be profitable.

Writing a business plan is one way of explaining a company’s business model. The business model canvas takes a different approach.

A business model canvas is a one-page template that explains your business model and provides an overview of your:

• Relationships with key partners
• Financial structure
• And more…

While the business model is a statement of fact, the business model canvas is a strategic process—a method for either documenting or determining your business model.

It’s meant to be quickly and easily updated as a business better understands what it needs to be successful over time. This makes it especially useful for startups and newer businesses that are still trying to determine their business model.

You can think of a business model canvas as a condensed, summarized, and simplified version of a business plan. It’s a great way to quickly document an idea and get started on the planning process.

The business plan is a way to expand on the ideas from the canvas and flesh out more details on strategy and implementation.

Brought to you by

Create a professional business plan

Using ai and step-by-step instructions.

Secure funding

Validate ideas

Build a strategy

Components of a Business Model Canvas

The simplest way to think about your business model canvas is to map it out visually. A business model canvas covers nine key areas:

• Value proposition : A company’s unique offering in the market and why it will be successful.
• Key activities: The actions that a company takes to achieve its value proposition.
• Customer segments : The types of people or businesses that are likely to want a company’s products or services.
• Channels : How a company reaches customers through marketing and distribution efforts.
• Customer relationships: How a company interacts with customers and maintains important relationships.
• Revenue streams: The ways in which a company makes money.
• Key resources: The assets such as property, equipment and staffing that a company needs to perform its key activities.
• Key partners: The relationships with suppliers, vendors, customers and other stakeholders a company must maintain in order to be successful.
• Cost structure: The major drivers of company expenses that will need to be tracked and managed.

[Want an even simpler alternative? Try downloading our free one-page plan template and start building your plan in less than 30 minutes.]

To get a better sense of how a business model canvas documents business strategy, consider a company like Netflix. The streaming company’s business model is based on generating subscription revenue through its content library and exclusive content.

If Netflix executives were to create a business model canvas, it would map out how the company leverages key resources, partnerships, and activities to achieve its value proposition and drive profitability. The business model is the destination.

The great thing about a business model canvas is that you can quickly document business ideas and see how a business might work at a high level. As you do more research, you’ll quickly refine your canvas until you have a business idea you think will work.

From there, you expand into a full business plan.

• What is a business plan?

If a business model canvas captures what a company looks like when it’s operating successfully, then a business plan is a more detailed version along with a company’s blueprint for getting there.

Think of your business plan as a process of laying out your goals and your strategies for achieving them.

The business plan is more detailed, and changes over time. It examines each aspect of your business, from operations to marketing and financials.

The plan often includes forward-looking forecasts of a company’s projected financial performance. These are always educated guesses. But these forecasts can also be used as a management tool for any growing business.

Comparing actual results to the forecast can be a valuable reality check, telling a business if they’re on track to meet their goals or if they need to adjust their plan.

A business plan is also a must for companies hoping to receive a bank loan , SBA loan , or other form of outside investment . Anyone putting up funds to help you grow will want to see you’ve done your homework.

So a business plan is how you not only prepare yourself, but also show your audience that you’re prepared.

Components of a business plan

While there are several different types of business plans meant for different uses, well-written plans will cover these common areas:

• Executive summary : A brief (1-2 pages) overview of your business.
• Products and services : Detailed descriptions of what you’re selling and how it fills a need in the market.
• Market analysis : Assessing the size of your market, and information about your customers such as demographics (age, income level) and psychographics (interests, values).
• Competitive analysis : Documenting existing businesses and solutions your target customers are finding in the market.
• Marketing and sales plan : Your strategies for positioning your product or service in the market, and developing a customer base.  
• Operations plan : Describing how you will run the business from day to day, including how you will manage inventory, equipment, and staff.
• Organization and management team: Detailing the legal structure of the business, as well as key members, their backgrounds and qualifications.
• Financial Plans : Business financials that measure a company’s performance and health, including profit & loss statements, cash flow statements and balance sheets. Effective financial plans also include forward-looking sales forecasts and expense budgets.

How a business plan and business model canvas inform business strategy

Avoid the trap of using the two terms interchangeably. As we’ve shown, the two have different focuses and purposes. 

The business model canvas (or our one-page plan template ) is a great starting point for mapping out your initial strategy. Both are easy to iterate on as you test ideas and determine what’s feasible.

Once you have a clearer sense of your idea, you can expand the canvas or one-page plan into a business plan that digs into details like your operations plan, marketing strategy, and financial forecast.

When you understand how – and when – to use each, you can speed up the entire planning process. That’s because the business model canvas lays out the foundation of your venture’s feasibility and potential, while the business plan provides a roadmap for getting there.

The work of business planning is about connecting the dots between the potential and the process.

See why 1.2 million entrepreneurs have written their business plans with LivePlan

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

Table of Contents

• How both inform your strategy

Related Articles

12 Min. Read

Do You Need a Business Plan? Scientific Research Says Yes

10 Min. Read

14 Reasons Why You Need a Business Plan

Use This Simple Business Plan Outline to Organize Your Plan

5 Min. Read

Business Plan Vs Strategic Plan Vs Operational Plan—Differences Explained

The Bplans Newsletter

The Bplans Weekly

Subscribe now for weekly advice and free downloadable resources to help start and grow your business.

We care about your privacy. See our privacy policy .

The quickest way to turn a business idea into a business plan

Fill-in-the-blanks and automatic financials make it easy.

No thanks, I prefer writing 40-page documents.

Discover the world’s #1 plan building software

Business Model Vs Business Plan: What’s the Difference?

There’s a big misconception about the whole business model vs. business plan debate because both terms have been wrongly used. Today, we’ll look into what they’re really for and why they’re needed for the business.

Strategy has always been a building block of business. In the ever-competitive and highly volatile industry, you have to come up with a sustainable advantage over your competitors. Few lucky entrepreneurs successfully start on the right foot, but luck often runs out while keeping a great momentum. This is where a solid business strategy comes to play.

You can’t just launch your startup without establishing where it’s heading. You need a business strategy to identify which direction you’ll operate towards. This is why a business plan and a business model are essential factors in a company’s success. But because they seemingly have a similar purpose, they’re mistakenly used interchangeably. The truth is, one cannot exist without the other.

To truly understand the difference between a business model vs. a business plan, we’ll need to define what they are and what they’re used for. 

What is a Business Model?

A business model is the company’s rationale and plans for making a profit. It explains how a company delivers value to its customers at a specific cost. A business model would include details about the company’s products and services, its target market, and all expenses related to the operations and production.

Why is it necessary?

It’s considered a roadmap for a business to achieve its financial goal in a given period. It maps out how you can sustain the value you deliver to your customers. Entrepreneurs use it as a tool to study, test, and estimate cost and revenue streams.

They can make quick hypothetical changes to the business model to determine how a financial decision can impact their long-term operations . This allows business owners to anticipate and adapt to trends and challenges in their industry.  

Consequently, a strong business model also helps attract investors, recruit talent, and motivate employees. The management and staff are often motivated by how well a company adheres to the business model.  

Types of Business Model

When it comes to different kinds of business models, there are several options for a company. For example, a software company might go with a subscription model because it’s easier to sell their product through a license subscription. On the other hand, retail companies might go for the accessories model because it’s more straightforward.

In determining which type of business model to use, companies choose the style that best suits their operations and industry. A growing method is using a combination of business models to create a hybrid system for the business.

The following are some of the most widely used types of business models:

• Subscription
• Transactional
• Retail sales

Creating a Business Model

Now that we’ve established what a business model is, it’s time to learn how to create one for your startup. Your business model has to answer all the critical questions about your business.

Here are the key components you must include in your business model:

• Key Objectives
• Target Market
• Product Value
• Product Pricing
• Required Funding
• Growth Opportunity

Keep in mind, the business model has to be updated regularly to fit your goals. All companies undergo a stage of maturity that directly affects the business model it follows. 

For early-stage startups, the business model would ideally be simple and straightforward. Most business owners would even opt for a flat organization where staff could communicate their concerns directly to the owner. This, of course, will change as the company expands.

Now that we’ve learned what a business model is, it’s time to move on to the next part of the business model vs. business plan discussion. So, let’s discuss what is a business plan.

What is a Business Plan?

A business plan is a written document that details a company’s goals and its strategies to achieve them . It’s considered the “blueprint of the business” because it summarizes all the essential aspects of the company such as finance, marketing, and operations.

It serves as a reference for the company owner and the management in making major business decisions. It can also be presented to investors when the owner is raising capital. It’s beneficial for startups who have no proven track record since a business plan can pitch its full potential.     

A business plan is not only helpful to a business in its early stage, but it also helps it pivot during unforeseen circumstances. In a volatile industry, a company needs to adapt quickly and efficiently. Hence, update the goals and methods should accordingly.

Creating a Business Plan

So, what should a business plan include?

Business plans vary according to industry, but there is a general format for writing a business plan. You can expand or shorten this template based on long-term goals.  

• Executive Summary
• Business Description
• Market Analysis
• Product Development
• Marketing Strategies
• Operations and Management
• Financial Plans

You can choose from a wide selection of business plan templates when it comes to the actual writing. Remember to keep it concise and avoid jargon in the content. You will present your business plans to investors and stakeholders; hence, they need to get a clear idea of it in one reading.

Business Model vs. Business Plan: How to Use Them 

At this point, we’ve established that both a business model and a business plan are essential to success. However, both can only take your business so far. How well you execute and follow them is a whole other story. It’s challenging to start a startup , let alone maintain it.

If you want to avoid common startup mistakes , you need to build your business on a strong foundation. Hire the best people, invest in reliable tools, and sign up for mentoring.

Speaking of mentors, Full Scale founders Matt DeCoursey and Matt Watson are incredibly passionate about helping entrepreneurs succeed. They’ve created Full Scale to assist startup owners in launching and managing their companies.

Full Scale is an offshore software development company that offers a wide array of services for startups. We offer the best talent and resources needed to begin your entrepreneurial journey.

We have seasoned project managers, marketing specialists, and technology experts at your service. We’ll take care of all the hassles out of your daily operations so you can focus on your core competencies.

Want to learn more about Full Scale? Get your FREE consultation today!

Learn More about Offshore Development

Copyright 2024 © Full Scale

Small Business Trends

How to create a business plan: examples & free template.

This is the ultimate guide to creating a comprehensive and effective plan to start a business . In today’s dynamic business landscape, having a well-crafted business plan is an important first step to securing funding, attracting partners, and navigating the challenges of entrepreneurship.

This guide has been designed to help you create a winning plan that stands out in the ever-evolving marketplace. U sing real-world examples and a free downloadable template, it will walk you through each step of the process.

Whether you’re a seasoned entrepreneur or launching your very first startup, the guide will give you the insights, tools, and confidence you need to create a solid foundation for your business.

Table of Contents

How to Write a Business Plan

Embarking on the journey of creating a successful business requires a solid foundation, and a well-crafted business plan is the cornerstone. Here is the process of writing a comprehensive business plan and the main parts of a winning business plan . From setting objectives to conducting market research, this guide will have everything you need.

Executive Summary

The Executive Summary serves as the gateway to your business plan, offering a snapshot of your venture’s core aspects. This section should captivate and inform, succinctly summarizing the essence of your plan.

It’s crucial to include a clear mission statement, a brief description of your primary products or services, an overview of your target market, and key financial projections or achievements.

Think of it as an elevator pitch in written form: it should be compelling enough to engage potential investors or stakeholders and provide them with a clear understanding of what your business is about, its goals, and why it’s a promising investment.

Example: EcoTech is a technology company specializing in eco-friendly and sustainable products designed to reduce energy consumption and minimize waste. Our mission is to create innovative solutions that contribute to a cleaner, greener environment.

Our target market includes environmentally conscious consumers and businesses seeking to reduce their carbon footprint. We project a 200% increase in revenue within the first three years of operation.

Overview and Business Objectives

In the Overview and Business Objectives section, outline your business’s core goals and the strategic approaches you plan to use to achieve them. This section should set forth clear, specific objectives that are attainable and time-bound, providing a roadmap for your business’s growth and success.

It’s important to detail how these objectives align with your company’s overall mission and vision. Discuss the milestones you aim to achieve and the timeframe you’ve set for these accomplishments.

This part of the plan demonstrates to investors and stakeholders your vision for growth and the practical steps you’ll take to get there.

Example: EcoTech’s primary objective is to become a market leader in sustainable technology products within the next five years. Our key objectives include:

• Introducing three new products within the first two years of operation.
• Achieving annual revenue growth of 30%.
• Expanding our customer base to over 10,000 clients by the end of the third year.

Company Description

The Company Description section is your opportunity to delve into the details of your business. Provide a comprehensive overview that includes your company’s history, its mission statement, and its vision for the future.

Highlight your unique selling proposition (USP) – what makes your business stand out in the market. Explain the problems your company solves and how it benefits your customers.

Include information about the company’s founders, their expertise, and why they are suited to lead the business to success. This section should paint a vivid picture of your business, its values, and its place in the industry.

Example: EcoTech is committed to developing cutting-edge sustainable technology products that benefit both the environment and our customers. Our unique combination of innovative solutions and eco-friendly design sets us apart from the competition. We envision a future where technology and sustainability go hand in hand, leading to a greener planet.

Define Your Target Market

Defining Your Target Market is critical for tailoring your business strategy effectively. This section should describe your ideal customer base in detail, including demographic information (such as age, gender, income level, and location) and psychographic data (like interests, values, and lifestyle).

Elucidate on the specific needs or pain points of your target audience and how your product or service addresses these. This information will help you know your target market and develop targeted marketing strategies.

Example: Our target market comprises environmentally conscious consumers and businesses looking for innovative solutions to reduce their carbon footprint. Our ideal customers are those who prioritize sustainability and are willing to invest in eco-friendly products.

Market Analysis

The Market Analysis section requires thorough research and a keen understanding of the industry. It involves examining the current trends within your industry, understanding the needs and preferences of your customers, and analyzing the strengths and weaknesses of your competitors.

This analysis will enable you to spot market opportunities and anticipate potential challenges. Include data and statistics to back up your claims, and use graphs or charts to illustrate market trends.

This section should demonstrate that you have a deep understanding of the market in which you operate and that your business is well-positioned to capitalize on its opportunities.

Example: The market for eco-friendly technology products has experienced significant growth in recent years, with an estimated annual growth rate of 10%. As consumers become increasingly aware of environmental issues, the demand for sustainable solutions continues to rise.

Our research indicates a gap in the market for high-quality, innovative eco-friendly technology products that cater to both individual and business clients.

SWOT Analysis

A SWOT analysis in your business plan offers a comprehensive examination of your company’s internal and external factors. By assessing Strengths, you showcase what your business does best and where your capabilities lie.

Weaknesses involve an honest introspection of areas where your business may be lacking or could improve. Opportunities can be external factors that your business could capitalize on, such as market gaps or emerging trends.

Threats include external challenges your business may face, like competition or market changes. This analysis is crucial for strategic planning, as it helps in recognizing and leveraging your strengths, addressing weaknesses, seizing opportunities, and preparing for potential threats.

Including a SWOT analysis demonstrates to stakeholders that you have a balanced and realistic understanding of your business in its operational context.

• Innovative and eco-friendly product offerings.
• Strong commitment to sustainability and environmental responsibility.
• Skilled and experienced team with expertise in technology and sustainability.

Weaknesses:

• Limited brand recognition compared to established competitors.
• Reliance on third-party manufacturers for product development.

Opportunities:

• Growing consumer interest in sustainable products.
• Partnerships with environmentally-focused organizations and influencers.
• Expansion into international markets.
• Intense competition from established technology companies.
• Regulatory changes could impact the sustainable technology market.

Competitive Analysis

In this section, you’ll analyze your competitors in-depth, examining their products, services, market positioning, and pricing strategies. Understanding your competition allows you to identify gaps in the market and tailor your offerings to outperform them.

By conducting a thorough competitive analysis, you can gain insights into your competitors’ strengths and weaknesses, enabling you to develop strategies to differentiate your business and gain a competitive advantage in the marketplace.

Example: Key competitors include:

GreenTech: A well-known brand offering eco-friendly technology products, but with a narrower focus on energy-saving devices.

EarthSolutions: A direct competitor specializing in sustainable technology, but with a limited product range and higher prices.

By offering a diverse product portfolio, competitive pricing, and continuous innovation, we believe we can capture a significant share of the growing sustainable technology market.

Organization and Management Team

Provide an overview of your company’s organizational structure, including key roles and responsibilities. Introduce your management team, highlighting their expertise and experience to demonstrate that your team is capable of executing the business plan successfully.

Showcasing your team’s background, skills, and accomplishments instills confidence in investors and other stakeholders, proving that your business has the leadership and talent necessary to achieve its objectives and manage growth effectively.

Example: EcoTech’s organizational structure comprises the following key roles: CEO, CTO, CFO, Sales Director, Marketing Director, and R&D Manager. Our management team has extensive experience in technology, sustainability, and business development, ensuring that we are well-equipped to execute our business plan successfully.

Products and Services Offered

Describe the products or services your business offers, focusing on their unique features and benefits. Explain how your offerings solve customer pain points and why they will choose your products or services over the competition.

This section should emphasize the value you provide to customers, demonstrating that your business has a deep understanding of customer needs and is well-positioned to deliver innovative solutions that address those needs and set your company apart from competitors.

Example: EcoTech offers a range of eco-friendly technology products, including energy-efficient lighting solutions, solar chargers, and smart home devices that optimize energy usage. Our products are designed to help customers reduce energy consumption, minimize waste, and contribute to a cleaner environment.

Marketing and Sales Strategy

In this section, articulate your comprehensive strategy for reaching your target market and driving sales. Detail the specific marketing channels you plan to use, such as social media, email marketing, SEO, or traditional advertising.

Describe the nature of your advertising campaigns and promotional activities, explaining how they will capture the attention of your target audience and convey the value of your products or services. Outline your sales strategy, including your sales process, team structure, and sales targets.

Discuss how these marketing and sales efforts will work together to attract and retain customers, generate leads, and ultimately contribute to achieving your business’s revenue goals.

This section is critical to convey to investors and stakeholders that you have a well-thought-out approach to market your business effectively and drive sales growth.

Example: Our marketing strategy includes digital advertising, content marketing, social media promotion, and influencer partnerships. We will also attend trade shows and conferences to showcase our products and connect with potential clients. Our sales strategy involves both direct sales and partnerships with retail stores, as well as online sales through our website and e-commerce platforms.

Logistics and Operations Plan

The Logistics and Operations Plan is a critical component that outlines the inner workings of your business. It encompasses the management of your supply chain, detailing how you acquire raw materials and manage vendor relationships.

Inventory control is another crucial aspect, where you explain strategies for inventory management to ensure efficiency and reduce wastage. The section should also describe your production processes, emphasizing scalability and adaptability to meet changing market demands.

Quality control measures are essential to maintain product standards and customer satisfaction. This plan assures investors and stakeholders of your operational competency and readiness to meet business demands.

Highlighting your commitment to operational efficiency and customer satisfaction underlines your business’s capability to maintain smooth, effective operations even as it scales.

Example: EcoTech partners with reliable third-party manufacturers to produce our eco-friendly technology products. Our operations involve maintaining strong relationships with suppliers, ensuring quality control, and managing inventory.

We also prioritize efficient distribution through various channels, including online platforms and retail partners, to deliver products to our customers in a timely manner.

Financial Projections Plan

In the Financial Projections Plan, lay out a clear and realistic financial future for your business. This should include detailed projections for revenue, costs, and profitability over the next three to five years.

Ground these projections in solid assumptions based on your market analysis, industry benchmarks, and realistic growth scenarios. Break down revenue streams and include an analysis of the cost of goods sold, operating expenses, and potential investments.

This section should also discuss your break-even analysis, cash flow projections, and any assumptions about external funding requirements.

By presenting a thorough and data-backed financial forecast, you instill confidence in potential investors and lenders, showcasing your business’s potential for profitability and financial stability.

This forward-looking financial plan is crucial for demonstrating that you have a firm grasp of the financial nuances of your business and are prepared to manage its financial health effectively.

Example: Over the next three years, we expect to see significant growth in revenue, driven by new product launches and market expansion. Our financial projections include:

• Year 1: $1.5 million in revenue, with a net profit of $200,000.
• Year 2: $3 million in revenue, with a net profit of $500,000.
• Year 3: $4.5 million in revenue, with a net profit of $1 million.

These projections are based on realistic market analysis, growth rates, and product pricing.

Income Statement

The income statement , also known as the profit and loss statement, provides a summary of your company’s revenues and expenses over a specified period. It helps you track your business’s financial performance and identify trends, ensuring you stay on track to achieve your financial goals.

Regularly reviewing and analyzing your income statement allows you to monitor the health of your business, evaluate the effectiveness of your strategies, and make data-driven decisions to optimize profitability and growth.

Example: The income statement for EcoTech’s first year of operation is as follows:

• Revenue: $1,500,000
• Cost of Goods Sold: $800,000
• Gross Profit: $700,000
• Operating Expenses: $450,000
• Net Income: $250,000

This statement highlights our company’s profitability and overall financial health during the first year of operation.

Cash Flow Statement

A cash flow statement is a crucial part of a financial business plan that shows the inflows and outflows of cash within your business. It helps you monitor your company’s liquidity, ensuring you have enough cash on hand to cover operating expenses, pay debts, and invest in growth opportunities.

By including a cash flow statement in your business plan, you demonstrate your ability to manage your company’s finances effectively.

Example:  The cash flow statement for EcoTech’s first year of operation is as follows:

Operating Activities:

• Depreciation: $10,000
• Changes in Working Capital: -$50,000
• Net Cash from Operating Activities: $210,000

Investing Activities:

•  Capital Expenditures: -$100,000
• Net Cash from Investing Activities: -$100,000

Financing Activities:

• Proceeds from Loans: $150,000
• Loan Repayments: -$50,000
• Net Cash from Financing Activities: $100,000
• Net Increase in Cash: $210,000

This statement demonstrates EcoTech’s ability to generate positive cash flow from operations, maintain sufficient liquidity, and invest in growth opportunities.

Tips on Writing a Business Plan

1. Be clear and concise: Keep your language simple and straightforward. Avoid jargon and overly technical terms. A clear and concise business plan is easier for investors and stakeholders to understand and demonstrates your ability to communicate effectively.

2. Conduct thorough research: Before writing your business plan, gather as much information as possible about your industry, competitors, and target market. Use reliable sources and industry reports to inform your analysis and make data-driven decisions.

3. Set realistic goals: Your business plan should outline achievable objectives that are specific, measurable, attainable, relevant, and time-bound (SMART). Setting realistic goals demonstrates your understanding of the market and increases the likelihood of success.

4. Focus on your unique selling proposition (USP): Clearly articulate what sets your business apart from the competition. Emphasize your USP throughout your business plan to showcase your company’s value and potential for success.

5. Be flexible and adaptable: A business plan is a living document that should evolve as your business grows and changes. Be prepared to update and revise your plan as you gather new information and learn from your experiences.

6. Use visuals to enhance understanding: Include charts, graphs, and other visuals to help convey complex data and ideas. Visuals can make your business plan more engaging and easier to digest, especially for those who prefer visual learning.

7. Seek feedback from trusted sources: Share your business plan with mentors, industry experts, or colleagues and ask for their feedback. Their insights can help you identify areas for improvement and strengthen your plan before presenting it to potential investors or partners.

FREE Business Plan Template

To help you get started on your business plan, we have created a template that includes all the essential components discussed in the “How to Write a Business Plan” section. This easy-to-use template will guide you through each step of the process, ensuring you don’t miss any critical details.

The template is divided into the following sections:

• Mission statement
• Business Overview
• Key products or services
• Target market
• Financial highlights
• Company goals
• Strategies to achieve goals
• Measurable, time-bound objectives
• Company History
• Mission and vision
• Unique selling proposition
• Demographics
• Psychographics
• Pain points
• Industry trends
• Customer needs
• Competitor strengths and weaknesses
• Opportunities
• Competitor products and services
• Market positioning
• Pricing strategies
• Organizational structure
• Key roles and responsibilities
• Management team backgrounds
• Product or service features
• Competitive advantages
• Marketing channels
• Advertising campaigns
• Promotional activities
• Sales strategies
• Supply chain management
• Inventory control
• Production processes
• Quality control measures
• Projected revenue
• Assumptions
• Cash inflows
• Cash outflows
• Net cash flow

What is a Business Plan?

A business plan is a strategic document that outlines an organization’s goals, objectives, and the steps required to achieve them. It serves as a roadmap as you start a business , guiding the company’s direction and growth while identifying potential obstacles and opportunities.

Typically, a business plan covers areas such as market analysis, financial projections, marketing strategies, and organizational structure. It not only helps in securing funding from investors and lenders but also provides clarity and focus to the management team.

A well-crafted business plan is a very important part of your business startup checklist because it fosters informed decision-making and long-term success.

Why You Should Write a Business Plan

Understanding the importance of a business plan in today’s competitive environment is crucial for entrepreneurs and business owners. Here are five compelling reasons to write a business plan:

• Attract Investors and Secure Funding : A well-written business plan demonstrates your venture’s potential and profitability, making it easier to attract investors and secure the necessary funding for growth and development. It provides a detailed overview of your business model, target market, financial projections, and growth strategies, instilling confidence in potential investors and lenders that your company is a worthy investment.
• Clarify Business Objectives and Strategies : Crafting a business plan forces you to think critically about your goals and the strategies you’ll employ to achieve them, providing a clear roadmap for success. This process helps you refine your vision and prioritize the most critical objectives, ensuring that your efforts are focused on achieving the desired results.
• Identify Potential Risks and Opportunities : Analyzing the market, competition, and industry trends within your business plan helps identify potential risks and uncover untapped opportunities for growth and expansion. This insight enables you to develop proactive strategies to mitigate risks and capitalize on opportunities, positioning your business for long-term success.
• Improve Decision-Making : A business plan serves as a reference point so you can make informed decisions that align with your company’s overall objectives and long-term vision. By consistently referring to your plan and adjusting it as needed, you can ensure that your business remains on track and adapts to changes in the market, industry, or internal operations.
• Foster Team Alignment and Communication : A shared business plan helps ensure that all team members are on the same page, promoting clear communication, collaboration, and a unified approach to achieving the company’s goals. By involving your team in the planning process and regularly reviewing the plan together, you can foster a sense of ownership, commitment, and accountability that drives success.

What are the Different Types of Business Plans?

In today’s fast-paced business world, having a well-structured roadmap is more important than ever. A traditional business plan provides a comprehensive overview of your company’s goals and strategies, helping you make informed decisions and achieve long-term success. There are various types of business plans, each designed to suit different needs and purposes. Let’s explore the main types:

• Startup Business Plan: Tailored for new ventures, a startup business plan outlines the company’s mission, objectives, target market, competition, marketing strategies, and financial projections. It helps entrepreneurs clarify their vision, secure funding from investors, and create a roadmap for their business’s future. Additionally, this plan identifies potential challenges and opportunities, which are crucial for making informed decisions and adapting to changing market conditions.
• Internal Business Plan: This type of plan is intended for internal use, focusing on strategies, milestones, deadlines, and resource allocation. It serves as a management tool for guiding the company’s growth, evaluating its progress, and ensuring that all departments are aligned with the overall vision. The internal business plan also helps identify areas of improvement, fosters collaboration among team members, and provides a reference point for measuring performance.
• Strategic Business Plan: A strategic business plan outlines long-term goals and the steps to achieve them, providing a clear roadmap for the company’s direction. It typically includes a SWOT analysis, market research, and competitive analysis. This plan allows businesses to align their resources with their objectives, anticipate changes in the market, and develop contingency plans. By focusing on the big picture, a strategic business plan fosters long-term success and stability.
• Feasibility Business Plan: This plan is designed to assess the viability of a business idea, examining factors such as market demand, competition, and financial projections. It is often used to decide whether or not to pursue a particular venture. By conducting a thorough feasibility analysis, entrepreneurs can avoid investing time and resources into an unviable business concept. This plan also helps refine the business idea, identify potential obstacles, and determine the necessary resources for success.
• Growth Business Plan: Also known as an expansion plan, a growth business plan focuses on strategies for scaling up an existing business. It includes market analysis, new product or service offerings, and financial projections to support expansion plans. This type of plan is essential for businesses looking to enter new markets, increase their customer base, or launch new products or services. By outlining clear growth strategies, the plan helps ensure that expansion efforts are well-coordinated and sustainable.
• Operational Business Plan: This type of plan outlines the company’s day-to-day operations, detailing the processes, procedures, and organizational structure. It is an essential tool for managing resources, streamlining workflows, and ensuring smooth operations. The operational business plan also helps identify inefficiencies, implement best practices, and establish a strong foundation for future growth. By providing a clear understanding of daily operations, this plan enables businesses to optimize their resources and enhance productivity.
• Lean Business Plan: A lean business plan is a simplified, agile version of a traditional plan, focusing on key elements such as value proposition, customer segments, revenue streams, and cost structure. It is perfect for startups looking for a flexible, adaptable planning approach. The lean business plan allows for rapid iteration and continuous improvement, enabling businesses to pivot and adapt to changing market conditions. This streamlined approach is particularly beneficial for businesses in fast-paced or uncertain industries.
• One-Page Business Plan: As the name suggests, a one-page business plan is a concise summary of your company’s key objectives, strategies, and milestones. It serves as a quick reference guide and is ideal for pitching to potential investors or partners. This plan helps keep teams focused on essential goals and priorities, fosters clear communication, and provides a snapshot of the company’s progress. While not as comprehensive as other plans, a one-page business plan is an effective tool for maintaining clarity and direction.
• Nonprofit Business Plan: Specifically designed for nonprofit organizations, this plan outlines the mission, goals, target audience, fundraising strategies, and budget allocation. It helps secure grants and donations while ensuring the organization stays on track with its objectives. The nonprofit business plan also helps attract volunteers, board members, and community support. By demonstrating the organization’s impact and plans for the future, this plan is essential for maintaining transparency, accountability, and long-term sustainability within the nonprofit sector.
• Franchise Business Plan: For entrepreneurs seeking to open a franchise, this type of plan focuses on the franchisor’s requirements, as well as the franchisee’s goals, strategies, and financial projections. It is crucial for securing a franchise agreement and ensuring the business’s success within the franchise system. This plan outlines the franchisee’s commitment to brand standards, marketing efforts, and operational procedures, while also addressing local market conditions and opportunities. By creating a solid franchise business plan, entrepreneurs can demonstrate their ability to effectively manage and grow their franchise, increasing the likelihood of a successful partnership with the franchisor.

Using Business Plan Software

Creating a comprehensive business plan can be intimidating, but business plan software can streamline the process and help you produce a professional document. These tools offer a number of benefits, including guided step-by-step instructions, financial projections, and industry-specific templates. Here are the top 5 business plan software options available to help you craft a great business plan.

1. LivePlan

LivePlan is a popular choice for its user-friendly interface and comprehensive features. It offers over 500 sample plans, financial forecasting tools, and the ability to track your progress against key performance indicators. With LivePlan, you can create visually appealing, professional business plans that will impress investors and stakeholders.

2. Upmetrics

Upmetrics provides a simple and intuitive platform for creating a well-structured business plan. It features customizable templates, financial forecasting tools, and collaboration capabilities, allowing you to work with team members and advisors. Upmetrics also offers a library of resources to guide you through the business planning process.

Bizplan is designed to simplify the business planning process with a drag-and-drop builder and modular sections. It offers financial forecasting tools, progress tracking, and a visually appealing interface. With Bizplan, you can create a business plan that is both easy to understand and visually engaging.

Enloop is a robust business plan software that automatically generates a tailored plan based on your inputs. It provides industry-specific templates, financial forecasting, and a unique performance score that updates as you make changes to your plan. Enloop also offers a free version, making it accessible for businesses on a budget.

5. Tarkenton GoSmallBiz

Developed by NFL Hall of Famer Fran Tarkenton, GoSmallBiz is tailored for small businesses and startups. It features a guided business plan builder, customizable templates, and financial projection tools. GoSmallBiz also offers additional resources, such as CRM tools and legal document templates, to support your business beyond the planning stage.

Business Plan FAQs

What is a good business plan.

A good business plan is a well-researched, clear, and concise document that outlines a company’s goals, strategies, target market, competitive advantages, and financial projections. It should be adaptable to change and provide a roadmap for achieving success.

What are the 3 main purposes of a business plan?

The three main purposes of a business plan are to guide the company’s strategy, attract investment, and evaluate performance against objectives. Here’s a closer look at each of these:

• It outlines the company’s purpose and core values to ensure that all activities align with its mission and vision.
• It provides an in-depth analysis of the market, including trends, customer needs, and competition, helping the company tailor its products and services to meet market demands.
• It defines the company’s marketing and sales strategies, guiding how the company will attract and retain customers.
• It describes the company’s organizational structure and management team, outlining roles and responsibilities to ensure effective operation and leadership.
• It sets measurable, time-bound objectives, allowing the company to plan its activities effectively and make strategic decisions to achieve these goals.
• It provides a comprehensive overview of the company and its business model, demonstrating its uniqueness and potential for success.
• It presents the company’s financial projections, showing its potential for profitability and return on investment.
• It demonstrates the company’s understanding of the market, including its target customers and competition, convincing investors that the company is capable of gaining a significant market share.
• It showcases the management team’s expertise and experience, instilling confidence in investors that the team is capable of executing the business plan successfully.
• It establishes clear, measurable objectives that serve as performance benchmarks.
• It provides a basis for regular performance reviews, allowing the company to monitor its progress and identify areas for improvement.
• It enables the company to assess the effectiveness of its strategies and make adjustments as needed to achieve its objectives.
• It helps the company identify potential risks and challenges, enabling it to develop contingency plans and manage risks effectively.
• It provides a mechanism for evaluating the company’s financial performance, including revenue, expenses, profitability, and cash flow.

Can I write a business plan by myself?

Yes, you can write a business plan by yourself, but it can be helpful to consult with mentors, colleagues, or industry experts to gather feedback and insights. There are also many creative business plan templates and business plan examples available online, including those above.

We also have examples for specific industries, including a using food truck business plan , salon business plan , farm business plan , daycare business plan , and restaurant business plan .

Is it possible to create a one-page business plan?

Yes, a one-page business plan is a condensed version that highlights the most essential elements, including the company’s mission, target market, unique selling proposition, and financial goals.

How long should a business plan be?

A typical business plan ranges from 20 to 50 pages, but the length may vary depending on the complexity and needs of the business.

What is a business plan outline?

A business plan outline is a structured framework that organizes the content of a business plan into sections, such as the executive summary, company description, market analysis, and financial projections.

What are the 5 most common business plan mistakes?

The five most common business plan mistakes include inadequate research, unrealistic financial projections, lack of focus on the unique selling proposition, poor organization and structure, and failure to update the plan as circumstances change.

What questions should be asked in a business plan?

A business plan should address questions such as: What problem does the business solve? Who is the specific target market ? What is the unique selling proposition? What are the company’s objectives? How will it achieve those objectives?

What’s the difference between a business plan and a strategic plan?

A business plan focuses on the overall vision, goals, and tactics of a company, while a strategic plan outlines the specific strategies, action steps, and performance measures necessary to achieve the company’s objectives.

How is business planning for a nonprofit different?

Nonprofit business planning focuses on the organization’s mission, social impact, and resource management, rather than profit generation. The financial section typically includes funding sources, expenses, and projected budgets for programs and operations.

Image: Envato Elements

Your email address will not be published. Required fields are marked *

© Copyright 2003 - 2024, Small Business Trends LLC. All rights reserved. "Small Business Trends" is a registered trademark.

Case Studies

Resource Hub

Featured post

What is a Pitch Deck: The Definitive Guide for Entrepreneurs

Explore our latest posts

Navigating the Challenges and Opportunities in Green Tech Startups

Navigating the Gig Economy: Strategies for Startups to Leverage Freelance Talent

Leveraging Business Incubators for Startup Success: A Comprehensive Guide

Business Plan vs. Business Model: What's the Difference?

Dive into the nuances of Business Plans & Models. Uncover their key differences, applications, and tips for strategic growth. Master your business journey today!

November 28, 2023

In the world of business, two terms often emerge as foundational elements to startup founders, seasoned entrepreneurs, and everyone in between: the Business Plan and the Business Model. Both are crucial, yet their roles, purposes, and impacts are distinct, and understanding these differences can mean the difference between the success and failure of an enterprise.

In a landscape where innovation is rampant and industries are constantly evolving, having clarity about one's business direction is indispensable. It's akin to a sailor knowing the direction of the wind and having a map. While the wind's direction can be equated to the broader strategy of the sailor (the Business Model), the map which plots out the course in detail is akin to the Business Plan.

Yet, with these tools being so pivotal, it's alarming how often they are misunderstood or used interchangeably. Some entrepreneurs pour weeks into crafting the perfect business plan, only to realize they haven’t clarified their fundamental business model. Others sketch out a brilliant business model on the back of a napkin but falter when asked for the detailed strategy and projections that a business plan requires.

This guide aims to dissect the nuances between a Business Plan and a Business Model, highlighting their unique roles in the entrepreneurial journey and offering insight into how each can be harnessed most effectively. By the end of this exploration, readers will have a clear roadmap (pun intended!) for their own business endeavors, understanding when, why, and how to leverage each tool.

Definition of Key Terms - Understanding Business Plan and Business Model

In order to delve deep into the distinctions between a Business Plan and a Business Model, it's imperative that we first lay down clear definitions for each term. This ensures that as we progress, we're aligned in understanding and can avoid any ambiguities. So, let's start by putting these cornerstone concepts under the microscope.

Business Plan

A Business Plan can be envisioned as a detailed blueprint for setting up a business and ensuring its success. It's a comprehensive document that articulates what a business intends to achieve and the strategies it will deploy to make those aspirations a reality. Let's break down the typical components:

• Executive Summary: A snapshot of your business, providing a concise overview of what the business is about, its mission, and how it stands out in the market.
• Company Description: An in-depth look at the company, detailing its formation, mission, objectives, and overarching goals.
• Market Analysis: A study of the industry landscape, understanding potential competitors, target audience, market trends, and opportunities.
• Organizational Structure: A delineation of the company's hierarchy, roles, responsibilities, and the dynamics of how operations will be conducted.
• Product or Service Line: A detailed description of the product or service the company offers, its benefits, lifecycle, and relevance in the market.
• Marketing and Sales Strategies: Outlining the approach for promoting the product/service, attracting customers, and the strategies for sales conversion.
• Funding Requirements: If seeking external investment, a clear layout of the capital needed, the reasons, and the strategy for effective utilization.
• Financial Projections: Forecasts for the business, including projected income statements, balance sheets, cash flow statements, and break-even analysis.

Business Model

A Business Model is akin to the conceptual foundation of a business. It succinctly defines how a company plans to generate revenue, make a profit, and ensure sustainability in a competitive market. Core components of a business model include:

• Value Proposition: What makes the company’s offering unique and desirable? How does it solve a problem or fill a need in the market?
• Customer Segments: Who are the primary target customers? What are their needs and how will the business cater to them?
• Channels: Through which avenues will the product/service be delivered to the customers?
• Customer Relationships: How does the business intend to interact with its customers, ensuring retention and loyalty?
• Revenue Streams: The avenues through which the company will make money. This can include sales, subscriptions, licensing, and other revenue models.
• Key Resources: Assets required to run the business, which can be physical, intellectual, human, or financial.
• Key Activities: The main operations and tasks that need to be performed to ensure the business runs smoothly.
• Key Partnerships: Collaborations, alliances, and affiliations that will be essential in supporting the business operations.
• Cost Structure: A clear breakdown of the business’s expenses and financial obligations.

With these definitions at our fingertips, it becomes easier to discern the distinct role each plays in the grand scheme of establishing and running a business. As we progress further, we will delve into how these elements differ in scope, objective, and application.

Main Differences - Navigating the Nuances Between Business Plan and Business Model

Having delineated clear definitions for both a Business Plan and a Business Model, it's now time to pinpoint their distinctive differences. While both tools are essential to a business's success, they serve varied purposes and are used at different stages of the entrepreneurial journey. Let's explore the primary differences between the two:

• Business Model: This represents the broader concept of the business's structure and its fundamental modus operandi. It's an overview of how the business plans to function at its core, capturing, delivering, and creating value.
• Business Plan: This is a comprehensive document that dives deep into the strategy required to make the vision (often illustrated by the business model) a reality. It details everything from operations, marketing, sales, and finances to ensure the business is on the right track.
• Business Model: Its primary aim is to define the method through which the company creates, delivers, and captures value. It's about answering the "What, Why, and For Whom" of the business.
• Business Plan: This seeks to showcase the feasibility of the business model, detailing how the business will operate, generate revenue, manage costs, and expand. The business plan is more about the "How, When, and Where."
• Business Model: While it is primarily crafted for internal stakeholders to align their vision and operations, it also serves as an overview for potential investors, partners, and other external parties who are interested in understanding the company's foundational strategy.
• Business Plan: This is a tool tailored for both internal decision-makers and external stakeholders. When seeking investments, partnerships, or loans, a well-drafted business plan becomes indispensable. It provides the detailed insight that external parties often require before committing resources or capital.

Flexibility

• Business Model: Given its higher-level perspective, the business model is often more adaptable. As market conditions change, customer preferences evolve, or new opportunities emerge, the business model can be adjusted to pivot or capitalize on these shifts.
• Business Plan: Though not rigid, a business plan is more static compared to a business model. While it should be periodically updated as milestones are achieved, market conditions change, or business goals evolve, it typically requires a more formal revision process.

In essence, while the business model is about conceptualizing the heart and soul of the enterprise, the business plan is about putting flesh to that skeleton, bringing it to life with details, strategies, and actionable steps. Grasping these nuanced differences is vital for entrepreneurs as they chart the course of their business journey.

When to Use Which - The Strategic Application of Business Plan and Business Model

The distinctions between a Business Plan and a Business Model are clear, but knowing when to deploy each can be equally as crucial. Their application at the right junctures can enhance clarity, attract resources, and drive effective implementation. Here's a guide on when to use which:

Starting Up a Business

• Business Model: Before any detailed planning commences, it's pivotal for entrepreneurs to draft a Business Model. This helps in conceptualizing the very essence of the business: what value it offers, who it caters to, and how it will generate revenue. Using tools like the Business Model Canvas can provide a visual and concise representation of this.
• Business Plan: Once the fundamental business concept is clear, the Business Plan comes into play. This document will map out the strategy to realize the business model, offering detailed steps, financial projections, marketing strategies, and more. It's a roadmap for how the business will operate and grow.

Seeking Investments

• Business Model: Investors will want a snapshot of your business's core. They want to know why your business exists and how it stands out. Thus, presenting a clear business model is paramount.
• Business Plan: Alongside understanding your business's essence, investors also need reassurance on its feasibility and growth potential. This is where the Business Plan becomes crucial. It offers detailed projections, strategies, and plans that can instill confidence in potential investors, showing them the roadmap to returns on their investment.

Iterating on Business Ideas

• Business Model: In rapidly changing industries or for startups practicing the lean startup methodology, frequent iterations might be needed. Every time there's a significant pivot or change in direction, the Business Model should be revisited and possibly adjusted.
• Business Plan: While the Business Model might be revised more frequently, it's not always necessary to overhaul the entire Business Plan. However, if the pivot is significant enough to alter operations, marketing strategies, or financial forecasts, then a revision of the Business Plan is warranted.

Periodic Review and Expansion

• Business Model: While the core of a business might remain steady, it's beneficial to revisit the Business Model periodically, especially when considering expansion into new markets, launching new products, or diversifying revenue streams.
• Business Plan: As businesses hit milestones, they should update their Business Plan. This could be done annually or during strategic inflection points like mergers, acquisitions, or significant market shifts. A current Business Plan is also invaluable when seeking further investments, opening new branches, or exploring partnerships.

In summation, while the Business Model encapsulates the very soul of the enterprise, the Business Plan serves as the detailed blueprint for bringing that vision to fruition. Knowing when to focus on each, and how to leverage them effectively, can guide businesses through their initial setup, growth, challenges, and expansions. Both tools, when used strategically, are the compass and map guiding a business towards its envisioned success.

Real-world Examples - Illustrating the Nuances of Business Plan and Business Model

A theoretical understanding of the distinction between Business Plans and Business Models is one thing, but observing them in practice can offer an invaluable perspective. Let’s explore some real-world examples that showcase these tools in action:

• Business Model: At its core, Airbnb’s model is about connecting people with spaces to rent to those looking for accommodations. Their value proposition revolves around offering unique, homely, and affordable accommodations compared to traditional hotels. Their primary revenue stream comes from charging hosts a commission on each booking.
• Business Plan: When Airbnb sought investments, they presented a detailed startup business plan that included their marketing strategy, growth projections, financial details, and expansion plans into new markets. This plan articulated how they intended to move from their foundational model to a global powerhouse in the hospitality industry.
• Business Model: Uber’s primary model is a platform connecting drivers with passengers. Their value proposition is offering a convenient, affordable, and reliable alternative to traditional taxis. Revenue primarily comes from taking a cut from each ride a driver completes.
• Business Plan: Uber’s rapid expansion into cities worldwide didn’t happen by chance. It was part of a strategic plan that included targeted marketing campaigns, strategies to onboard drivers, handling regulatory challenges, and financial projections for each new market.
• Business Model: Netflix started as a DVD rental-by-mail service, pivoting to streaming as technology and consumer preferences evolved. Their value proposition revolves around offering an extensive library of content for a fixed monthly price, without ads. Revenue comes from monthly subscriptions.
• Business Plan: When Netflix decided to pivot from DVD rentals to streaming, and later into producing original content, it would have required detailed planning. Their business plan would outline content acquisition strategies, technological infrastructure needs, financial forecasts for the new ventures, and a marketing strategy to promote their evolving services.
• Business Model: Dropbox’s model is based on providing cloud storage solutions for individuals and businesses. Their value proposition is offering a simple, reliable, and accessible means to store digital content. They employ a freemium model where basic services are free, but advanced features come at a cost.
• Business Plan: As Dropbox sought to grow, especially in the competitive cloud storage market, they needed a comprehensive plan. This would include strategies for user acquisition, scaling their technological backend, partnerships with other software providers, and financial plans for managing their freemium model efficiently.

In essence, these examples vividly illustrate how the foundational concept of a business (Business Model) is different from the detailed strategy for its operation and growth (Business Plan). While the model captures the essence, the plan dives into specifics. Both are integral at different stages, and as seen with companies like Netflix, they need to be revisited and revised as the company evolves.

Navigating the Business Landscape with Precision

Throughout this exploration of Business Plans and Business Models, one thing remains abundantly clear: both are indispensable tools in the toolkit of every entrepreneur and business leader. However, understanding the nuanced differences between the two and knowing how to deploy each effectively can significantly impact a company's success.

A Business Model provides the visionary blueprint of a company – it's the big picture that showcases what the company stands for, its primary methods of generating revenue, and how it intends to deliver value to its target market. It’s the foundation upon which a company is built, a reflection of its core identity.

On the other hand, a Business Plan dives into the specifics, detailing the strategies, operations, financial projections, marketing approaches, and other key components necessary to bring the business model to life. It's the roadmap, detailing the route a business needs to take to achieve its goals.

In the rapidly changing world of business, where consumer preferences evolve, technologies disrupt traditional operations, and markets are continually in flux, having a robust business model is crucial. But it’s the detailed business plan that allows businesses to navigate these complexities with precision, foresight, and strategic acumen.

Drawing inspiration from real-world examples, we've seen how giants like Netflix and Uber have effectively utilized both these tools. They've conceptualized innovative business models and then deployed detailed business plans to capture market share, adapt to changes, and remain at the pinnacle of their respective industries.

In conclusion, as an entrepreneur or business leader, think of the business model as your compass, giving direction and purpose. The business plan is your map, detailing the terrain and showing the path forward. With both in hand, you're not only set for the journey but also equipped to tackle the challenges and capitalize on the opportunities that lie ahead.

Key Takeaways

Foundational Differences: A Business Model provides an overview of how a company creates, delivers, and captures value, whereas a Business Plan delves into the detailed strategies, operations, and financial projections for realizing the model.

Strategic Application: The Business Model sets the core vision and foundation for a business, while the Business Plan acts as a roadmap, detailing steps for achieving business goals and milestones.

Real-world Applications: Successful companies, such as Airbnb, Uber, Netflix, and Dropbox, have effectively conceptualized innovative business models and employed comprehensive business plans for strategic execution and growth.

Necessity for Adaptation: Both the business model and business plan should be revisited and revised periodically to ensure alignment with evolving market realities and business objectives.

Call to Action: Entrepreneurs and businesses should constantly reflect on, refine, and update their models and plans, engage with experts, commit to continuous learning, and actively share insights to ensure sustained success.

Table Of Content

Explore Our Services

Explore our top-notch pitch deck service

We help discerning startups and growing businesses create powerful pitch decks that attract investors and secure big deals.

Subscribe to our newsletter and keep in touch with us

An error has occurred somewhere and it is not possible to submit the form. Please try again later.

Only available to newsletter subscribers!

Answers, To The Most Asked Questions

What tools can help in creating a business model, how often should i update my business plan, is a business plan necessary for businesses that aren't seeking external investment, how detailed should a business model be, can a business have multiple business models, you may like.

10 Best Cyber Security Startup Ideas

Discover the most promising cybersecurity startup ideas for 2023. Drive innovation, meet market demands, and elevate digital safety. Start your journey now!

Read Article

10 Best Software Startup Ideas

Discover the hottest software startup ideas for 2023. Dive into trends, market potentials, and launch strategies to kickstart your entrepreneurial journey!

10 Pros and Cons of Venture Capital You Should Know

Explore the dynamics of venture capital. Dive into its benefits, potential pitfalls, and learn how it can shape startup trajectories. Make informed decisions with our guide.

10 Unique Clothing Business Ideas

Discover groundbreaking fashion business concepts for 2023! From sustainability to tech trends, master the art of differentiating your brand. Dive in now!

discover the menu

Get Ready For Funding

Pitch Deck Service

Pitch Training

Financial Modeling

Investor Outreach

Fundraising Consultant

We normally respond within 24 hours

View all our blog articles

The Leading Source of Insights On Business Model Strategy & Tech Business Models

Business Model Vs. Business Plan: When And How To Use Them

A business model is a holistic framework to design how a business might create and capture value. A business plan is a document explaining how a business might become viable. Where a business model is made to be tested, a business plan’s primary goal is to gain investments. 

Table of Contents

The key difference between a business model and a business plan

It is easy to confuse a business model with a business plan . Yet those tools have specific functions, in some cases similar, in most other cases completely different.

Indeed, while a business model is a framework to understand the way an organization works, a business plan is a document that helps to understand the future strategy of an organization and its expected performance in a three to five years time frame.

While in some cases, a business plan can also serve the purpose of better understanding your own business, and in some other cases, the business model can be comprised within the business plan .

Indeed, as an investor, I want to know exactly how your business works or how you think it will work in the future. Keeping a distinction between those tools is critical.

In particular, I want to focus on the critical difference from two perspectives:

• external (investors, stakeholders, and other parties)
• internal (owners, top management, shareholders)

External:  business plan or business model?

If you’re looking for a tool whose aim is to show how attractive your business is, a business plan is the most suited for that.

Indeed, suppose you want to attract investors and grow your business via external resources.

In that case, a detailed business plan is the most effective way to allow those investors to understand the several parts of your business.

Also, the business plan is a way to show where you see the business in the future. Indeed, one key ingredient of a business plan is a set of projections for three-five years.

While investors will also want to know what kind of business model you want to build (depending on whether or not your business model will be scalable will make or break the interests of investors).

The primary tool to show where your business will be in the future and to address the kind of resources needed to get there is the business plan. In short, for external subjects to know about your business and invest in it, the business plan is the best tool.

Internal: business plan or business model?

Among the tools to leverage on to understand your business, a business model is one of the most effective.

Indeed, the business model is a framework (usually a one-page) that allows you to understand how your business works from several perspectives.

Depending on what kind of business you’re trying to build or where you want to steer your organization, you might want to look at a few tools, such as:

• FourWeekMBA Busines Model 
• Business Model Canvas
• Blitzscaling Business Model Innovation Canvas
• Value Proposition Canvas
• Lean Startup Canvas

Each of those tools will help you to build a different kind of business.

For instance, in a start-up phase, the business model canvas and the lean startup canvas are the most suited.

In a phase of scale-up, the lean startup is better suited than the business model canvas.

Instead, if you’re trying to blitzscale your business , the Blitzscaling Canvas will be your best companion.

In conclusion, if you’re looking for a way to understand better your business in the present or how to design a business model that can help you grow, the business model frameworks are the most suited to the business plan .

In some cases, though, a business plan might also work for that purpose, especially a one-page business plan.

Key takeaway and resources

A business plan is a tool that is most suited to shot external stakeholders where your business is headed and why they should finance or invest in its future.

The business model instead, is a framework that helps you assess how your business works from several angles and the kind of actions you can take in the now.

Below you can find an example on how to build a one-page business plan as well:

Key Highlights:

• Business Model vs. Business Plan: A business model is a comprehensive framework for creating and capturing value in a business, while a business plan is a document that outlines how a business can become viable. The primary goal of a business plan is often to secure investments.
• Key Difference: The main distinction between a business model and a business plan lies in their functions. A business model explains how an organization operates, while a business plan focuses on the future strategy and expected performance over three to five years.
• External Perspective: For external stakeholders like investors and partners, a detailed business plan is essential. It helps them understand various aspects of the business and provides projections for the future. Investors also want to know about the scalability of the business model.
• Internal Perspective: When looking to understand the current state of your business or design a business model, tools like the Business Model Canvas, Lean Startup Canvas, and others are more effective. These tools offer insights into how the business operates and can guide decision-making.
• Choosing the Right Tool: The choice between a business model and a business plan depends on your goals and the stage of your business. For startups, the Lean Startup Canvas and Business Model Canvas are useful. In a scale-up phase, Lean Startup tools might be more suitable, and for rapid growth , the Blitzscaling Canvas can be valuable.
• Key Takeaway: A business plan is best suited for presenting your business to external stakeholders and securing financing, while a business model is a framework for understanding your business from multiple angles and making informed decisions in the present.
• Resources: Various tools, such as the Business Model Canvas and Lean Startup Canvas, can help you analyze and improve your business model. A one-page business plan can also be effective in clarifying your business’s core problem, target customers, and distribution channels .

Case Studies

Case Study 1: Nike – Business Model vs. Business Plan

• Nike utilizes its business model to create, deliver, and capture value. It focuses on the core components of a business’s operations and revenue generation.
• When considering external stakeholders like investors, Nike might develop a detailed business plan to showcase its future strategies and financial projections.

Case Study 2: Coca-Cola – Business Model vs. Business Plan

• Coca-Cola employs digital marketing channels like social media and email marketing to better communicate its products and engage with consumers.
• Coca-Cola may use a business model framework to understand how it creates and delivers value through marketing , while a business plan could be used to outline future marketing strategies and financial goals.

Case Study 3: Amazon – Business Model vs. Business Plan

• Amazon uses technology not only for its e-commerce platform but also integrates customer feedback into its product design, enhancing its business model .
• In the process of attracting investors or lenders, Amazon might create a comprehensive business plan to demonstrate its long-term growth strategy , financial viability, and risk mitigation.

Case Study 4: Tesla – Business Model vs. Business Plan

• Tesla leverages technology to shape its electric vehicles, constantly improving features and performance based on user feedback and data collected from their vehicles.
• Tesla could use a business model to understand how it delivers value through innovation and customer feedback. Simultaneously, a business plan might outline its future growth strategies and financial projections.

Case Study 5: Airbnb – Business Model vs. Business Plan

• Airbnb operates a two-sided platform that connects hosts and travelers, creating interactions that generate value for both parties.
• To secure investments for expansion or growth , Airbnb may develop a business plan that outlines its financial outlook, expansion strategies, and risk management, while its business model emphasizes how interactions drive its value.

Case Study 6: Uber – Business Model vs. Business Plan

• Uber’s platform connects riders and drivers, creating a multi-sided marketplace driven by network effects .
• Uber could use a business model to understand the dynamics of its marketplace. When seeking investors or funding, it might present a comprehensive business plan highlighting its growth potential, financial projections, and strategies to address market challenges.

Case Study 7: Apple – Business Ecosystem vs. Business Plan

• Apple’s App Store has evolved into a thriving business ecosystem that benefits both the company and app developers.
• While the business ecosystem concept is central to Apple’s strategy , the company may use a business plan to outline its future ecosystem development, financial projections, and governance design for potential investors.

Case Study 8: Ethereum – Business Ecosystem vs. Business Plan

• Ethereum’s blockchain platform facilitates the creation of decentralized applications (dApps) and smart contracts within a larger business ecosystem .
• Ethereum might use a business model to understand how its ecosystem creates and captures value. For attracting investors or funding, a business plan could illustrate its growth strategies, financial outlook, and governance design.

Key Difference – Business Model vs. Business Plan

• A business model is a strategic framework for understanding how a business creates, delivers, and captures value. It focuses on the core components of a business’s operations and revenue generation.
• A business plan is a comprehensive document outlining a company’s goals, strategies, financial projections, and operational details, often used for fundraising and as a roadmap for the business.

Choosing the Right Tool

• The choice between a business model and a business plan depends on the goals and stage of the business. While a business model helps understand the present and guide innovation , a business plan is primarily for external stakeholders, showcasing future strategies and financial projections.

Connected Business Frameworks

Business Engineering

Tech Business Model Template

Web3 Business Model Template

Asymmetric Business Models

Business Competition

Technological Modeling

Transitional Business Models

Minimum Viable Audience

Business Scaling

Market Expansion Theory

Speed-Reversibility

Asymmetric Betting

Growth Matrix

Revenue Streams Matrix

Revenue Modeling

Pricing Strategies

Cynefin Framework

SWOT Analysis

Personal SWOT Analysis

Pareto Analysis

Failure Mode And Effects Analysis

Blindspot Analysis

Comparable Company Analysis

Cost-Benefit Analysis

Agile Business Analysis

SOAR Analysis

STEEPLE Analysis

Pestel Analysis

DESTEP Analysis

Paired Comparison Analysis

Related Strategy Concepts:  Go-To-Market Strategy ,  Marketing Strategy ,  Business Models ,  Tech Business Models ,  Jobs-To-Be Done ,  Design Thinking ,  Lean Startup Canvas ,  Value Chain ,  Value Proposition Canvas ,  Balanced Scorecard ,  Business Model Canvas ,  SWOT Analysis ,  Growth Hacking ,  Bundling ,  Unbundling ,  Bootstrapping ,  Venture Capital ,  Porter’s Five Forces ,  Porter’s Generic Strategies ,  Porter’s Five Forces ,  PESTEL Analysis ,  SWOT ,  Porter’s Diamond Model ,  Ansoff ,  Technology Adoption Curve ,  TOWS ,  SOAR ,  Balanced Scorecard ,  OKR ,  Agile Methodology ,  Value Proposition ,  VTDF

Main Free Guides:

• Business Models
• Business Strategy
• Business Development
• Digital Business Models
• Distribution Channels
• Marketing Strategy
• Platform Business Models
• Tech Business Model

More Resources

About The Author

Gennaro Cuofano

Leave a reply cancel reply, discover more from fourweekmba.

Subscribe now to keep reading and get access to the full archive.

Type your email…

Continue reading

• 70+ Business Models
• Airbnb Business Model
• Amazon Business Model
• Apple Business Model
• Google Business Model
• Facebook [Meta] Business Model
• Microsoft Business Model
• Netflix Business Model
• Uber Business Model

Business Model vs. Business Plan

You might be wondering what the difference is between a business plan and a business model. The truth is, they are different things with different purposes. 

The main difference between a business plan and business model is that a business plan outlines your goals and strategy to grow your company, while a business model shows you how to generate revenues. Read on to learn more about this subject, including what types of business models there are and how to figure out which type best suits your situation.  

What is a Business Model?

What is a Business Plan?

What Should Be Included in a Business Plan?

During the business planning process, especially if you are trying to attract investors, there are 10 essential elements of a business plan which you must include as follows:

• Executive Summary
• Company Description
• Customer Analysis
• Market Analysis
• Competitive Analysis
• Marketing Strategy & Plan
• Operations Plan
• Management Team
• Financial Plan (Performance & Forecasting)

For each of these sections, you should provide an in-depth description of your research, analysis, and expected financial performance. You can learn more about the components of a business plan and review our repository of 100+ business plan examples to help you get started on writing your own business plan.  

What Should Be Included in a Business Model?

A business model should include the details of every way in which your business makes money. It’s important not to leave anything out, even if it seems insignificant. Every dollar counts!   

How Does a Business Model Differ from a Business Plan?

Business models outline how your company generates revenues. On the other hand, business plans focus on the specifics of how the business will achieve sales and growth over a given period of time, typically five years. Business plans discuss your business model among other things and are critical if you want to gain investments to grow your business.  

The business model strategy is very different from a business plan. While they overlap a bit, the critical difference is that a business plan outlines the goals and business strategy while the basic business model shows you how to make money. 

Your needs will change over time so it’s important to be able to switch between these two documents when needed. For example, if your goal is long-term growth then you may want more information about what type of strategy would work best for this situation or which resources might help get there faster. On the other hand, if you’re looking for some immediate income then paying attention to the various types of models available could give you an idea of where to start with generating enough sales quickly without too much cost upfront.  

How to Finish Your Business Plan in 1 Day!

Don’t you wish there was a faster, easier way to finish your business plan?

With Growthink’s Ultimate Business Plan Template you can finish your plan in just 8 hours or less!

OR, Let Us Develop Your Plan For You

Since 1999, Growthink’s business plan consulting team has developed business plans for thousands of companies who have gone on to achieve tremendous success.

Click here to see how our professional business plan consultants can create your business plan for you.  

Other Helpful Business Plan Articles & Templates

Crafting the Perfect Pitch to Secure Investors for Your Mobile App

5 Ways to Incorporate AI Into Your Project Management Workflow

The Role of AI in Personalizing Employee Training

Legal Labyrinth: What Happened to Atrium?

• Project Management

Business model vs business plan: What’s the difference between them

If you aspire to be an entrepreneur, that means you already have some ideas in mind. Knowing what the difference is between a business model and a business plan is going to help you. Each has its own use, so understanding them is important.

Any successful business owner will have to do some business planning . There are a lot of benefits to doing this, and the more organized you get, the better it is going to be for you. In the digital era, you don’t have to do it on paper – you can do it much more efficiently using IdeaBuddy, for example, but the better you understand the essence, the higher your chance of building a successful plan you have.

The differences between business model vs business plan

The business model is the foundation of a company, while the business plan is the structure. So, a business model is the main idea of the business together with the description of how it is working.

The business plan goes into detail to show how this idea could work. A business model can also be considered the mechanism that a company has to generate profits. At the same time, the business plan also does its part in being the way a company can present its strategy. It is also used to show the financial performance that is expected for the near future.

Comparing how business models and business plans work to help you in different ways is important. A business model can help you be sure that the company is making money. It helps to identify services that customers value. It also shows the reciprocation of funds for the activity that a business renders to its customers.

Any business can have different ways of generating income, but the goals of the business model should aim to simplify the money process. It does this by focusing on the large income generators.

So, we now understood that a basic business model is a gateway to show how an organization is functioning. A business plan is a document that shows the strategy of an organization together with the expected performance details.

We can find the details of a company when we check its business plan. What it does is offer more info about the business model. It does this by explaining the teams needed to meet the demand of the business model. It explains the equipment needed, as well as resources that need to be obtained to start creating. Explaining the marketing goals , and how the business is going to attract and retain more customers over the competition , will be part of the model.

Another interesting thing when it comes to comparing business models and business plans is that they cannot function without each other. Just remember this, the business model is going to be the center of the business plan.

Business plan

When comparing using a business model versus a business plan, we also need to understand each one better to draw some final conclusions. One of the first goals of a company could be to define its business model.

The business plan is going to be the detailed part that includes all the information and steps like Mayple’s marketing plan template, organization, products or services, sales plan, business proposal for investors , and so on. Some useful questions that you can use when developing your business plan are:

• What do we have now?
• What do we want to have in the future?
• What do we need in order to be there?

Business Model

What Is A Project Management Framework? (Must Read)

What Is Project Management Lead Time and How to Improve It

Primary and Secondary Stakeholders: What Makes Them Different

The Best Project Management Software For Creatives (17 Tools)

• 400+ Sample Business Plans
• WHY UPMETRICS?

Customers Success Stories

Business Plan Course

Strategic Canvas Templates

E-books, Guides & More

Business consultants

Entrepreneurs and Small Business

Accelerators and Incubators

Educators & Business Schools

Students & Scholars

AI Business Plan Generator

Financial Forecasting

AI Assistance

Ai Pitch Deck Generator

Stratrgic Planning

See How Upmetrics Works  →

• Sample Plans

Small Business Tools

Business Model vs Business Plan What’s the Difference?

Free Business Model Canvas Template

• January 2, 2024

The idea of starting a business comes easier than actually starting a business, isn’t it? Business plan, business model, marketing, and whatnot.

Are you confused between a business plan and a business model? Worry not many entrepreneurs started with just an idea without knowing anything about business terminologies.

Business plans and business models are sometimes mistakenly interchanged. Although they sound similar, they are not the same. Let’s see what they mean, their differences, and their types.

Here are the points we are going to go through:

• What Is A Business Model
• What Is A Business Plan

Types Of Business Models

Types of business plans, what is a business model.

A business model  is a mechanism that directs how you create, deliver, and attain value in the market; it’s the profit-generating plan of your company. Simply put, it’s how you sell your product to make money.

• Defining your offerings
• Identifying and describing your target audience
• Stating your sales strategy
• Predicting expenses along the way

Don’t find customers for your products, find products for your customers. – Seth Godin

What Is A Business Plan?

A business plan is a document that outlines your entire business operations. From product launches to setting milestones to planning an exit strategy, it includes every step of your business journey. It says what a company does, its vision and goals, and its strategies to achieve them.

• Executive summary
• Company Overview
• Mission statement
• Vision statement
• Problem statement
• Products and services
• Market analysis
• Customers analysis
• Competitors analysis
• SWOT analysis
• Marketing and sales plan
• Operations plan
• Financial plan

There are online business plan tools that help you to write business plans in a standardized format which helps the whole business ecosystem to understand the business.

Say goodbye to boring templates

Build your business plan faster and easier with AI

Plans starting from $7/month

• Business Model: Your business model focuses on optimizing the internal and external operations of your company to earn maximum profits. It explains your relationship with dealers, distributors, service partners, customers, and target audience.
• Business Plan: Conversely, your business plan focuses on how you set goals , create strategies, make predictions, and manage labor to sustain and scale your business . It also outlines your relationship with your customers, competitors, industry, and the market.

Adopting The Right Business Model(s) Helps You:

• Gain A Competitive Edge: Incorporating a unique business model amazes your audience and attract them to be your first-time customer. It also provides you with a competitive edge over other companies in your industry.
• Ensure Sustainability And Scalability: A business model pushes an entrepreneur to have monthly updates and what exactly your next month should look like. Most businesses get close due to poor financial management, which is why a business model is required. From economic storms to any unexpected difficulties, a business model ensures both sustainability and scalability.
• Inspires Trust In Investors: Investors know what is the failure rate of any small business , which is why incorporating a business model will give a sense of security. They will also know that you have a strategy and what is your profitability expectations from the upcoming years.

Writing A Great Business Plan Helps You:

Test the viability of your business idea:

A business plan defines the target audience and their willingness to pay for your product or service. This way your business idea will get the validation of whether to go ahead with it or not.

If you have no idea about how to write a business plan , worry not, Upmetrics – the business planning software is here to the rescue!

Acquire Funding:

If you want funds from banks, investors, or other parties, then you will require proper financial goals, plans, and projections. So, an ideal business plan will help you out with impressing investors.

Plan For Exit:

The business plan includes strategies and a timeline to accomplish any task, which helps in planning the exit of your business too. While handing over your business or closing it directly, meeting the financial goals is also important, which are very specific in the business plan.

Some of the other advantages of writing an ideal business plan are:

• Identify market gaps and threats
• Organize and plan business processes
• Forecast financial estimates and market trends
• Create strategies to achieve objectives

While Adopting A Business Model, You:

First, consider the scalability of your business, then measure the value you offer. List down your competitors, segment your customers, see the market potential, and then choose a business model.

Here are other points to consider:

• Aim to receive validation from prospective customers
• Modify assumptions to match customer preferences
• Focus on the current financial position

While Creating A Business Plan, You:

Answer a few questions first like where you think your business will be in 10–15 years, what is your expected income, or what are your projections.

• Aim to find factual information through research
• Support assumptions through data from customer analysis
• Focus on the current and future financial position

How many business models there can be since new models are created all the time? Here are some of the most recognizable business models:

• Brick-and-mortar
• Bricks-and-clicks
• Razor and blade
• Subscription
• Advertising

If you feel none of the above business models suits your vision, you can build a custom business model for your company via business planning software.

As your business grows, it is advisable to modify your business model to accommodate the changes in the economy, customer buying behavior, industry trend, etc.

Nine Key Elements

• Customer Segments: Who are you selling your product to? Identify the top three revenue-generating segments in the market.
• Value Proportion: How are you solving your customer’s problems? Describe the product or service you are offering.
• Revenue Streams: How do you receive payments for your offerings? Think advertisements, direct sales of products, etc. List your top three revenue streams.
• Channels: How do you reach your customers and sell your offerings? Think stores, wholesalers, door delivery, etc.
• Customer Relationships: How do you communicate with your customers? How do you offer support? Think self-service, personal assistance, telephonic support, etc.
• Key Activities: What are your daily business activities? State the activities that are vital for operating your business.
• Key Resources: What do you need to run your business? List all the physical, financial, intellectual, and human resources you need. For instance, a SaaS company needs human expertise, equipment, etc.
• Key Partners: Who are your business partners ? What are their responsibilities? What are the only activities they can do?
• Cost Structure: What are your key costs? Considering your activities and resources, list your important expenses. Do you follow a cost-driven structure or a value-driven one?

• Traditional business plan : This is a detailed 40-page business plan. It is ideal if you want to record all your business activities without leaving anything up for assumption.
• Lean business plan: A lean business plan is half the size of a traditional business plan and is common among most modern-day businesses.
• SBA business plan: SBA business plan This is a specific business plan that banks and investors require you to submit if you are looking for funding.
• Startup business plan: A startup business plan includes all the steps you need to take before and during establishing your startup.

Planning To Grow Your Business?

Although some functions of a business model and a business plan do overlap, you cannot replace one with another. Both focus on different outcomes and are must-haves in your business arsenal.

Planning to run a company requires you to use online business plan tools to maximize your chances of success. Try Upmetrics for your business, and join 110K entrepreneurs who trusted us.

Build your Business Plan Faster

with step-by-step Guidance & AI Assistance.

About the Author

Riya Shah is a skilled content writer experienced in various areas of writing, currently working with Upmetrics. Fascination with reading led her to be a writer. Highly creative, focused, imaginative, and passionate. Read more

Related Articles

What Is a Business Model? Explained With Types & Examples

6 Components of a Strong Business Model

How to Write a Business Plan Complete Guide

Reach your goals with accurate planning.

No Risk – Cancel at Any Time – 15 Day Money Back Guarantee

Popular Templates

The Differences Between a Business Plan & Business Model

• Small Business
• Business Planning & Strategy
• Business Plans
• ')" data-event="social share" data-info="Pinterest" aria-label="Share on Pinterest">
• ')" data-event="social share" data-info="Reddit" aria-label="Share on Reddit">
• ')" data-event="social share" data-info="Flipboard" aria-label="Share on Flipboard">

How to Install a Dynex Web Camera Capture Device

What is a strategic business plan, business plan vs. business model.

• The Importance of a Business Plan
• The Chief Elements of Business Models

Every successful business starts with a concept, a plan and a product or service that customers are willing to pay money to obtain. Business strategies are never conducted in a vacuum, however, and for a business to be successful, there must be a business plan and a business model generated. These two terms are unfortunately used interchangeably, but in reality, they are two very different documents that cannot exist without one another. It is essential that a business owner understand the use of a business model vs a business plan.

Business Plan vs. Business Model

At its simplest, a business plan is a written description of the future of a business. It's a document that not only gets a business concept on paper but also outlines the people and steps that will be involved to lead the business to success. The business plan is where you discuss the industry and the need for a particular product or service, the business structure and how you will achieve success.

The business plan also talks about the market in which the business will operate, lays out the competition and what the plans are to position the business as a leader. Lastly, the business plan lays out the ever-important financial plan, discussing things such as income and cash flow, loans and obligations and when and how investors can expect to see a return.

A business model, on the other hand, is a business's rationale and plan for making a profit. If the business plan is a road map that describes how much profit the business intends to make in a given period of time, the business model is the skeleton that explains how that money will be made. A model covers everything from how a company is valued within an industry to how it will interact with suppliers, clients and partners to generate profits.

There are several different kinds of business models. A software company, for instance, might be based on a subscription model, which generates revenue from customers that renew subscriptions annually for a license to use the software. An example of an accessories model would be a razor company or computer printer company that guarantees future income through the sale of razor blades and printer cartridges.

Interdependence

While it's true that a business plan and business model are two separate documents, the reality is that the business plan cannot live without the business model. While a business plan can describe the structure of a business's financial goals, the business model explains how the money will flow - from customer generation to marketing to sales, and finally, to customer retention. The business model must have room to grow and adapt. Consequently, if the business model changes, so must the business plan.

The Need to Adapt and Change

One of the most prominent examples of a business model changing is currently occurring in the computer software industry. About 10 years ago, the way to purchase software programs was to go to the store and buy a CD-ROM to download the application and license to your computer. Today, the advent of cloud-based subscription services makes it possible for customers to download software and renew licenses remotely over the internet.

This transition to the Software as a Service (SaaS) subscription model has caused many businesses to change their plans. Companies affected by this shift include computer companies that no longer need to build machines with CD-ROM drives in them and software companies that no longer need to make or sell software in physical form.

As a result, software companies have had to change their business plans, including costs and infrastructure costs for cloud storage and bandwidth, as well as maintain a cloud operations team 24 hours a day, seven days a week. These ongoing efforts can increase costs and reduce margins, but they're a necessary adaptation to changing customer needs and market technology with the new business model.

• The Business Plan Shop: Business Model Vs. Business Plan
• Wikipedia: Business Model
• Harvard Business Review: What is a Business Model?
• Entrepreneur: An Introduction to Business Plans

John began his 25-year career in the editorial business as a newspaper journalist in his native Connecticut before moving to Boston in 2012. He started fresh out of college as a weekly newspaper reporter and cut his teeth covering news, politics, police, and even a visit from a waterskiing squirrel. He went on to work in the newsrooms of several busy daily newspapers, and developed a love for detailed storytelling, focusing on the lives and diverse tales that all people have to offer. Moving on to the business arena later in his career, John worked as a managing editor for a healthcare publishing company and a technology software firm. He’s used his background in broadcast journalism as a webinar moderator, voice-over specialist, and podcast narrator. John also holds a master’s degree as an elementary school teacher and spent 10 years working with and tutoring students of various ages and backgrounds, including multilingual students and students with special needs of all ages.

Related Articles

The relationship between the business model and strategy, what is the purpose of a business model, difference between a business plan & a business proposal, the size of a macbook, how to remove unwanted pre-installed programs on a sony vaio, what is the business planning process, components of a business model, business model strategy, what is a business model and how does it differ from a business plan, most popular.

• 1 The Relationship Between the Business Model and Strategy
• 2 What Is the Purpose of a Business Model?
• 3 Difference Between a Business Plan & a Business Proposal
• 4 The Size of a MacBook

ZenBusinessPlans

Home » Business Model

Business Model Vs Business Plan – What is the Difference?

Do you want to know the difference between a and a business plan? If YES, here is a detailed comparison and analysis and how each is used. A business plan and a business model look amazingly similar like two peas in a pod, but they are equally different, just like two peas in a pod. They are both part of each other but play different roles thus making the line between them seem dim.

A business plan and a business model both contain , customer retention strategy, revenue generation strategies, and overall, they are used to outline the vision of the company. So what then differentiates a business plan from a business model and how can you make a clear distinction of both?

Business Model Vs Business Plan

What is a business model.

A business model is a company’s outlined plan for making profit. It identifies the products or services the business will sell, the target market it has identified , and the expenses it anticipates. A business model also shows the destination of the business, how it is meant to work, and what it is meant to become.

A business model ascertains how your business makes money. It identifies the services that your customers value and shows how funds are generated for the services your business renders to your customers. A small business can have more than one method of generating income, and it is the duty of the business model to simplify the money process by focusing on the largest income generator.

For instance, a gas station sells gas to customers, but it also provides other services such as a car wash, lube station, etc. The business model only recognizes the majority income generator, which is the sale of gas. Therefore, the business model will reflect the sale of gas to the customer, which generates income at the time of the customer’s purchase.

The business model summarily simplifies and makes revenue-generation easy to understand by focusing on the key generator, highlights exactly how you intend to acquire, retain, and service your customers. The business model can come in different distinct models like:

• Franchise model
• Direct sales model
• Advertising model
• Subscription based model
• Lowcost model
• Freemium model
• Affiliate model
• Production model

The business model is basically at the center of the business plan, as it describes how the company is positioned within its industry’s value chain, and how it organises its relations with its suppliers, clients, and partners in order to generate profits. The business plan translates this positioning in a series of strategic actions and quantifies their financial impact.

What is a BUSINESS PLAN

A business plan is a formal written document that contains business goals, the methods on how these goals can be attained, and the time frame within which these goals need to be achieved. A business plan acts like a GPS. It shows you the roadmap of how you intend to get to your destination as a business person.

It highlights the market opportunities you want to take advantage of, the existing competition, the strength and experience of your team, a detailed description of the products and services you intend to offer, and a roadmap that shows exactly how you intend to execute your plans in the market.

A business plan is a document presenting the company’s strategy and expected financial performance for the years to come.

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

The business plan pays close attention to your goals, projects the cash flow, profits or losses, and ultimately shows how long and what would be required to enable the business break-even.

A sample structure of a business plan is seen below:

• Executive Summary
• Business Description
• Service or Product Line
• Market Analysis & Strategies
• Organization & Management
• Funding Request
• Financial Assumptions
• Financial Projections

Differences Between a Business Plan and a Business Model

Some of the major differences between a business plan and a business model are outlined thus;

• A business model aims at highlighting the profit making potentials of a business, while a business plan highlights every aspect of the business.
• The business plan explains in details the steps needed to achieve the goals of your business model.
• Another difference is that business plans are usually written at the beginning of a business or a business initiative, while a business model is relevant at any time, and can be written at any time.
• Again, business models are less expensive to put together, and may represent a fictional future goal. As a goal, they may be both complete and entirely unprofitable or even infeasible, quite unlike your business plan.
• A business model is centered around Value; while business plan is centered around Resources. The business plan thus lays out how to manage these resources over time to materialize the business model, grow and scale the business.
• A model explains how you will make money: for example, by selling advertising, by earning a commission, by adding a markup to services, working with partners, selling direct, charging by the hour, with additional services, etc. While a business defines specific activities, it includes timeframes, budgets, owners, dependencies and impact.

More on Business Model

How does a business plan differ from a business model canvas?

Business plans and business model canvas are two key decision making tools that entrepreneurs need to know (and use!). Despite sounding similar, however, they do differ significantly and shouldn't be confused.

This in-depth guide covers all you need to know about the two documents, including what they contain, their similarities and differences and the tools you can use to create either of them.

Ready? Let’s get started!

In this guide:

What is a business plan?

What is the business model canvas, business plan vs. business model canvas: what do they have in common.

• Business plan vs. business model canvas: what are the differences?

What tools can you use to write a business plan?

What tools can you use to write a business model canvas.

A business plan is a document providing detailed information about your business and its objectives for the years to come (usually 3-5 years).

To keep it short and simple, a business plan consists of two parts: 

• A financial forecast which provides information about the expected growth and profitability of your business, your potential funding requirements, and cash flow projections.
• A written part which provides the context and details needed to assess the relevance of the forecast: company overview, description of products and services, market analysis, strategy, operations, etc.

Formal business plans are usually written: to secure financing, to get buy-in from stakeholders (board members, investors, business partners) on the plan of action for the coming years, to convince suppliers to do business with the company, or to communicate the company's vision to staff members.

Financial savvy businesses regularly track their actual financial performance against the forecast included in their business plan and re-assess their progress against what was planned, and update their plans as needed.

Need a convincing business plan?

The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.

In simple terms, a business model is how a company makes money, and the business model canvas is a tool to help entrepreneurs find a coherent business model for their business (or for new products or services).

A business model can be broken down into two parts:

• The first part deals with what a business is about. This relates to what the business sells - and all the activities that go into creating this. That means research, designing, raw material sourcing and costs, production, and testing. 
• The second part is concerned with selling what the business is about - the product or service it has invested in. These activities include everything from marketing to distribution and the sale transaction process. 

The business model canvas can be used to visualize a business model idea. It is a visual chart that includes simple, yet effective graphical illustrations that highlight every aspect of the potential business' operations.

It outlines the infrastructure, value proposition, and customers, including the target market, customer relations and marketing approach, revenue streams, and profit margins.

The business model canvas helps stakeholders brainstorm business model ideas. For example, they can come up with multiple business models and test them against each other to see which ones are viable and which ones aren’t.

As a result, this tool is only useful for those looking to start a business, launch a new product, or change their business model.

Since we’ve covered business goals and strategies in relation to both a business plan and a business model canvas, it stands to reason that there are at least some similarities between the two. 

In essence, both relate to the way a business functions and there is some overlap between the two. Some of the similarities between the two include:

Outlining business strategy

Both a business plan and a business model canvas outline key strategies that the business intends to use in day-to-day operations.

This includes key aspects such as how a business might create and distribute a product or service and identify corresponding revenue streams.

Decision-making tools

Since both tools help formulate some aspects of business strategy, they are useful in the decision-making process. 

With key business processes highlighted, and ultimate goals set out from the onset, decision-makers within the business have an easier time determining what their next steps should be. 

As such, these tools are used to help stakeholders make more accurate choices when tasked with making decisions. Therefore, businesses that utilise these tools are likely to have successful outcomes.

Indefinite methods

Neither a business plan nor a canvas offers any guarantees. Instead, they are tools that help test out and present your business idea to other stakeholders or managers.

Just because you’ve used these tools, it doesn’t mean that your business idea will pan out or your forecast will go as predicted.

In all likelihood, mapping out your strategy on a business model canvas may help you realize your business idea isn’t destined to be a success. 

An idea can seem good in an abstract form, but when you’re forced to consider all its intricacies, you may understand it won’t work. The good thing about business plans and models is that they can help you determine the viability of your idea before you go through with it.  

Business plan vs. business model canvas plan: what are the differences?

There are major key differences between business plans and business model canvasses. 

Let’s take a look at them in more detail!

Different scopes

As mentioned previously, a business model canvas is a strategic tool that helps find the best busines model for a business or product/service idea.

The business plan can only be drawn once you know what business model will be used. The role of the business plan is then to show how much it will cost to launch the business or product, and how much money it could make, and what it will take in terms of concrete resources (people, equipment, etc.).

Different length

The business model canvas is meant to fit on a single piece of paper ("the canvas").

A business plan, however, goes into much more detail. You can expect a typical business plan to be somewhere between 15 to 30 pages.

Different audiences

A business model canvas can be used to bounce off ideas, iron things out, and create a definite model for the business to follow. As such, it is primarily used by the internal team, typically the business founders and others involved in starting the business (or a product team in a large organization). 

A business plan is used internaly - by the management team and the board, and sometimes shared with the wider staff - but it’s not limited to this audience. It is also used with external stakeholders, like banks or investors in order to secure financing. And sometimes suppliers who need it to create their impression of the business’s potential for success before getting involved. 

One-off vs. recurring use

Typically, business model canvases are used prior to starting a business or when a change is needed to the existing business model. 

It is a tool used to visually represent the business idea before it comes to fruition. This means that the idea can be tested practically to decide whether it is viable or not.

Business plans go further, rather than being simple one-off go/no-go decision making tools, business plans are used continously and maintained up to date.

One key concern is knowing whether or not the company is on track to deliver what it planned in its business plan. To do so, managers compare the actual financials to what was planned in the forecast. And then re-plan if needed.

Business plans are also used to make key operational decisions. For example: should you hire a team of marketers or outsource to an agency? To make an informed decision, entrepreneurs can model both scenarios and decide based on the most promissing forecast.

Similarly, business plan are used to anticipate key risks. For example: what happens if sales are 20% below expectations?

As you can see business plan are fairly different from canvasses.

Need inspiration for your business plan?

The Business Plan Shop has dozens of business plan templates that you can use to get a clear idea of what a complete business plan looks like.

In this section, we will review three solutions for writing a professional business plan:

• Using Word and Excel
• Hiring a consultant to write your business plan 
• Utilizing an online business plan software

Create your business plan using Word or Excel

Writing a business plan using Word and Excel is not the best option.

First of all, this option is only recommended if you have a degree in finance or accounting and expertise in financial modelling. You are likely to make mistakes otherwise, and as a result banks or investors are unlikely to trust the accuracy of your financial forecast.

Using Word to draft the plan also means starting from scratch and formatting the document yourself once written - a process that is quite tedious. There are also no instructions or examples to guide you through what to write in each section.

Hire a consultant to write your business plan

This option is only feasible if you have the required finances - you probably need to budget at least £1.5k ($2.0k) for a complete business plan, more if you need to make changes after the initial version (which happens frequently after the initial meetings with lenders).

Despite the expensive price tag that comes with it, outsourcing your business plan to a consultant can be a good idea. Consultants are experienced in writing business plans and adept at creating financial forecasts without errors. Furthermore, outsourcing to a consultant saves you time and allows you to focus on the day-to-day operations of your business.

Use an online business plan software for your business plan

Another alternative is to use online business plan software .

There are several advantages to using specialized software:

• You are guided through the writing process by detailed instructions and examples for each part of the plan
• You can be inspired by already written business plan templates
• You can easily make your financial forecast by letting the software take care of the financial calculations for you without errors
• You get a professional document, formatted and ready to be sent to your bank
• The software will enable you to easily track your actual financial performance against your forecast and update your forecast as time goes by

If you're interested in using this type of solution, you can try our software for free by signing up here .

To get started, you need the canvas itself which can be downloaded here .

Once you have the canvas you can either print multiple copies of it to compare alternative business models on paper, or draw it on a white board to brainstorm with your team.

We hope this guide helped you get a clear understanding of how the business model canvas differs from a business plan, and when you one or the other. Don't hesitate to contact our team if you have any questions regarding business planning.

Also on The Business Plan Shop

• Practical example of a business plan outline
• Business Model vs. Business Plan?

Know someone struggling with their business plan? Share this article and give them a nudge in the right direction!

Founder & CEO at The Business Plan Shop Ltd

Guillaume Le Brouster is a seasoned entrepreneur and financier.

Guillaume has been an entrepreneur for more than a decade and has first-hand experience of starting, running, and growing a successful business.

Prior to being a business owner, Guillaume worked in investment banking and private equity, where he spent most of his time creating complex financial forecasts, writing business plans, and analysing financial statements to make financing and investment decisions.

Guillaume holds a Master's Degree in Finance from ESCP Business School and a Bachelor of Science in Business & Management from Paris Dauphine University.

Create a convincing business plan

Assess the profitability of your business idea and create a persuasive business plan to pitch to investors

500,000+ entrepreneurs have already tried our solution - why not join them?

Not ready to try our on-line tool ? Learn more about our solution here

Need some inspiration for your business plan?

Subscribe to The Business Plan Shop and gain access to our business plan template library.

Need a professional business plan? Discover our solution

Write your business plan with ease!

It's easy to create a professional business plan with The Business Plan Shop

Want to find out more before you try? Learn more about our solution here

• Business Planning
• Cash Flow Forecasting
• Scenario Planning
• Financial Reporting
• Financial Planning & Analysis
• For Enterprises
• For Franchises
• Case Studies
• Partnerships
• Software Integrations
• Templates & Downloads

A large update to Brixx has been released (15.04.24) - read about it here . Please clear cache/cookies in your browser if you encounter difficulties in loading the app.

Business plan vs. business model

Understanding the difference between a business model and a business plan is crucial for entrepreneurs and business managers. While these two terms are often used interchangeably, they refer to distinct aspects of a business’s strategy and operations.

What is a business model

A business model is a conceptual framework that outlines how a company creates, delivers, and captures value. It’s a strategic plan for earning profits, detailing the products or services the business will sell, the target market it aims to reach, and the expected costs and revenue streams. Essentially, it’s a blueprint that defines the way a company operates and makes money.

Examples of business models

• Subscription model : This model is prevalent in companies like Netflix or Spotify . Customers pay a recurring fee, usually monthly or annually, to continuously access a service. This model provides steady, predictable revenue for the business and convenience for the customer.
• Freemium model : Popularized by companies such as Dropbox , this model offers basic services for free while charging for advanced or premium features. It’s a way to attract a large user base quickly, with the hope of converting a portion of those users into paying customers.
• E-commerce model : Companies like Amazon and Alibaba operate under this model, selling products directly to consumers or other businesses through online platforms. This model has revolutionized retail by offering a wide range of products with the convenience of online shopping and home delivery.
• Advertising model : Platforms like Facebook and Google use this model, where the primary revenue stream comes from advertising. These companies offer free services to users and sell targeted advertising space to businesses, leveraging the vast amount of user data they collect.
• Direct sales model : This traditional model involves selling products directly to consumers, bypassing intermediaries. Companies like Avon and Tupperware use this model, often combining it with network marketing strategies.
• Franchise model : In this model, a business (the franchisor) allows individuals (franchisees) to trade under the business’s name and sell its products or services. The franchisee will then pay an initial fee, alongside ongoing royalties to the franchisor. Examples include fast-food chains like McDonald’s and Subway .
• Gig economy model : Platforms like Uber and Airbnb exemplify this model. They provide a marketplace where individuals offer services (like ridesharing or lodging) to others. The platform facilitates these transactions and earns a commission from each booking.

Each of these models has its unique characteristics and strategies for creating value and generating revenue. The choice of a business model depends on various factors including the industry, target market, and the nature of the product or service offered.

What is a business plan

A business plan is a comprehensive document that outlines the vision, goals, and roadmap for a business’s growth and success. It is a detailed plan that includes information about the business idea, market analysis, marketing and sales strategies, financial projections , and operational plans.

The business plan serves several purposes: it helps in securing funding from investors or banks, guides the management in strategic decision-making, and sets a course for the business’s development. It typically covers a period of three to five years and is regularly updated as the business evolves.

What’s in a business plan?

A business plan is a comprehensive document that outlines a company’s vision, strategy, and the steps it will take to achieve its goals. Here are the key components typically found in a business plan:

• Executive summary : This is an overview of the business plan, highlighting the business concept, key financials, and what sets the business apart. It’s meant to grab the reader’s attention and summarize the main points.
• Company description : Provides detailed information about the business, including its history, structure, objectives, and the products or services it offers. This section also defines the target market and the problem or need the business intends to address.
• Market analysis : This section involves thorough research on the industry, market trends, target market demographics, and the competitive landscape. It demonstrates an understanding of the market environment in which the business will operate.
• Organization and management : Outlines the business’s organizational structure, detailing the ownership, management team, and board of directors (if applicable). This section may also include biographies of key team members.
• Products or services : Describes in detail the products or services offered by the business, focusing on the benefits to customers. It may also cover the product’s life cycle, intellectual property issues, and any research and development activities.
• Marketing and sales strategy : Explains how the business will attract and retain customers. This includes marketing plans, sales strategies, pricing policies, advertising, and promotions.
• Funding request : If the business plan is being used to secure funding, this section details the amount of funding needed, how it will be used, and the preferred terms.
• Financial projections : Provides financial forecasts, including income statements, cash flow statements, and balance sheets for the next three to five years. These projections are crucial for demonstrating the business’s potential for profitability.
• Appendix : Includes supporting documents such as resumes, permits, leases, legal documentation, detailed market research studies, and references.

Each section plays a crucial role in illustrating the business’s strategy, operational plans, and financial health, making the business plan an essential tool for guiding the company’s direction and securing external funding.

Types of business plans

• Startup business plans : These are created for new businesses seeking funding from investors or banks. They focus on the business idea, market opportunity, unique value proposition, revenue model, and initial financial projections. They often include detailed information about the founding team, the problem they are solving, and their approach to capturing market share.
• Growth business plans : Aimed at existing businesses looking to expand. These plans outline strategies for entering new markets, launching new product lines, or scaling operations. They include market research on new potential markets, financial projections based on expansion, and a roadmap for implementation.
• Operational business plans : Designed for internal use, these focus on operational improvements. They might include plans for improving efficiency, reducing costs, or implementing new systems or technologies. These plans often have detailed timelines and milestones for the operational changes.
• Strategic business plans : These are high-level plans that set out the strategic direction of the company. They focus on long-term goals and objectives, major initiatives to achieve these goals, and allocation of resources. They are typically used by senior management to guide the overall direction of the business.
• Feasibility business plans : Used to assess the viability of a new product, service, or business idea. They include market research, cost analysis, and initial financial projections to determine whether the concept is worth pursuing.

Each type of business plan serves a different purpose and is tailored to the specific needs and stage of the business. Whether for a new startup, a growing business, or an established company seeking new strategies, a well-crafted business plan is crucial for outlining the path to success.

Business model vs. business plan: What’s the difference?

While a business model is a conceptual framework outlining how a company creates value, a business plan is a more detailed and practical document that sets out specific business goals and the strategies to achieve them. The business model is the core concept around which a business plan is developed.

To further distinguish between a business model and a business plan, let’s consider them from various perspectives:

Metaphorical comparison

• Business model : Think of the business model as the blueprint of a house. It’s an overarching design that outlines the structure and functionality of the house – the type of house, its layout, the flow between rooms, etc.
• Business plan : The business plan is like the construction plan for building the house. It includes detailed specifications, materials, timelines, and the steps needed to build the house as per the blueprint.
• Business model : Its primary purpose is to identify how the business will create and deliver value to customers, and how it will extract economic value for itself. It’s about the company’s strategy for operating in the market.
• Business plan : The purpose of a business plan is to provide a detailed roadmap for realizing the business model. It’s used for operational planning, securing financing, and guiding the company’s growth and development.

Scope and detail

• Business model : Generally, business models are more abstract and high-level. They provide an overall picture of how the business intends to function in the market.
• Business plan : Business plans are detailed and comprehensive. They delve into specifics like market research, financial projections, marketing strategies, and operational details.
• Business model : Primarily designed for internal understanding and strategic direction of the company.
• Business plan : Often created with external audiences in mind, such as investors, banks, or potential partners, to convey the company’s strategy and operational plans.

Functionality

• Business model : It’s a conceptual tool used to explore and articulate the business strategy and innovative approaches to the market.
• Business plan : Serves as a practical tool for execution, guiding the day-to-day operations and long-term objectives of the business.

By considering these different aspects, it becomes clear that while a business model and a business plan are closely related, they serve distinct functions and have different focuses within the business structure and strategy.

This table outlines the main differences between a business model and a business plan across various criteria:

Transform your business strategy with Brixx

The business model serves as the conceptual blueprint for creating and capturing value, while the business plan provides a detailed roadmap for implementation.

Brixx emerges as an essential financial forecasting tool in this process. It offers a suite of features that effectively bridges the gap between the strategic planning of your business model and the practical execution of your business plan. Key features include dynamic financial modeling, strategic planning and forecasting, comprehensive cash flow management, scenario analysis, collaborative planning capabilities, and in-depth reporting and analysis.

For entrepreneurs and business managers looking to seamlessly integrate their business model with an actionable business plan, Brixx offers the perfect solution. Discover how Brixx’s business planning software can transform your business strategy into a tangible success story. Try Brixx today and take the first step towards a more streamlined and efficient business planning process.

Is a business model more important than a business plan, or vice versa?

Both are equally important but serve different purposes. The business model provides the strategic foundation, while the business plan outlines the tactical execution of that strategy.

Can a business operate without a formal business plan?

Yes, particularly in the early stages or in very small operations. However, as a business grows, a formal business plan becomes crucial for guiding strategy, securing financing, and managing operations effectively.

Should startups focus more on their business model or business plan?

Startups should first develop a solid business model to understand their value proposition and market fit. Once this is established, a detailed business plan is essential for guiding growth and securing funding.

Related articles

• What is a 13 Week Cash Flow Forecast in Accounting?
• Cash Flow Statement Template for Excel
• What are Actuals in Finance?
• What are Direct Costs in Finance?

Get started FREE with Brixx today

and take the first steps to planning your business’ future development

• Skip to main content
• Skip to primary sidebar
• Skip to footer
• phone (336) 665-8154

email [email protected]

Cogent Analytics

Delivering Powerful Business Solutions

Business Model vs. Business Plan

Business owners are often confused about the difference between a Business Model and a Business Plan . Although they are related, there are also distinct differences, and both deserve serious consideration as part of the business’s Strategic Planning process.

First, let’s define Strategic Planning as – the process for setting goals, determining actions to achieve goals, and mobilizing resources to execute the planned actions . This sounds simple and appropriate; however, most small businesses don’t have a Strategic Plan. By default, businesses that do not develop and follow a Strategic Plan evolve over time rather than take control of their own future. As a result, these businesses generally underperform their potential and, all too often, do not survive. The Strategic Plan provides clarity of direction and a means of measuring the business’s degree of success; with no Strategic Plan the odds of success are dramatically diminished. The Strategic Plan embodies both the Business Model and the Business Plan. So, what is a Business Model, and what is a Business Plan?

A Business Model captures the key elements of the company’s plan for how the organization will create, deliver, and capture value, in economic, social, cultural or other contexts . For example, a traditional business model for a retail business might be to use a chain of brick-and-mortar stores with media advertising to generate revenue and profits. An alternate business model for retail could use an on-line B-to-B web-site with search engine optimization (SEO) to generate sales and a brick-and-mortar distribution warehouse for order fulfillment. Therefore, it is appropriate to think of the business model as a conceptual representation of how the company intends to do business ; thus, the Business Model can be thought of as the skeleton and vital organs of the entity you know as your business.

A Business Plan is a formal statement of business goals, reasons they are attainable, and plans for reaching them. Think of the it as the muscles, connective tissue, and skin that overlay on the skeletal structure and vital organs represented by the Business Model; the Plan brings the Business Model to life. Business plans can be developed for a variety of audiences and may be externally or internally focused.

• Externally focused plans express targets and goals that are important to external stakeholders (i.e. owners, investors, lenders, strategic partners, etc.) along with plans for achieving those targets and goals. The external plan normally covers the next 3 to 5 years, which is the time frame during which stakeholders would expect to realize a return on their investment.
• Internally focused business plans express operational performance goals and specific action plans for achieving those goals thereby assuring accomplishment of the organization’s goals as represented in the “external” business plan. The internal plan provides company management with a plan for achieving the external stakeholder expectations. Included in the internal business plan should be the company’s operating budget. The internal plan can be as short as 1 year (annual budget), or can project several future years, but normally will only look 1 to 3 years into the future.

So the answer to the question about the difference between a Business Model and a Business Plan is that they are both part of an effective Strategic Planning process. The Business Model defines the business structure (what the company will look like and how it will operate). The Business Plan defines the expected operational results from effective utilization of the Business Model and effective execution of a set of action plans. Having an effective Strategic Plan is a very powerful business advantage that dramatically increases the odds of success. The lack of an effective Strategic Plan can lead to problems, chaos, and failure.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

What is a Business Plan Outline?

A business plan outline is an initial overview of what goes into the business plan. An outline is created as the first draft and is likely a result of a “napkin” discussion or some other non-formal…

WHAT IS A BUSINESS PLAN FORMAT?

A business plan format is a structured description of what goes into the business plan. The business plan should present what the business will focus on, who will be on the business team, business….

3 Steps to Small Business Strategic Planning

Having a definitive strategy in place is critical for small businesses. This will define the plans you, as a small business owner, have in mind for moving from where you are currently to where you…

Corporate Address

7027 Albert Pick Road, Suite 300 Greensboro, NC 27409

phone Office: 336.665.8154

phone Fax: 336.665.2480

• Meet The Team

Memberships

• Strategic Planning
• Profit Engineering
• Sales Performance Improvement
• Exit & Succession Planning
• Business Leadership
• Organizational Engineering
• Procedural Systems
• Reporting Systems
• Tax Strategy
• Discovery Process
• Solution Implementation
• Lifecycle Relationship
• Video Testimonials
• Spotlight Videos
• Written Testimonials
• Manufacturers/Shops
• Contractors
• Wholesalers/Distributors
• Transportation
• Engineering/Architectural
• Technology Firms
• Knowledge Center
• Published Articles
• Case Studies
• White Papers
• Client Center
• Cogent Cares
• The Profit Platform
• Associations

Processing Your Payment

Please do not leave this page until complete. This can take a few moments.

Login to your account

Due to our new system upgrade, we are requesting all existing users to update their password. Create a new password

Forgot your password ?

• Purchase History
• Real Estate
• Tourism & Recreation
• Banking & Finance
• Manufacturing
• Fisheries & Marine
• Health Care
• Forest Products
• Agriculture
• Energy & Utilities
• Transportation
• Greater Portland
• Greater Bangor
• Lewiston-Auburn
• Augusta-Waterville

Biweekly Issues

• April 15, 2024
• April 1, 2024
• March 18, 2024
• March 4, 2024
• February 19, 2024
• February 5, 2024
• January 22, 2024

Special Editions

• 2024 Innovation Hub
• 2024 Book of Lists
• 2023 SeniorSmart
• 2023 Fact Book: Doing Business in Maine
• 2023 Work for ME
• 2021 Diversity / Equity / Inclusion
• 25th Anniversary Issue
• How To's
• The Mainebiz Women's Leadership Forum 2024
• On The Road with Mainebiz in Belfast 2024
• The Mainebiz Health Care Forum 2024
• On The Road With Mainebiz in Rangeley
• The Mainebiz Small Business Forum 2024
• The Mainebiz Women to Watch Reception 2024
• The Mainebiz CEO Breakfast Forum 2024
• View all Events

Award Honorees

• 2024 Business Leaders of the Year
• 2023 NextUp: 40 Under 40 Honorees
• 2023 Women to Watch Honorees
• 2023 Business Leaders of the Year
• 2022 NextUp: 40 Under 40 Honorees
• 2022 Women to Watch Honorees
• 2022 Business Leaders of the Year
• Nomination Forms
• Post Your Event
• View Business Events
• Company Profiles
• 2023 Giving Guide
• Email newsletters

Business model vs. business plan — what's the difference?

• Share on Facebook
• Share on Twitter
• Share on LinkedIn
• Share via Email
• Print Article
• Add PDF to Cart
• Write a Comment

Q: What is the difference between a business model and a business plan? Do I need both?

ACE Advises: A business plan is a document that details the organization’s strategy and expected financial performance for years to come. It is typically required by lending institutions, banks and investors to prove a business has a plan for profitability. A well-developed business plan lays out a map for marketing, financial planning and operations.

A business model describes how an organization creates, delivers and captures value in economic, social, cultural or other contexts. Business models help you develop strategies for customer acquisition, talent recruitment, key partnership alliances, and business development.

The business model and the business plan are both key elements to an organization’s development, growth and succession planning and decision making.

If the business plan is a road map that describes how much profit the business intends to make in a given period of time, the business model is the vehicle that gets you there. A model covers everything from ideal customers, customer relationships, value propositions, company activities and assets, and key partners that help you gain, maintain and retain your customers, employees and core values.

Developing strategic plans for your business is an investment. It will take time, energy, research, and commitment on the part of the leaders of the organization. Once developed, they should be referred to often, and updated as your business grows and adapts. When they are done well, your business will stay competitive, relevant, and profitable.

Priscilla Hansen Mahoney can be contacted at  www.blazingtrailscoaching.com .

The Association for Consulting Expertise (ACE) is a nonprofit association of independent consultants who value “Success through Collaboration.” The public is welcome to attend its regular meetings to share best practices and engage with industry experts. For more information go to www.consultexpertise.com .

Sign up for Enews

Most recent.

The Giving Guide

The Giving Guide helps nonprofits have the opportunity to showcase and differentiate their organizations so that businesses better understand how they can contribute to a nonprofit’s mission and work.

Work for ME

Work for ME is a workforce development tool to help Maine’s employers target Maine’s emerging workforce. Work for ME highlights each industry, its impact on Maine’s economy, the jobs available to entry-level workers, the training and education needed to get a career started.

The Mainebiz Innovation Hub

This special publication examines the innovation infrastructure in Maine and the resources available to help entrepreneurs at the various stages of their journey. 

• Custom Publishing
• New England Business Media
• Refund & Privacy Policy
• Press Releases/Submissions
• Reprint/Permissions
• Subscriptions
• Terms and Conditions
• Request Information
• Ad Sizes and Specs
• Marketing Planner
• Subscriber Demographics
• HartfordBusiness.com
• WBJournal.com

NEW ENGLAND BUSINESS MEDIA SITES

No articles left, get access now.

In order to use this feature, we need some information from you. You can also login or register for a free account.

By clicking submit you are agreeing to our cookie usage and Privacy Policy

Already have an account? Login

Want to create an account? Register

This website uses cookies to ensure you get the best experience on our website. Our privacy policy

To ensure the best experience on our website, articles cannot be read without allowing cookies. Please allow cookies to continue reading. Our privacy policy

• +1 855 328 3331 / +91- 020-29911979
• [email protected]
• Investability Testing
• ALCOR Value Proposition
• Investment Thesis for ALCOR
• ALCOR Leadership
• Write For Us
• Sample Report
• ALCOR AUSTRALIA
• ALCOR BRAZIL
• ALCOR ECUADOR
• ALCOR GERMANY
• ALCOR INDIA
• ALCOR JAPAN
• ALCOR KOREA
• ALCOR KUWAIT
• ALCOR SINGAPORE
• ALCOR SOUTH AFRICA
• ALCOR UNITED KINGDOM
• ALCOR URUGUAY

A complete Guide on Business Model vs Business Plan

• August 19, 2020
• Entrepreneurship Venture Capital Funding

Introduction

Business Model and Business plan are interrelated to each other. Lets see a brief difference between business model vs business plan. Business Model acts as a centre for the business plan .

A business model is a framework used to design and depicts how a business might create and capture value. The business plan is a document explaining how a business might become profitable.

A business model is made to be tested while a business plan’s primary goal is to gain investments. If I talk about stages, designing a business model comes first, then we create a plan.

This plan describes strategies involved to build the business and match the plan with the business model.

In this blog, I will start with the difference then some key considerations involving why we should opt, how to write, and some examples of business models and business plans.

We would also be covering components of the business model that can be used while designing a business model canvas. The business model canvas is a tool which helps you to understand a business model in a clear and structured way.

What are the main differences between the business model and the business plan?

Most entrepreneurs start with a strong vision to work on a perfect ideal plan. Instead of chasing an ideal plan, begin with a written description. This description should include who you are, what your ideas are, and why you are in that particular business.

Let’s take an example: If you are selling jewellery online, e-commerce is your business model. Your business plan is to sell jewellery.

Business Plans can be long and time-consuming. So, we need to format the plan properly. A business plan is a document containing detailed future projections such as tactics, goals to cover.

Business Models are structured proposals of a business containing an outline that is easy and less time-consuming. A one-page business model explains how an organization is working with the main idea.

This makes a business model fast, concise, and portable. I will discuss the critical difference from two perspectives:

• External resources including stakeholders, investors, and other parties
• Internal resources including top management, owners, and shareholders

External Resources: Business model vs Business Plan?

If you want to attract investors and grow your business through external resources, a detailed plan is needed. This allows investors to understand the several parts of your business.

If I talk about the main ingredient of a business plan is a set of projections for three-five years. The interests of investors depend on whether your business model is scalable or not.

While investors will also want to know what kind of business model you want to build. The main idea is to show your business future projections and to address the kind of resources needed to get there through a business plan.

So, for external subjects to know about your business and invest in it, the business plan is the best tool.

Internal Resources: Business plan vs Business model?

To understand your business, a business model is one of the most effective. For instance, in a start-up phase, the business model canvas and the lean startup canvas are the most suited.

Each of those tools will help you to build a different kind of business. If you want to understand or design a business model that can help you grow, the business model frameworks are the most suited, vs business plan.

According to   Alan Gleeson , who is the General Manager of Palo Alto Software, Ltd recently answered the difference between business model & business plan in a guest post on TechCrunch : –

“It is worth clarifying the business model vs business plan. A business plan details the business opportunity in a document whereas a business model represents a one-page visual representation or a simple verbal description”.

So if you are a technology-based startup who is looking to raise venture capital, then your business plan should focus on the Venture Capital with a PowerPoint slide deck and an executive summary.

However, if you are a coffee shop looking for a modest investment then the information should include a simple business plan.

Modern business planning is agile, flexible, concise, and more about goal setting than bound physical documents.

This planning process brings numerous benefits for the entrepreneur, such as an ability to look at the operations, to ensure internal focus and cash flow management.

• Business Model Canvas vs Business Plan

Business Model Canvas and Business Plans are useful for an organization to grow. It depends on which stage of the project your company is working in.

Let us discuss the difference between the two and when they should be prepared for the growth of the business.

Business Model Canvas and Business Plan serve a very different purpose. If you are still checking and testing out different ways to roll out your business, BMC is the right place to start.

But, if you are looking for a loan from a bank or an investment for your business, a BMC is inadequate. Rather you should have a business plan. Business Model Canvas helps you, the founder, to figure out the business model and design it accordingly.

Business Plan is for an external stakeholder to analyze your business. The Business Model Canvas functions as a guide. It helps in quick communication between the owners of the business and its stakeholders.

So, let’s take an example of a startup business to understand it clearly. In the startup world, everything is highly changeable. Your business model or target audience can be changed in a month after you started.

And, can you imagine, you spent 3-5 weeks to write a full Business Plan & now you need to rewrite it again because some of the core points have changed? So, for a Startup business model canvas is highly preferred.

If you’re working on a project for more than one year and you’re thinking of asking for funding to an investor, you should work hard to write a great business plan, including an investor pitch.

• Business Model
• Purpose of Business Model

Business Models are necessary for the smooth functioning of every organization. They help in maintaining a close relationship with the customer.

Business Models focus on customer feedback that includes the problems and needs of the customers once the product or service is distributed to them.

How to write a Business Model?

A good Business Model describes the marketing, operations, and distribution strategies of a company. It also includes the analysis of the organizational structure and amending them to sustain a competitive edge.

1. Operational Outline- Design a pictorial view of business operations on a flip chart with circles and labels.

Define the interrelation between them to promote sales, distribute products, target customers, and revenue generation for your team as shown below.

2. Formatting Business Model – Format your business model on a template. You can include the details about different types of customers and how your products and services are valuable to them.

Prepare the total cost incurred for production, employees, and material. Further, prepare a  list of suppliers and partners involved in your business.

3. Operational Business Model – Adopt the “Bricks and Mortar” Business Model to attract local customers who want to choose the products and services provided by your store.

If the customers are from different geographical regions, then target the audience through the Internet. Also, plan to utilize company resources and maintain business profits. Focus on getting new customers and potential risks or threats to the business.

4. Additional Add up Values – Recognize the different methods for serving your customers with products and services. Maintain customer relations based on various segments and target potential customers.

Business Model Example

Let us discuss the different Business Model Examples in different segments.

1. Advertising- Advertising model includes content creation and displaying it in the visual form of advertisement to the readers and viewers. Examples are YouTube, New York Times.

2. Affiliate- Affiliate model uses links embedded in the content through the internet. Examples are TopTenReviews.com, TheWireCutter.com.

3. Brokerage- Brokerage models are mainly used by real estate agencies that involve brokerage transaction fees levied either to the buyer or seller or both by the brokers. Examples are century 21, Orbitz.

4. Crowd sourcing- A large number of people are contributing content for your site in exchange for access to other content. Examples are YouTube, Dell.

5. Freemium- Freemium provides free primary services and charges for premium services. Examples are LinkedIn, Mail chimp.

6. Franchise- Franchise is selling a methodology for starting and running a business. Examples are McDonald’s, Allstate.

Check Your Business Worth And Get The Highest Price For Your Business

Components of business model  canvas.

There are different components and elements of a business model. These are known as the main building blocks of a business which provides information regarding customers, finance, infrastructure & offers related to business.

1. Customer Segments- It defines the customer according to the segment based on the products and services offered to them.

2. Value Propositions- These add up the value to the products and services offered to the customer based on their performance, brand status, design, costing, accessibility, and newness.

3. Distribution Channels – They act as a medium between the customer and the organization. A quick, easy, and the most efficient channel is always for the distribution of products and services.

4. Customer Relationships- It helps in maintaining customer relationships according to segments to achieve financial success and stability.

5. Revenue Streams – This strategy provides a way in which a company can engage its customers to buy its products and services.

6. Key Resources- Key resources such as human, financial, intellectual, and physical provide value to the customers.

7. Key Activities – Relevant Key activities are necessary for every business as they help in maintaining revenue streams to make an efficient business model.

8. Partnerships- Partnerships with high-quality suppliers and partners reduce the risks to maintain efficient and streamlined operations.

9. Cost Structure – Cost structure is the total cost that will be incurred for the establishment of a particular business.

Business Model Canvas  

Business Model Canvas is a pictorial representation that provides a brief idea about your proposed business. They also include a visualizing description of business models and their values.

Business Model Canvas comprises all business components such as customer segments, value proposition, revenue streams, channels, Customer relationships, Key resources and activities, Partners, and Structure of Cost.

Business Plan

Purpose of the business plan.

The main purpose of a business plan is to focus on achieving business goals, secure outside financing, mapping growth, and including the right talent for the organization.

It acts as a blueprint for expanding and running a business in the right direction at every step. It also prepares for the future with clarity about the goals and achievements.

Every company should adopt a business plan as it acts as a decision-making tool by formatting the business goals and its intended audience.

How to write a business plan?  

Business Plan provides a road map for the growth and success of every business. It also helps to find investors and business partners. It  includes some components as

1. Executive Summary- It is the brief of the business plan that includes mission and statement, primary information, products and services, location, and employees.

2. Company Description- This includes detailed information about a company such as customers, business problems, nature of products, and services catered.

3. Market Analysis- It helps in understanding the target market, its trends, the potential for growth in the existing market.

4. Organization and Management- This depicts the organizational chart with vision and mission regarding the department and functioning of the company.

5. Marketing and Sales- Marketing involves different marketing strategies required in the business while the sales are responsible for covering the return on investments.

6. Funding Requests- Funding requests can be online or in a substantial manner.

7. Appendix and Glossary- Every business should provide appendix and glossary for the supporting documents and references to the data.

• Business Plan Examples

Let us discuss some business plan examples in the different sections of the business.

• Construction and Engineering
• Travel and Transport sector
• Hotels and Hospitality
• Children’s Education
• Computers and the Internet
• Consulting, Health, and Beauty
• Food and Farming, Medical and Healthcare
• Personal Services, Non-Profit Organizations
• Manufacturing and Online business.

For instance, let us consider a business plan for the Manufacturing sector. The manufacturing is mainly adopted by the companies who want to start new manufacturing, production, or fabrication business.

This plan helps in knowing the business profile and description, detailed investor information, risk factors involved. It also includes products, and services to be used, market research, sales and marketing strategies, operations, and financial analysis.

Types of Business Plan  

There are various business plans adopted by organizations depending on their nature of business.

1. Startup Business Plan- It is for the enterprises that want to start their business. This mainly includes market evaluations, products and services provided, financial analysis, and projected management team.

2. Internal Business Plan- These plans describe the operational costs and profitability, the company’s actual position, marketing, hiring, and technical costs.

3. Strategic Business Plan- This plan includes the company’s goals in the form of implementation schedule, objectives, and critical success factors and how to achieve them.

4. Feasibility Business Plan- It consists of the description of products and services, required capital, and target demographics.

5. Operations Business Plan- They are part of internal plans that include the company’s main operations with employee responsibilities.

6. Growth Business Plan- This plan provides an in-depth description of the proposed growth plan and investment for its potential investors.

So, the difference between a Business Model and a Business Plan is that they are both parts of an effective Strategic Planning process. A business model is all about VALUE!

What value are you creating, whom are you creating this value for, how are you delivering this value to said target?A great business plan is contingent on RESOURCES – time, infrastructure, manpower, technology, competences & capital.

They both help a business to grow. Using the right one means that your company can have a clearer process and better products and services.

As I said above, the business model is like a destination, and the planning is how you will reach your destination. So, let me add that the planning I recommend isn’t just a map or a route; it’s a GPS, real-time traffic and weather information.

And in that analogy, the business model is the destination. Hence, having an effective Strategic Plan is a powerful business advantage that dramatically increases the odds of success.

Alcor private equity and Venture capital firm  also empowers founders and businesses to grow their companies at all stages.

• Business model canvas
• Business Model Examples
• Business Model vs Business Plan
• business plan
• Components of Business Model
• Difference between business model and business plan
• global investors
• high-end AI platform
• How to Write a Business Model?
• How to write a business Plan?
• Pre-screening
• Purpose of Business Plan
• Risk Assessment
• Types of Business Plans
• Venture Capital Funding
• What is a Business Model Canvas
• What is a Business Plan

6 Major Differences Between Convertible Notes & SAFEs

All About Startup Incubator

A Step-by-Step Guide On How To Accurately Calculate Market Size

15 Types of Investors is all you need to know for Startup

11 SaaS Metrics That Shouldn’t Be Ignored- Alcor Fund !!!

Ready to talk, download free ebook here, get a free ebook on avoiding 10 startup blunders to achieve 10x growth, why over 98% of businesses fail , and what those who succeed do differently.

Are you an aspiring entrepreneur looking for the secrets to success? Are you struggling to stay focused and motivated while building your business?

Look no further – this book is packed with the insights, tips, and strategies you need to become a successful entrepreneur. Discover the two most significant driving forces of successful entrepreneurship, examples of the best entrepreneurial leaders, and why focus and tenacity matter more than strategies, business plans, and techniques.

Get ready to take your business to the next level! This book contains the knowledge and insight you need to become a successful entrepreneur.

Don’t miss out on this opportunity to learn the secrets of successful entrepreneurship. Buy this book now and start your journey towards success!

Hello there!

Thanks for choosing to download our sample report today.

**This is a free report and does not approve or guarantee funding**

Entrepreneur Training

• Ask An Expert

Entrepreneur Library

The Difference Between a Business Model and a Business Plan

By Samantha Garner, GoForth Institute

When you’re getting ready to start your small business, you might have heard that you should start with a business plan, or a business model. That’s great! But what are they, exactly, and how are they different from one another?

Business model

The business model is a blueprint for the business, outlining how you’re going to run your business, and how you’re going to make money.

There are five components in a business model:

• Business concept:  A short description of an opportunity, including a description of your average customer; the benefit of your product or service to the customer; the product or service; and the way you’re going to get your product or service to the customer.
• Value chain position:  Your business’ position on the chain of activities through which products and services pass to get from you all the way to the end user.
• Calculating customer value:  An estimate of the value of the tangible benefits your customers will receive by purchasing your product or service.
• Revenue sources and cost drivers:  Identifying your sources of revenue, and activities that come at a cost.
• Competitive advantage:  The state when customers perceive your products or services to be superior to your competition.

Business plan

Where a business model is a blueprint, a business plan is a roadmap. A business plan is a formal written document that includes a description of the business you want to run, your business goals, and the plan for reaching those goals.

A business plan is a detailed document that contains sections such as: Marketing Plan, Startup Expenses and Capitalization, Management and Organization, Products and Services, and Operational Plan.

A business plan is usually developed around the answers to three common questions:

• Where are we now?
• Where do we want to be?
• How are we going to get there?

And is usually written for one or more of these five reasons:

• To test the feasibility of your business idea and work out any bugs on paper first.
• To develop strategies ahead of time for marketing, finance, operation and human resources, instead of when you’re in the fast-paced start-up stage.
• To get funding, such as a bank loan.
• To attract investors.
• To have a roadmap to follow for at least the first year in business.

Do you need both a business model and a business plan?

A business model and a business plan work in tandem. You need a good foundation and planning before you invest your time and money. To get started, check out our free  One-Page Business Plan . 

Samantha Garner is GoForth Institute's Director, Communications.  Contact Samantha by email:  [email protected]

Want to succeed in your small business?

Modules & Lessons

Getting Started Guides

Templates & Checklists

Business Calculators

Essential Links

Our Compassion

Our Partners

Ask an Expert

Browse Questions

Question Search

The Ultimate Guide on Business Model vs Business Plan

The business model vs business plan are intertwined. Let’s look at the differences between a business model and a business plan in more detail. The business plan’s center is the business model. A business model is a framework for designing and illustrating how a company might produce and capture value.

A business plan is a document that explains how a company can make money. This plan outlines the strategies that will be used to create the company and aligns the strategy with the business model.

We’ll also go over business model components that can be used when creating a business model canvas. The business model canvas is a tool that aids in the clear and organized understanding of a company model. Click here to know what an entrepreneur must do after creating a business plan.

What is the main difference between a business model and a business plan?

Most entrepreneurs begin with a clear vision to develop a flawless ideal plan. Start with a written explanation rather than chasing an ideal blueprint. This description should include information about who you are, your thoughts, and why you are in that particular line of work.

Consider the following scenario:

E-commerce is your business model if you sell jewelry online. You intend to offer jewelry as part of your business plan. Business plans can be time-consuming and lengthy. As a result, we must appropriately format the plan. A business plan is a document that details future projections such as techniques and objectives to be met.

Business models are well-structured business proposals that have a simple and time-saving outline. The fundamental objective of a one-page business model is to show how a company works. A business model becomes quick, concise, and portable as a result of this. I’ll look at the crucial distinction from two angles:

• Stakeholders, investors, and other third parties are examples of external resources.
• Top management, owners, and shareholders are all internal resources.

To avoid common mistakes entrepreneurs do on business plans, read this!

External Resources: Business Model vs. Business Plan?         

A solid plan is required if you wish to attract investors and build your business using external resources. This enables investors to comprehend the various aspects of your company.

If I had to talk about the most important component of a business strategy, it would be a set of projections for the next three to five years. Whether or not your business concept is scalable is important to investors.

While investors will want to know what kind of business model you want to establish, you should also know what kind of business model you want to build. The fundamental concept is to use a business plan to highlight your company’s future projections and address the resources required to get there.

So, if you want other people to know about your firm and invest in it, the ideal tool is a business plan.

Internal Resources: Business Plan Vs Business Model?

A business model is one of the most effective ways to understand your company. The business model canvas and the lean startup canvas, for example, are the best tools for a startup.

Each of these tools will assist you in establishing a distinct type of business. Rather than a business strategy, business model frameworks are best for understanding or designing a business model that can help you expand.

In a guest post on TechCrunch, Alan Gleeson, the General Manager of Palo Alto Software, Ltd, explained the distinction between a business model and a business plan:

“It’s important to distinguish between a business model and a business plan. A business plan is a written document that explains the business opportunity, whereas a business model is a one-page visual representation or a basic spoken statement.”

So, if you’re a tech startup wanting to raise venture capital, your business plan should include a PowerPoint slide deck and an executive summary that focuses on Venture Capital.

This planning method provides various advantages to the entrepreneur, including the capacity to examine operations, maintain an internal focus, and manage cash flow. Read on the step by step process of how to write a business plan.

Business Model

How to write a business model.

A good Business Model explains a company’s marketing, operations, and distribution methods. It also entails examining the organizational structure and making changes to maintain a competitive advantage.

• Operational Outline – On a flip chart, creates a graphical representation of business activities using circles and labels.

As illustrated below, define the interrelationships between them to help your team boost sales, distribute products, target customers, and generate income.

• Business Model Formatting – Use a template to format your business model. You can include information on various customer categories and how your products and services are beneficial to them.

Calculate the overall cost of production, personnel, and materials. Additionally, make a list of your business’s suppliers and partners.

• Operational Business Model – Use the “Bricks and Mortar” Business Model to attract local clients who want to pick and select from your store’s items and services.

If your clients come from different parts of the world, use the Internet to reach out to them. Also, consider how you’ll use firm resources and keep profits up. Concentrate on attracting new customers and identifying potential hazards or challenges to the company.

• Additional Add-Up Values – Recognize the many techniques for providing items and services to your clients. Maintain customer relationships by segmenting them and focusing on potential consumers.

Business Model Types

Let’s break down the many Business Model Examples into sections.

1. Advertising – The advertising model entails creating content and exposing it to readers and viewers in the form of a visual commercial. YouTube and the New York Times are two examples.

2. Affiliate – The affiliate model makes use of links placed in content that may be accessed over the internet. TopTenReviews.com and TheWireCutter.com are two examples.

3. Brokerage -Brokerage models are mostly utilized by real estate agencies and involve brokerage transaction fees imposed by the brokers on either the buyer or the seller, or both. Century 21 and Orbitz are two examples.

4. Crowdsourcing – In exchange for access to additional content, a big number of people provide content to your site. YouTube and Dell are two examples.

5. Freemium – Freemium is a business model that offers free basic services but charges for premium ones. LinkedIn and Mailchimp are two examples.

6. Franchise – A franchise is a means of creating and maintaining a business that is sold. McDonald’s and Allstate are two examples.

Examples of Business Models

Consider two competing business models in which two companies rent and sell movies. After investing $4 million in their movie inventories, both companies made $5 million in revenue. This translates to a gross profit of $5 million minus $4 million, or $1 million, for each company. They also share the same gross profit margin, which is computed by dividing gross profit by revenues by 20%.

However, with the advent of the internet, things have changed. Instead of renting or selling physical copies, Company B intends to stream movies online. This adjustment has a favorable impact on the company model. The licensing payments remain unchanged, but the cost of keeping inventory falls dramatically. In reality, the shift saves $2 million in storage and distribution expenditures.

The company’s new gross profit is $5 million minus $2 million, or $3 million. 60 percent is the new gross profit margin. Company A, on the other hand, fails to update its business plan, resulting in a reduced gross profit margin. As a result, the company’s revenues begin to decline. Company B isn’t producing any more money, but it has transformed its business model, which has resulted in significant cost savings.

Business Plan

How to write a business plan  .

Every business needs a business plan to guide its growth and success. It also aids in the search for investors and business partners. It has some elements such :

1. Executive Summary – The executive summary is a summary of the company plan that includes the mission and statement, primary data, products and services, location, and staff.

2. Company Description – This section contains detailed information about a business, such as customers, business problems, product types, and services provided.

3. Market analysis – this aids in the comprehension of the target market, its trends, and the present market’s potential for expansion.

4. Organization and Management – This diagram shows the organizational structure, along with the department’s vision and mission, as well as the company’s overall operation.

5. Marketing and Sales – Marketing entails various marketing techniques that are essential in the firm, whereas sales are in charge of covering the return on investment.

6. Funding Requests – Funding requests can be submitted online or in person.

7. Appendix and Glossary – For supporting documentation and data references, every organization should supply an appendix and glossary.

Types of Business Plans   

Depending on the nature of their business, businesses use a variety of business plans.

1. Startup Business Plan – This plan is for businesses that are just getting started. Market analyses, products, and services are given, and financial analysis and the expected management team are all included.

2. Internal Business Plan – These plans detail the company’s actual position, marketing, hiring, and technical costs, as well as the operational costs and profitability.

3. Strategic Business Plan – This plan outlines the company’s objectives, including a timeline for implementation, objectives, and important success elements, as well as strategies for achieving them.

4. Feasibility Business Plan – This document includes a description of the products and services, as well as the capital requirements and target demographics.

5. Activities Business Plan – These are internal plans that detail the company’s primary operations as well as staff responsibilities.

6. Growth Business Plan – This plan gives potential investors a detailed overview of the projected growth strategy and investment.

Business Plan Types

Let’s look at some business plan examples in each section of the company.

• Personal Services, Non-Profit Organizations
• Hotels and Hospitality
• Children’s Education
• Manufacturing and Online Business
• Construction and Engineering
• Consulting, Health, and Beauty
• Food and Farming, Medical and Healthcare
• Travel and Transportation sector
• Computers and the Internet

This plan aids in understanding the company’s profile and description, as well as specific investor information and risk considerations. It also covers market research, sales, and marketing strategies, operations, and financial analyses, among other things.

Differences between a business plan and a business model

So, how are a business plan and a business model different? Allow me to give you a quick recap.

• A business model known as a subset of business plan
• A business plan is extensive and has many pages, whereas a business model is a short document with few pages—it can even be depicted diagrammatically on a single page. The canvass is known as the Business Model Canvass (BMC).
• A business plan is a document that is used to guide management, operations, and decision-making in a business – a document that serves as the blueprint and a guide for every aspect of a business. A business model canvass is a document that shows who your customer is, what value you will offer the customer, and how you can do that at reasonable costs, whereas a business model canvass is a document that shows who your customer is, what value you will offer the customer, and how you can do that.
• The business model explains how a firm makes money, whereas the business plan explains the organization’s strategy and predicted financial results in the future.
• The business model demonstrates how a company fits into the value chain of the industry in which it works, as well as how profitable its relationships with suppliers, clients, and partners are. The business plan translates a company’s positioning (as described by the business model) into a sequence of strategic activities and calculates the financial ramifications of those actions.

The only distinction between a Business Model and a Business Plan is that they are both components of a successful Strategic Planning process. It’s all about VALUE in a business concept! What kind of value are you providing, for whom are you creating it, and how are you distributing it to your target?

Time, infrastructure, labor, technology, competencies, and capital are all resources that must be considered when developing a business plan. They both contribute to the expansion of a company. When you use the proper one, your business will have a clearer procedure and superior products and services.

You may also like

Organizing Conversations: The Benefits of Call Tagging...

Cultivating High-Performance Teams: Running Impactful...

Preserving Your Wardrobe: Tips for Extending the...

How to get ahead in your journalism career

Navigating the New Era: How Security Firms Are...

The Future of Clinical Trials: Embracing Precision...

Maximizing Efficiency: Tips for Hiring Top Talent in...

The Crucial Role of Mining Scales in Ensuring...

Best Cruise Insurance Plans of April 2024

Find a Qualified Financial Advisor

Finding a qualified financial advisor doesn't have to be hard. Datalign's free tool matches you with financial advisors in your area in as little as 3 minutes. All firms have been vetted by Datalign and all advisors are registered with the SEC. Get started with achieving your financial goals!

The offers and details on this page may have updated or changed since the time of publication. See our article on Business Insider for current information.

Affiliate links for the products on this page are from partners that compensate us (see our advertiser disclosure with our list of partners for more details). However, our opinions are our own. See how we rate insurance products to write unbiased product reviews.

A cruise vacation can take much of the stress out of planning a vacation. With a pre-set itinerary on the high seas, you don't have to worry about how you're getting to your destination and what you're going to do there. However, an unexpected emergency can take the wind out of your sails and money out of your travel budget. So you'll want to ensure you have the best cruise insurance plan that won't leave you high and dry in an emergency.

Best Cruise Insurance Companies

Best Overall: Nationwide Travel Insurance

Best for affordability: AXA Assistance USA

Best for seniors: Seven Corners Travel Insurance

Best for expensive trips: HTH Worldwide Travel Insurance

Best for exotic locations: World Nomads Travel Insurance

Best overall: Nationwide

Nationwide Travel Insurance  is a long-standing and reputable brand within the insurance marketplace that offers cruise insurance plans with solid coverage and reasonable rates.

It has three cruise insurance options: Universal, Choice, and Luxury. The Nationwide Choice plan, for example, offers $100,000 in emergency medical coverage and $500,000 in emergency medical evacuation coverage.

The right plan for you depends on your budget and coverage needs. But each plan offers cruise-specific coverages like ship-based mechanical breakdowns, coverage for missed prepaid excursions if your cruise itinerary changes, and covered service disruptions aboard the cruise ship.

Read our Nationwide Travel Insurance review here.

Best for affordability: AXA

AXA Assistance USA  offers three comprehensive coverage plans: Gold, Silver, and Platinum. Each of these plans offers coverage for issues like missed flights, medical emergencies, lost luggage, and more.

The highest-tier Platinum plan provides $250,000 in medical emergency coverage and $1 million in medical evacuation coverage. The baggage loss coverage is $3,000 per person, and their missed connection coverage is $1,500 per person for cruises and tours.

In addition, travelers can take advantage of AXA's concierge service, which provides an extensive network of international service providers. They'll be able to assist you with things like restaurant reservations and referrals, golf course information, and more. This service could come in handy if you're stopping at a variety of unfamiliar destinations during your cruise.

The coverage limits on AXA's policies are on the higher end compared to other providers. And you can buy coverage for a little as 4% of your trip cost depending on your age, travel destination, and state of residence.

Read our AXA Travel Insurance review here.

Best for seniors: Seven Corners

Seven Corners Travel Insurance lets cruisers enjoy traveling in their golden years with the knowledge they're covered in the event of an accident or emergency. While other providers do offer coverage to those 80+ years old, Seven Corners is known for its affordable premiums while offering above-average medical expenses and medical evacuation coverage limits — two areas of travel insurance coverage that are even more important as we get older.

Seven Corners also offers the option of a preexisting conditions waiver and CFAR insurance at an additional cost, plus "Trip Interruption for Any Reason" coverage, which you won't find on many policies.

You can choose between the Trip Protection Basic or Trip Protection Choice plans, with the higher-tier Choice plan costing more but providing more coverage.

Read our Seven Corners Travel Insurance review here. 

Best for expensive trips: HTH Worldwide

HTH Worldwide Travel Insurance  offers three levels of trip protection: TripProtector Economy, Classic, and Preferred. The higher the tier, the more coverage you'll get for things like baggage delays, trip delays & cancellations, and medical expenses. But their premiums remain reasonable even at the highest tier of coverage.

Not only does the HTH Worldwide Trip Protector Preferred plan offer higher-than-average medical emergency and evacuation coverage limits ($500,000 and $1 million, respectively), but you'll also get a baggage loss coverage limit of $2,000 per person and coverage for trip interruption of up to 200% of the trip cost. You also have the option to add CFAR coverage for an additional cost.

Read our HTH Worldwide Travel Insurance review here.

Best for exotic locations: World Nomads

World Nomads Travel Insurance  has been a top choice for comprehensive travel insurance for many years now. And it's a great option when it comes to cruise coverage, too.

Even the most basic Standard Plan comes with $100,000 in medical emergency coverage and $300,000 in emergency evacuation coverage. And you'll get higher coverage limits with their Premium Plan. Plus, unlike many other providers, World Nomads trip cancellation and emergency medical coverage include COVID-19-related issues.

What sets World Nomads apart from many other insurance companies is that its policies cover 200+ adventure sports. This can be important for adventurous cruisers who plan to take part in activities like jet skiing, scuba diving, or parasailing during their cruise.

Read our World Nomads Travel Insurance review here.

Introduction to Cruise Insurance

Cruise insurance may offer unique coverage like missed port of call and medical evacuation coverage. You might not need the flight protections of a regular travel insurance plan if you're catching a cruise at a port near you, but medical and cancel for any reason coverage could be critical. The best travel insurance plans will provide flexibility to add coverage options to fit your travels needs.

Understanding the Basics of Cruise Insurance

At its core, cruise insurance is your financial lifeboat, designed to protect you from unforeseen events that could disrupt your sea voyage. Whether it's a sudden illness, adverse weather, or other unexpected occurrences, having the right insurance can make a world of difference.

Why Cruise Insurance is Important

Picture this: You're all set for your dream cruise, but a sudden family emergency means you can't set sail. Or worse, you fall ill in the middle of the ocean. Without cruise insurance, you're not just missing out on an adventure, but also facing potentially huge financial losses. That's why securing cruise insurance isn't just recommended; it's a crucial part of your cruise planning.

Types of Cruise Insurance Coverage

Cruise insurance isn't a one-size-fits-all life jacket. There are various types of coverage, each tailored to protect different aspects of your cruise experience.

Trip Cancellation and Interruption Coverage

This coverage is like your safety net, catching you financially if you need to cancel your trip last minute or cut it short due to emergencies, be it due to personal, health-related, or even certain work conflicts.

Medical Coverage

Being on a cruise shouldn't mean being adrift from medical care. Medical coverage ensures that if you fall ill or get injured, your medical expenses won't sink your finances.

Emergency Evacuation Coverage

In the rare case that you need to be evacuated from the ship due to a medical emergency or severe weather, this coverage ensures you're not left adrift in a sea of expenses.

Baggage and Personal Effects Coverage

Imagine reaching your dream destination only to find your luggage lost at sea. This coverage ensures that lost, stolen, or damaged baggage doesn't dampen your cruise experience.

Buying Cruise Insurance

Securing the best cruise insurance isn't just about finding the best price; it's about ensuring it covers all your potential needs. 

When to Purchase Cruise Insurance

Timing is everything. Purchasing your insurance soon after booking your cruise can often provide additional benefits and ensure you're covered for any early surprises. As you get closer to your trip your coverage options may get more expensive, and certain providers may not be able to offer you coverage.

How to Find the Best Deals on Cruise Insurance

Keep a lookout for deals, but remember, the cheapest option isn't always the best. Balance cost with coverage, and ensure you're getting the protection you need at a price that doesn't rock your financial boat. A travel insurance comparison site like SquareMouth is a good place to compare multiple quotes from all of the major carriers at once.

How we reviewed cruise insurance plans

When comparing cruise travel insurance providers, we evaluated them based on the following criteria to come up with our list of top picks:

Customer Satisfaction

We look at ratings from JD Power and other industry giants to see where a company ranks in customer satisfaction. We also look at customer review sites like Trustpilot and SquareMouth.

Policy Types

We look at policy types and offerings, from standard travel protections to adventure sports coverage. We look at the amount of insurance offered

Average Premiums

We compare average premiums per trip. Some companies also offer annual plans, and we compare policies accordingly.

Claims Paid

How frequently do companies pay claims easily and quickly? We check customer reviews and other resources to see which companies honor policies most effectively.

We look at the company's overall behavior. Is it operating ethically? Companies can earn additional points for such behaviors.

You can read more about how Business Insider rates insurance here.

How much does insurance cost for a cruise?

As a rule of thumb, you can expect to pay between 5% and 10% of your prepaid, nonrefundable trip expenses for cruise insurance coverage. The price will vary depending on factors like your age, your travel destination, and whether you require additional coverage.

When is the best time to buy cruise insurance?

If you're booking a cruise, we recommend purchasing travel insurance when you make your first trip payment. That could be for the cruise itself or an expense like airfare to get you to your cruising destination. This way, if you have to cancel your trip, you'll have the most extended coverage period possible.

Can I buy my own cruise insurance?

You can buy your own cruise insurance that isn't offered directly through the cruise line operator. In fact, this could be a better option if you want coverage for your travel to the cruise's departure point, not just for the cruise itself.

What is the difference between travel insurance and cruise insurance?

The difference between traditional travel insurance and cruise insurance is that cruise insurance offers more specialized coverage, for situations such as missing a departure port and more coverage for medical evacuations, since it's more expensive to evacuate someone at sea than on land. 

Can I claim for missed ports on a cruise?

Most cruise insurance includes coverage for missing a departure port, so you should be able to claim for a missed port. Just make sure you check the details of your policy before you file a claim, and before you travel so you know what compensation you're entitled to.

If you enjoyed this story, be sure to follow Business Insider on Microsoft Start.