2. 2
Comparing business models to business plans
• They are not one in the same
• Your business model is the core concept upon
which you build your business plan
• Many business plans gloss over the business
model in favor of lengthy financial projections
and operational details
• Without a solid business model, these
projections and details are premature.
3. 3
Comparing business models to business plans
Section Purpose Weakness
Executive summary
Summarizes the key points of the
business plan, including a brief
description of the product, market
opportunity, and funds sought
None
Background information
Explains the history of the concept,
purpose, and management team
None
Marketing plan
Explains the marketing methods,
segments, and so on
Can presuppose the value
proposition, marketability, and
ability of product to generate
profitable sales
Operations plan
Shows management expertise and
operational systems
Spends significant energy
explaining how company will
deliver on sales that may never
happen
Financial plan
Shows expected profitability of the
company under various scenarios
May assume sales targets will
simply happen when more proof
is needed to show how sales will
occur
Risk analysis
Explains potential risks and how
they’ll be mitigated
None
4. 4
Business plans don’t cover everything
• Most entrepreneurs already know that they need a solid
business plan because the first step to funding any business
typically requires handing over your business plan to a banker
or investor
• Bankers love business plans in large part because they can
skim the executive summary and jump right to the financials.
Bankers love numbers because it makes them feel that their
loan is secure.
• Unfortunately, anyone who has read more than ten business
plans knows that many of them are nothing more than pie-in-
the-sky guesses.
• The typical business plan presupposes the existence of a
strong business model. If the business model on which the
plan is based is flawed, the marketing plan and operational
execution spelled out in the business plan are meaningless.
5. 5
Augmenting the business plan
• An excellent business plan can’t fix a flawed business model
• Don’t think of your business plan as the all-encompassing concept,
vision, marketing plan, execution strategy, and financial plan for the
business. Instead, think of your business plan as the execution plan
for your business model.
• Too much of a business plan is spent explaining how the business
model will work instead of why it will work.
• In order to create a successful business, you need a solid business
model and a good business plan.
6. 6
Creating a business model plan
• A business model plan combines the components of a business
plan with business model analysis. This document augments or
substitutes for the traditional business plan and has the following
basic layout:
• Background: Follow the traditional structure of the business plan for this
section.
• Breakdown of the business model into the eight crucial areas:
• Market attractiveness
• Unique value proposition
• Profit model
• Sales performance
• Ongoing competitive advantage
• Innovation factor
• Avoidance of pitfalls
• Graceful exit from the business
7. 7
Creating a business model plan
• Operational overview: Follow the traditional structure of the
business plan for this section.
• Financial analysis, including proformas: Follow the same
format as a traditional business plan with additional emphasis on
justifying your sales projections rather than the “we will sell this
much because I said so” method.
• Risk analysis: Some risk analysis is covered in various sections
of the business model analysis. Risks related to marketing are
covered in the marketability sections. Competitive risks are
covered in the competitive advantage section and so forth.
Eliminate the duplication and focus on presenting a brief overview
of the general market risks — such as economic recession,
government intervention, and so on — rather than the company
specific risks. The company specific risks are addressed by the
business model.
• Business model score: This section is optional. To add weight to
your self-evaluation of the business model, you can have a
Certified Business Model Analyst score your model on a scale of 0
to 100.
8. 8
Creating a business model plan
Traditional business plans over-emphasize some areas and
under-emphasize other areas.
In a Business Model Plan, the business model garners much
greater attention
9. 9
Creating a business model plan
The advantage of a business model plan over a business plan
alone is the increased focus on how the business will
create profitable revenue streams and the decreased focus
on how the business will operate when it’s generating
revenue. If you focus on what matters — profitable revenue
— the rest tends to take care of itself.
You can download a sample business model plan at
http://businessmodelinstitute.com/BusinessModelPlanSam
ple.pdf
