BUSINESS MODEL vs BUSINESS PLAN
WHAT'S THE DIFFERENCE & WHY SHOULD I CARE?
Business models represent the main ideas, processes & mechanisms that drive how a business operates, creates value, and makes money. They are limited on details but give enough information to be evaluated.
Business plans fill in the details around who will do what, how they will do it, when then will do it, why they will do it that way, and what the financial result will be.
In visual terms: A business model would look more like a flow chart, and a business plan would look more like a finished drawing.
In literary terms: A business model would be more like a bulleted list, while a business plan would be more like a complete story
In building terms: A business model would be a framed structure, while a business plan would be a finished house.
Why you should care: Writing your business plan before you have finished & tested your business model will lead to rewriting your business plan over and over as you discover new things and answer new questions for yourself. Creating a solid business model, and testing it before you start detailed planning will save you months of time, piles of frustration, and most likely a lot of wasted money.
WHAT IS THE BUSINESS MODEL CANVAS?
The Business Model Canvas (BMC) is a simple yet powerful tool that can help you visualize how the elements (pieces) of your business model fit together and relate to each other. The BMC is a widely recognized resource for business model creation, as well as a standardized format for communicating your business model. Having a standardized format is very helpful when seeking feedback about the strengths & weaknesses of your model from others who are familiar with how the BMC works.
The BMC consists of 9 blocks that combine to describe the core of what makes your business work or not work. It is designed to allow for quick iterations and rapid learning, not detailed planning. The BMC is most effective when combined with customer and partner discovery, which helps the BMC creator test and validate their assumptions as they go so they don't get too far down the wrong road before correcting a mistake in their planning or assumptions.
The BMC can be a very helpful tool, but you will get better results with some guidance and practice, the videos below will help. More than a few people have been frustrated by the BMC format; it's too nebulous for some, and to constrained for others. If you find yourself frustrated we recommend you step back, take a minute, and remember the purpose of the exercise; to get the main points out of your head and into a format you can share with others. Then, come back and try again, it gets easier each time.
Business Model Canvas used under License CC BY-SA 3.0, source: Strategyzer.com
CREATING YOUR BUSINESS MODEL CANVAS
Watch the videos below to see more about how the BMC comes together and how you can use this format to capture your thoughts & ideas as you explore their potential to become a profitable business.
When you think you are done with your Business Model Canvas, come back and validate your assumptions with customer & partner discovery. Start your discovery by clicking the button below.
Once you have feedback from potential partners and customers make sure your planned business is going to cooperate with your other life priorities and that yo will have the time & focus to make it work.