So in the last two videos, we had a discussion about business model and business model innovation.
But I've seen some people getting confused in business model versus business plan.
So in this video we will understand about the difference between business model versus business plan.
So are these two, Tom, exactly the same or they have any differences?
So business model is a single diagram of your business.
On the other side, business plan is a document that investors make you to write that they don't read.
And this business model is one of the part of that specific business plan document.
So now let's understand the difference between business plan and business model with the help of an
example.
So if you are selling eyewear online, then e commerce is your business model and figuring out how will
you sell these eyewear online is your business plan.
Let's start with business plan.
If you want to figure out how exactly will you sell this product in the market, then you have to focus
on business plan.
And business plan can be long and time consuming process.
And in this business plan you have to write things like your go to market strategy.
That means how will you market this product to all these different customer segments you have?
What is the target size of this market?
So you will write things like your total addressable market, the kind of growth rate you have in that
specific market and in business plan.
You will also write your future projections, the kind of past directions you have in your business
and all of that long and time consuming stuff that you need to write in a document.
On the other side, business model is a single page document that is easy to understand and it is less
time consuming.
Now, to simplify a business model, so many people have started using something known as business model
canvas.
Business Model Canvas is an oversimplified version of your business model, and you can write down almost
everything in a single page document.
But before we understand about business Model Canvas and we have a dedicated video on business model
Canvas.
Let's start with business plan.
So as we all know, business plan is a document and this document will have at least 10 to 12 different
slide.
Now, recently, so many people have given a new name to a business plan, and that is your pitch deck.
And this pitch track will have 12 different slides.
So in business plan, you will cover things like what problem that people are facing and how exactly
are you solving that problem for those people at scale?
It will also cover things like product demo.
So if you have solved that specific problem for people, how does that product looks like?
So you will show that product in this specific business plan or directly to investors.
You will also write things like your market size.
What is your target market that you are targeting?
And then this business plan will also have a business model.
What kind of business model are you solving to solve this problem?
Is it ecommerce marketplace aggregator or a subscription business model?
So you have to mention the type of business model in this business plan and other things like the kind
of competition you have in the market.
What is the unique advantage that you have, maybe your past experience or all your team members have
the core expertise in that domain?
Then things like your go to market strategy, that means how will you market this product to these different
customers segment?
You also need to mention your team members and the kind of tractions or milestones you have achieved
so far.
And what is the fundraising information that you wanted to give?
So this business plan document will cover almost every single possible thing that you can imagine in
your business.
So business plan will roughly cover things like your company overview, your market overview, the kind
of product and services you have, the financial projections.
And finally, how will you execute all of these things in your business?
On the other side, business Model Canvas is a single page document, and this single page document
is very easy for any person to understand.
So in Business Model Canvas, you will mention things like your customer segment, the different distribution
channels you have, how will you build customer relationship and your value proposition?
And then you will also mention things like all the key resources and partners you need to run this business
along with few key activities.
And in the end you will mention things like your revenue stream and cost structure.
So you will fill in almost every single detail about your business in these nine different boxes in
the business model canvas.
So now that you understand the basic difference between business model and business plan, let's understand
why do you need business model and business plan?
So most entrepreneurs start with a strong initial vision and they have a specific plan to achieve that
vision.
But unfortunately, almost 95% start up end up pivoting from their initial plan.
That is the plan A and now they have to quickly iterate their product and change their plan before they
run out of all the resources they have.
And that's why they need business model more than a business plan because they can quickly iterate all
of these things quickly on a business model because it's a single piece document.
Now, there are two things that you need to understand, both in case of business plan and business
model.
That is your key resources and key partners.
So let's understand business model and business plan and the critical difference between these two things
in terms of resource perspective.
So when we talk about all the resources that you have in a business, you have some internal resources
like your top management or leadership position that you have in your company and all of your employees,
that's your internal resource.
And then you also have some external resource like your investors, your other stakeholders.
And if you're looking to raise some capital and if you're talking to these different investors, they
are more.
Bastard in your business plan than in your business model.
So they will force you to write a business plan or a pitch deck so that you can pitch to them and you
can show them your five year or let's say, ten year plan.
So they wanted to see whether your business model is scalable or not.
That means if you're able to serve millions of customers without hiring so many people, then your business
model is scalable.
If you look at companies like Airbnb or Uber, they don't really need to hire all of these drivers or
hotel owners.
They just need to act as a platform between customer and the hotel owners.
On the other side, a bad business model is when it is difficult to scale.
That means if you need to serve your customer, you need to quickly hire more and more number of employees
or stakeholders on the other side.
Business model is super helpful for your internal resources.
So let's say if you're hiring some top executive like a chief Revenue officer or a chief technical officer,
then you can quickly show them a single page business model canvas and they can easily understand about
your business.
And apart from business model canvas, Lean Startup is also very effective over here.
And this single page document that is also known as Business Model Canvas can help them understand your
customer segment, the kind of resources you need and all your distribution channels.
So that's all about your business.
So that's all about your business model and business plan.
In the next video, we will understand one of the most widely used framework for business model.
That is your business model canvas.
In the next video, we will understand about business model Canvas.