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What is the Difference Between Business Models and Business Plans?

Updated: Sep 9, 2021

Business strategy

Many small business owners are confused about the difference between business plans and business models. They see business plans as a blueprint for operating their business, while business models are just the implementations of those plans. While there are certainly similarities, there are also apparent differences. Before looking at the differences, it is essential to understand where they come from.

What Is a Business Plan?

  • Business plans are nothing more than an outline. It outlines the steps that a business will take to achieve a specific objective. In other words, it is a series of steps that a company will take to turn one prospect into another. For instance, if a business were to enter a particular market, the first step taken is to draw up a business plan that outlines all the steps necessary to enter that market. This is the first level of a business model.

  • Keep in mind that a business plan is nothing more than a list of objectives. These objectives are then translated into specific actions. This action is then coupled with strategies and tactics that will help the business reach its goal. There is no correlation between what is the difference between business models and business plans.

These are typically measured against specific criteria to determine whether they will be successful. So, for example, if the business plans on entering the hospital retail market, it would first have to take a look at what health care systems are currently out there in the market. It would then need to determine how it will target and penetrate these markets. Once it has this information, it can start to create a business model that is

specific to the health care industry.

What Is Business Model?

  • However, if you do not want to start from scratch but instead want to incorporate a known proven business model into your venture, you should stick to the basics. The primary business model is to market a product or service using advertising and marketing strategies. You will then turn a profit by collecting a predetermined monthly or annual fee from your customers. This type of business model is referred to as a service or product business. There is much more to the difference between business plans and business models than meets the eye.

  • On the other hand, business models are much more detailed and anticipate a series of different outcomes for a given business venture.

However, when you combine the two, you can get a clearer picture of exactly what you need to do.

The significant difference between business plans and business models is the customization that each type of plan offers. A business plan generally gives you an overall picture of where you want your business to go.

However, it does not give you a lot of detail. For example, it does not provide a roadmap on how to get from point A to point B. On the other hand, a business model typically allows for a great deal more detail.

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