A business plan is a representation of how your business will look on paper from the time you start out to achieving your ultimate vision for the business. Just like a house plan, it shows you what house you intend to build, how it will look at different stages until completion.
That’s why a business plan starts with business name, business structure – team, legal structure etc. To product and service line, to product development, target market, financial and other projections for the business in 1,3 or 5 years time, though these projections will change along the way.
A business plan is also needed to for financial planning like startup capital and it’s distribution in the various areas like overhead, advertising, raw materials, R&D, and other various cost areas and also sales projections. Business plan deals most times with assumptions. That’s why it’s important your business plan be flexible and have room for change.
A business plan is also used when pitching to investors, partners or team (employees) for them to buy into the idea. Business plan is more of guide for direction on vision and mission objectives, market focus and other objectives.
A business model on the other hand is demonstration of how your business is going to operate and generate revenue and profit. Business model focuses on operational aspect of the business like product development or manufacturing, supply chain both in – supplies and out – delivery lies, logistics, target market penetration, sales funnel to final revenue.
In a simple form, business models tells other people how your business is going to generate sales. How the business plan is going to come to reality.
You need a business plan to see what your business will look like on paper and mind, but you need a business model, to prove what your see on paper and that vision can make actual business sense.
Business model and a business plan works hand in hand, one tells the other what to do (business plan) , the other does the work (business model)
About Fahad Bruhan.
He is the founder Afripreneur Nation, a community which focuses on building the capacity of African entrepreneurs and small business owners.
He is an Entrepreneur, writer in the fields of business, investment and personal finance.
