Business Models For Dummies
Book image
Explore Book Buy On Amazon

Many businesspeople mistakenly believe that a business plan and a business model are one and the same. Your business model is the core concept upon which you build your business plan. Therefore, your business model should be a significant portion of your business plan.

Many business plans gloss over the business model in favor of lengthy financial projections and operational details that go along with business plans. Without a solid business model, these projections and details are premature.

This table lists the components of a traditional business plan and describes their purpose. Without incorporating the aspects of the business model into a business plan, traditional business plans are incomplete.

Elements of a Business Plan
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

All the sections of a business plan listed in this table are important in the running of a business. However, none of these areas creates a good business. Instead, these areas sustain a good business. To create a good business, you need a good business model.

About This Article

This article is from the book:

About the book author:

Jim Muehlhausen is the founder and President of the Business Model Institute as well as consultant and speaker to businesses large and small. He is the author of The 51 Fatal Business Errors and How to Avoid Them and a frequent contributor to Entrepreneur, Businessweek, and dozens of other publications.

This article can be found in the category: