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.
| 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.