In this blogpost I explore the close relationship between business model and business plan. A business plan’s main role is to plan, outline and communicate a business (or not-for-profit) project and its implementation internally or externally. The motivation for the business plan may be to “sell” a project to potential investors or internally to top management and also serves as a planning document.
In fact, when you have designed and thought through your business model you have the perfect basis for writing a good business plan. Structure your business plan into five main sections: The team, the business model, financial analysis, external environment, implementation roadmap, and risk analysis.
The Team
One of the elements that particularly venture capitalists look at first is the management team of a project. Is the team experienced, knowledgeable and connected enough to pull-off what they propose? Highlight why your team is the right one to successfully build the business model you propose in the document.
The Business Model
In this section you showcase the attractiveness of your business model. Use the Business Model Canvas to give an immediate overview of your model. Ideally you sketch it out with drawings. Then describe the value proposition, outline why you believe potential customers need it and explain how you are going to reach the market. Use stories. Then highlight the attractiveness of your target markets to get the reader of the business plan interested. Finally, outline what key resources and activities are required to build and operate the business model.
Financial Analysis
This is traditionally an important part of the business plan that will attract a lot of attention. It contains the financial information that you can calculate based on your organization’s Business Model Canvas and a set of hypothesis of how many customers you can reach in a specific time period. This includes elements such as break-even analysis, sales scenarios and operating costs. The Canvas also helps you calculate capital spending and more generally how much it will cost you to implement the business model. Based on all these calculations you outline your funding requirements.
External Environment
In this section of the business plan you outline how your business model is positioned regarding the external environment. Outline market forces, industry forces, key trends, and macroeconomic situation. Summarizing, you need to stress what the competitive advantages of your business model are in this landscape.
Implementation Roadmap
This section gives the reader an idea of what it takes to implement your business model and how you will do it. It includes a summery of all projects and the overall milestones. A project roadmap, including Gantt charts, then outlines the implementation agenda. The projects can be directly derived from your organization’s Canvas.
Risk Analysis
At the end of the document you describe limiting factors and obstacles, as well as critical success factors. These can be easily derived from a SWOT analysis of your Business Model Canvas.
This is a brief excerpt of the “outlook part” of my Business Model Generation book.
you must be a pro to know all this stuff man !!!!
I really like the link you are drawing. So many companies conduct "Strategic planning" when what they are really doing is creating the business plan assuming the underlying business model is correct. Across an industry most companies work harder and harder to get better and better at the same business model and what results is that the customer is better off, but not the companies themselves. Discussing the link between the business model and the operating/business plan reminds leaders to test the assumptions behind their business model. Do you see this pattern in the markets in which you work?
I am actually writing on my bachelor thesis (based on your model I am developing a bm) and I also came to the conclusion, that the business model concept is missing in a business plan, although the concept generates a few advantages [stated in your blog - e.g. possibility to visualize a bm on a din-4 page]. Apart from other authors like Morris "Business Model Warfare" who also points out the importance of the concept, I am really wondering why the busines model concept haven't been taken in consideration in a business plan. Do you have any ideas?
Alex,
As usual, an insightful post bringing new perspectives to light. As a (future) entrepreneur, I very much appreciated how you highlighted the main elements of a business plan in a concise way.
In my opinion, the team and the business model are perhaps the most important elements of the plan as they determine largely how the other elements can/will be implemented and how succesful the business will ultimately be.
I look forward to receiving that book which I pre-ordered soon
Ago
@Kay I absolutely agree with your observation. Yet, in my work I see more and more companies trying to become pro-active when it comes to business model innovation.
They have seen other industries being challenged (e.g. music, media, etc.) and ask themselves Could this happen to us?
What these companies are still lacking are more structured methods to challenge their established business models
@California I believe entrepreneurs are taking into account the business model in their business plans. Yet, it still happens in a more implicit rather than explicit way. No "structured approach" has become popular enough to make a breakthrough in the business plan universe…
I am impressed with your Canvas BM and this blog with the explanation of the relation of BM with Business Plan. Also I already ordered your book. Then, I would appreciate your comment about the relation of BM with the strategic plan of the companies but from your point of view. I believe that in the process for developing the Strategic Plan the BM should go first after the Mission and Vision. The idea is to validate the current BM and then continue with the strategic plan. In this way end user and companies will improve their relation and process.
I think the best way to test out a business model is to actually take it to market as a small scale. What you will find it the model will need to be constantly tweaked and adjusted as your business grows.