Business Model vs Business Plan

Business Model vs Business Plan

A business model is not a business plan and a business plan is not a business model. Your business plan documents how you will execute your business model. Your business model is your proprietary methodology used to acquire service and retain your customers.

Most business plans are 50 pages of wasted paper. If your business to business model is outstanding, skip the business plan. Most business owners spend 5 minutes creating their business model and countless hours documenting the execution of a potentially flawed model. You know the old saying, statistics don’t lie, people do. This dynamic tends to lead business owners to write a justification document explaining why what they want to work, will work.

Strong business owners do not need detailed operational plans in order to be successful. There is nothing wrong with an operational plan or thoroughly thinking through your business. However, too much time in business plans is spent justifying and explaining the existing business model. In many cases, the existing business is the problem. All the planning in the world can’t fix a flawed model.

 



Most small business models are strong at the business’ inception. However, over time, all business models erode. Over a long enough period of time, they begin to fail. Look at Blockbuster Video. Blockbuster had an 80% market share and dominated their industry with an excellent business model. Unfortunately, the world changed and Blockbuster failed to change its business model. Blockbuster may have trouble seeing profits in the next 2-3 years. All the planning in the world can’t save Blockbuster from its flawed business model. All the planning in the world cannot save Blockbuster from a flawed business model.

On the other hand, look at IBM. IBM has fundamentally changed its business model several times. IBM has sold office equipment, Big Iron, person computers, IT services, and now Green Consulting. IBM provides a terrific example of how to morph a business model over time.

The bottom line is that most business plans are a waste of time. The CEO and management team spends their time justifying and documenting the current way of doing business. Instead, business owners should focus on morphing their business models. Savvy CEOs don’t need a plan to execute a great model.

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