Business Plan vs Business Model

Despite the similar names, a business plan and model are both completely different segments of a business's steps towards success. In simple terms, a business 'plan' is the planned future objectives and strategies that will lead to achieving said objectives set out in a document form. A business 'model' however, while still able to described as a plan, is more so one which plans out how exactly to succeed at each operation within that business, identifying important factors such as revenue sources, types of products, intended audience and/or customer base, and financing details.

In one sentence, a business plan describes what the business wants to do and achieve, while the business model is done in order to specifically just describe how exactly they will do things order to be successful.

Model

There are many different types of business models a company can decide to use and follow, with the most common including Production, Advertising, Commission, Subscription, Accessories and Freemium. Each model is unique, with the most basic model, Production, consisting of the business making its product and selling & servicing them to the public, making enough money back to fund the production, distribution and storage costs that come with producing said product/service going forward to sustain the business. Other models however, like the Freemium model, are a bit more complicated, offering two versions of their product or service to people, including a paid and a free version, using the free version as a way to encourage people to proceed to the paid version by withholding certain features for example, in order to make more profits off of people who may not have bought the product in the first place without first trying the lesser free edition. Something else important to mention is that a business plan needs a business model at the centre of it to be great.

Plan

While a business model is needed in order to generate a company its profits, the business plan is also extremely important in its own way, needed in order to present the company's strategy and expectations for the financial performance of the business in the near (or potentially far) future. The plan is made so it can translate the business's position in its related value chain and its relationships with areas like suppliers, clients and other partners, into a series of strategies and actions which can be done to hopefully achieve success, and quantify the impact of them financially.