Question

With the aid of practical examples from an identified start-up, identify and explain 4 major differences between a business model and a business plan.

                                                                       

Answer 1

A business plan is a static document that contains the overarching goals of a business idea. This document would contain financial goals, marketing goals, operations goals that are to be achieved in a stipulated time frame. .

A business model on the other hand is a dynamic document which contains the rationale behind which a business captures value. The main focus on a business model is the value proposition delivered to the chosen customer segment of a product or service.

Let's look at the case of Dollar Shave Club. Dollar Shave Club is a subscription based men's grooming service which delivers razors, shaving creams, after shave lotions and several men's grooming products on a monthly basis.

	Business Plan	Business Model
Static vs Dynamic	Business plan is a static document. It is a good tool to brainstorm in terms of the overall goals of the business. For Dollar Shave Club, it's financial goals with respect to the business plan would be to raise capital or debt for funding of the busines. Series A funding raised by DSC was around $9.8 million.	Busines Model is at the very core a tool to position a product or service with respect to the value it provides to its customer base. Since the value derived by customer keeps on changing, this is a very dynamic document and requires constant revisions.This would essentially translate into what a company provides to its customers as a brand.Dollar Shave Club has positioned itself as a men's lifestyle brand. By appealing to the exclusivity of being a club and the low pricing it has successfully captured a niche in the market.
External vs Internal Users	Business Plans are essential tools for official purposes of documentation. Users of business plans are usually banks, investors. The owners of the enterprise do not necessarily use it as much to visualise their business.This tool is used internally as well as externally.	A business model is a visualization tool. Especially the " Business Model Canvas" which was developed by Alexander Osterwalder. You can see the owners of DSC keep on revising their Business Model as they are successfully able to target the right groups in order to market their products. For example utilising Youtubers such as Philp Defranco and social media, they are well aware of where there customer segment is spread across. This tool is more for the promoters of the company hence it is an internal tool.
Marketing and Branding	Business Plans consider the overarching marketing goals of the business . This would contain the cost factor, where products/services are marketed etc. DSC utilises social media and word of mouth marketing for their marketing. This would be a part of their Business Plan.	Business Models are more concerned with how the products or services are positioned rather than just the where. This would be the messaging of the product/service. If one sees DSC's first advertisement, the subject was the owner of the company itself Michael Dubin. He utilises crisp humour which connects with an internet audienc, the tagline being "Our Blades Are F***ing Great".The viewers immediately connected with this commercial as it connected with the audience.
Obsolscence	Though a business plan can be revised periodically they are usually static in nature .It's heavy nature of detailed future goals can make it difficult to work with in a dynamic business environment. It might even be obsolete to work with. For instance DSC has struggled in terms of logistics because of the COVID-19 Pandemic even though a few years ago it was bought out by Unilever for a USD 1 billion. This could not have been predicted in the goals in any business plan . Including and Revising it in it would be an extremly tedious process making it an obsolete document.	A business model does not have the same restrictions of being static like a business plan. With a changing business environment even the most complicated business models can be pivoted to include the changes.