Starting a new venture can be quite intimidating. With so many questions to answer and forms to complete, there is a lot of ground to cover when building a business foundation – and you want to be sure you’ve done things right so that your big idea can really take flight.
So where do you start? Planning.
Before you officially kick off your new venture, there are several items you should already have squared away. Creating a business plan and a business model are two essential parts of creating a business with the potential to flourish, scale, and prosper in the long term.
So what’s the difference between a business plan and a business model? Let’s dive in and get into the nitty-gritty details so that your idea can get off the ground.
Business Model Versus Business Plan
A business model and a business plan are not the same thing, though they are closely related concepts. Both are vital elements in the foundation of any successful venture.
Here’s a brief overview of the two to get the ball rolling:
Business Model
A business model is the big-picture strategy that a company uses to generate revenue and create value for stakeholders. It outlines who a company’s customers are, what products or services it will offer, how it intends to make money, and how it will reach customers. Two popular visual formats for the business model are a business model canvas or a value proposition canvas.
Business Plan
A business plan, by contrast, is a detailed document that outlines the company’s objectives, strategies, and tactics for achieving those objectives. Typically used to raise capital, attract investors, or secure loans, it offers the precise methods for achieving grand ideas. As such, a business plan includes operational plans, financial projections, a description of the company’s management team, market analysis, and marketing and sales strategies.
In short, a business model is the high-level strategy for creating value and generating revenue, while a business plan is the detailed roadmap for executing that strategy. A business model is more focused on the big picture, while the business plan is more tactical. You will want to create both to ensure a sustainable venture.
For a deep dive into the business model, check out Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers from the Strategyzer series.
Your Value Proposition
The most important element in any business model is its value proposition. You will need to define what your unique benefit is to your customers. What makes your service or product worth the time and energy of others? A value proposition is a statement that describes those unique benefits, and how it solves a problem or meets a need that your customers have. It is the foundation of your business model and essential for both customer attraction and retention.
You will need your value proposition to be clear, concise, and easy to understand. It should communicate the benefit that your product or service provides to your customers and differentiate you from your competitors. It should also be supported by data that demonstrates how your product or service addresses a specific need or pain point in the market. Simply doing what someone else is already doing will mean direct competition. With the stage spanning far wider than local markets, honing in on your differentiators is vital.
There are other important elements of a business model including a revenue model, customer segmentation, identifying key resources, and partnerships. However, without a strong value proposition, your business is far less likely to be successful in the long run, as customers will not see the value in your offering.
The Business Model Checklist
The Business Model ChecklistBefore you launch your big idea, you should have the answers to the most vital aspects of your business venture. Below is a jumping-off point for your business model with a checklist of necessary components. Answering these 15 questions will give you a good start to a strong business foundation for your venture.
Vision/mission:
- What do you want to achieve?
- How will you accomplish it?
Objectives:
- What are your high-level goals that will support your vision and mission?
- How will you measure your success?
Target customer(s) and their challenges:
- Describe your target customers (write them as personas)
- What are their pain points?
Solutions:
- How will your offering(s) solve your customer pain points?
Differentiators:
- What are the characteristics that differentiate your product or service from others?
- What makes your venture unique?
Pricing:
- What will your solution(s) cost?
- How will it be sold?
Messaging:
- How will you communicate the value of your offering(s) to customers?
Market:
- What will your approach be for launching new offerings and services?
Investment:
- What resources are required to introduce your offering?
Growth opportunities:
- In what ways will you grow the business over time?
If you’re not ready to answer the items above, give yourself the time to find these answers first. It can be challenging to slow your momentum to gather this information, but doing so will save you the future headache of coming up with these critical elements after the fact. Longevity and sustainability depend on a solid business foundation.
Next Steps
Once you have constructed your business model, you will be ready to move to the next steps in building out your big idea. Though there are many best practices that can help guide you to business success, here are some general guidelines that can be applied across industries and business types:
Develop a solid business plan
A well-crafted business plan will help you define your goals, identify your target market, outline your marketing strategy, and establish financial projections. Remember, this is the tactical plan for accomplishing the elements in your business model.
Focus on customer needs
Understanding and meeting the needs of your customers is critical to building a successful business foundation. A little homework in this department will go a long way in ensuring that your products/services will make the impact you desire amongst your target audience. Conduct market research, listen to customer feedback, look at your competitors, and continuously improve your product or service based on customer needs.
Build a strong team
Surround yourself with talented and motivated employees who share your vision and are committed to your business. Invest in training and professional development to help your team grow and improve their skills. Make sure that your gratitude and respect are felt by your team at all times.
Manage your finances carefully
Keep a diligent eye on your finances and monitor your cash flow regularly. Develop a budget that makes sense – and stick to it. Be prepared to make adjustments as needed.
Embrace technology
Technology can help to streamline your operations, improve customer service, stay competitive in the marketplace, and heighten customer retention. Stay up-to-date with the latest technology trends and invest in the tools that will help your business grow.
Stay adaptable
Business environments can change rapidly, so it’s important to be flexible and able to adapt to new challenges and opportunities as they arise. You cannot predict how things will shift, but you can work towards agility so that you can roll with the punches, so to speak.
Establish a strong brand
Building a strong brand that reflects your values and resonates with your target audience is incredibly important – and often underappreciated in the process of creating long-term success. Develop a consistent brand identity across all channels, from your website and social media to your products and packaging. Consistency ensures that your audience will recognize your brand and can build an image of it that will stick with them.
Maintain a positive culture
It’s not enough to find talented individuals to fill out your team. A positive environment of growth and enthusiasm will keep your team invested. Create a positive and supportive work environment that fosters collaboration as well as creativity and innovation. And celebrate. Celebrate achievements, provide opportunities for growth and development, and maintain open communication.
These are just a few of the best practices. What will work best for your venture will depend on your industry, target market, desired audience, and your unique needs and goals.
Need help with brainstorming and strategizing? We can help you build your business foundation. Reach out today.
