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Business Model vs Business Plan
| Guest post by: Jim Muehlhausen |
Article Overview: 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.
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Free Download - Competitive Advantage vs. Your Business Model By Jim Muehlhausen |
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 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 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. All the planning in the world can't save Blockbuster from its 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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Article Tags: business model, business model vs busness plan, business plan
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About the Author: Jim Muehlhausen RSS for Jim's articles - Visit Jim's website Jim graduated from Valparaiso University with a B.S. in Accounting, passing the CPA exam while still in college. While subsequently attending the Indiana University School of Law, he became the youngest franchisee in Meineke Discount Muffler history (1987-1991). After successfully selling that business, Jim founded an automotive aftermarket manufacturing concern. During his 9-year tenure, the company achieved recognition from Michael Porter of the Harvard Business School and Inc. Magazine in the IC 100 Fastest Growing Businesses. Mr. Muehlhausen licenses his materials worldwide and is a nationally known business speaker. Over the past eight years, Jim has personally coached hundreds of business owners in more than 3,500 face-to-face coaching sessions and has clients in North America, Europe, Asia, Africa, and the Middle East. The recognition and awards Mr. Muehlhausen's clients have won are too numerous to list, but include: Indiana Blue Chip Award, Ernest & Young Entrepreneur of the Year Finalists, and NAWBO Businesswoman of the Year. He currently serves on the Board of Directors of Now Courier, Inc as well as the Advisory Board of Indiana Business & Modernization Technology Corporation, and Urban Mission YMCA. For several years, Mr. Muehlhausen has served as an adjunct professor of business at the University of Indianapolis teaching Organizational Behavior, Management & Sales Management. Aside from his book "The 51 Fatal Business Errors and How to Avoid Them", Mr. Muehlhausen has been published in various publications including Inc., The Small Business Report, Entrepreneur, the Indianapolis Business Journal, Undercar Digest, Digitrends, http://ceofocus.com and NAICC Journal. Click here to visit Jim's website   Assessing a Business Model Business Model vs Business Plan Competitive Advantage vs Your Business Model Excessive Cost Cutting and Your Business Model |
Related Forum Posts
Re: Franchise 'due diligence' checklist
- One of the things I focus on is this:
Does the Franchise fit the Business Model you are interested in?
Meaning, are you going to be doing what you want to do on a daily? For example, if you are a restaurant manager now and you hate your job because of the hours, then don't buy most food franchises. You have experience of course, so it is more comfortable, but you will basically be doing very similar duties and hours as you were before.
I always go through a series of questions, answers, more questions, more answers etc... to help my clients figure out what Business Model they are most interested in, I do this before even discussing a single name with them, they tell me what the business model is and then I match them up to that type of business, explain the entire business model as best I can and then and only then do we discuss the name of the company. Too many times people come to me wanting to own "abc" name brand franchise, when they don't even understand what type of business it really is and what they will be doing every day.
Business Innovation
- Hi Simon
If you can finish off the Business Plan and think about your strategic direction or how you are going to use your product to convince people it's a great idea, it will set the foundation for your programming project. You see, when you are looking for funding you will need a Business Plan and Strategic Plan that will convince companies to invest into your new idea.
Has anyone achieved this idea before using another industry besides health and fitness that you know of?
You should also design some mockups as a "preview" for your programming project. This will also help reduce your programming costs as everyone will know exactly what you want if you have detailed mockups already completed including any functionality you require.
Starting mockups for websites and software applications on paper is the best way if you're not a guru in graphic editing software.
My entry
- 1. The Best Business Books Ever: The 100 Most Influential Business Books You'll Never Have Time to Read
- this is a fascinating book about the history of Business theory, and I'd recommend it to anybody.
2. The Big Book of Small Business: You Don't Have to Run Your Business by the Seat of Your Pants, by Tom Gegax. Ditto.
3. PADI: The Business of Diving Book
Okay, so this book won't be of use to anyone who doesn't want to start a scuba store, but I did, and this book was of course invaluable to me in reaching that goal.
Re: NEW VIDEO - How to improve your business plan - Ask Evan
- Thanks Evan, great intro into how the VC's see business plan.
I will take a look, but hope that this video as number 1 in a series.
It is unfortunate that these types of errors, the most basic of errors as you point out here are common to too many business plans, having reviewed a few hundred myself from both a development and funding perspective.
As a mentor and workshop facilitator for Business Plan development for a number of start-up IT and multimedia companies, your presentation help support and show how the VC's see and evaluate a plan
Shameful, that too many don't take the time to learn how to properly prepare, present and defend their plans. Over the years, I have enjoyed Business Plan competitions, and help re-work some of the winning proposals
New Small Business Topic
- Hello everyone,
I'm on the lookout for new topics to add to my site. We just launched a Franchising section and are planning Human Resources section. Do you have any thoughts for a new section?
Here's a list of what we currently have:
Angel Investors
Branding
Bank Loans
Business Coaching
Business Plan
Franchises (New)
Insurance
Legal
Marketing
Public Relations
Sales
Small Biz Loans
Venture Capital
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