Modeling vs. Planning a Business: What’s The Difference And Why Does It Matter?
Many entrepreneurs and aspiring business owners are familiar with the concept of a business plan: a document that outlines the goals, strategies, and financial projections of a new venture. A business plan is often seen as a requirement for securing funding, attracting partners, or launching a product.
However, in recent years, a new approach has emerged that challenges the traditional business plan: the business model. A business model is a visual representation of how a business creates, delivers, and captures value for its customers and stakeholders. A business model is often created using a tool called the Business Model Canvas, which consists of nine building blocks that describe the key elements of a business.
So, what are the advantages and disadvantages of modeling vs. planning a business? And which one should you use for your own venture? Here is a table that compares and contrasts the two methods:
Planning to start your own business?
Don’t know how to write a business plan?
| Business Plan | Business Model |
|---|---|
| A linear and static document that describes the assumptions and hypotheses of a business | A dynamic and iterative map that tests and validates the assumptions and hypotheses of a business |
| Focuses on the future vision and goals of a business | Focuses on the current reality and experiments of a business |
| Requires extensive research and analysis to write | Requires customer feedback and data to build |
| Takes a long time to complete and update | Takes a short time to create and modify |
| Communicates the feasibility and viability of a business to external parties | Communicates the logic and value proposition of a business to internal teams |
As you can see, both methods have their pros and cons, depending on the context and purpose of your venture. However, many experts agree that modeling and planning are not mutually exclusive, but rather complementary. In fact, some suggest that you should start with a business model to test your ideas and assumptions, and then use a business plan to communicate your validated findings and strategies.
In summary, modeling vs. planning a business is not an either-or question, but rather a both-and answer. By using both tools, you can increase your chances of creating a successful and sustainable business.
