First of all, let us compare business model and business plan:
|Sr. No.||Business model||Business plan|
|1||It is platform to survive||It helps company in achieving growth|
|2||It works from ‘zero’ day||It starts working from ‘Zero +’ day/month/year|
|3||It is more stagnant in nature||It is very flexible|
|4||It plays supporting role in business||It refers the business model and plans for growth|
|5||It focuses on current situation||It focuses on future|
|6||It refers to “How a monthly or yearly target can be achieved”||It refers to “How the presently achieved target can be enlarged”|
|7||Its orientation is internal||Its orientation is externally driven|
In spite of few differences, Business model and business plan are complementary to each other.
Business Model (i.e. How the company should work):
It’s very key components are Revenue Model and Initial target market. Revenue model should give the fair idea of “From Where sound and consistent revenue can be generated and How”. Initial target market says “Who are the customers, How their needs can be fulfilled”.
Other basic requirements are:
- Products/services: – Products or services should be such that customers should beg it for more. Simultaneously, products should not be rigid.We must have right prices for our products/services: – Company may charge any price based on the estimation of profitability. But there are two dangers. Charging skimming prices (too much high price) will make some customers go away from the product. Whereas, penetrative prices (too low price) may create a negative impression for the products. We must have seen that new mineral water bottling company are keeping their products’ prices at par with the competitors’ products’ prices or there is a very marginal difference.Now the question comes that “why customers will consume our products”. So the “quality and satisfying exact needs of the customers” becomes name of the game
- The packaging of product and service: – Companies should package their products and services attached very nicely and carefully. Interestingly, nowadays, home delivery of products is very common.
- Making assured the customers: – If a company believes in that products or services are able to satisfy the customers’ need then companies should well communicate to customers i.e. messaging aspect should be quick and sound.
- Right distribution channel and other supports: – Distribution channel should be wide, quick and trustworthy. Furthermore, other support strategies such as sales, marketing, finance, HR should be proactive.
- Limited launch: – It is required that products/services should be launched on limited basis first. It controls cost, reduces frustration and reduces wastage of efforts put.
- Collecting feedback: – Next required is that the companies must collect regular feedback from our customers of limited launch. Moreover, we should seek references from the customers for our products or services.
- Customer relation: – For sound business model companies should develop and maintain good relationships with their customers. But attention should be given that it should not spoil the policy of fast collection.
Business Plan (What for the future):
A business plan is very essential from company’s future point of view.
1. NO Bias: – It has been observed that entrepreneurs while working on business plan are biased. Bias is normally seen upward. This will ruin the whole business plan.
2.Dynamism: – The business plan should be dynamic/flexible and if possible auto-adjustable. Since it is externally driven, even a small change in external environment may destroy its importance if it is rigid in nature. We have seen the chaos in case of demonetization last year.
3.Well communicated to the managers: – Business plan should be framed in consultation with the Internal who have the responsibility to get it executed successfully.
4.Authority should match responsibility: – it is also a requirement that managers should be given required level of authority so that they can execute their responsibility.
5.Estimation of “Near to Right” amount of capital needed: – Company may plan for new product development, exploring new technology, exploring new marketing channels etc. For all these it needs capital. The company should estimate at least “Near to Right” amount of capital to achieve the above.
6.Study of a trend in the industry: – Another requirement of setting growth-oriented business plan is that the company should study and analyze the past, present and expected the future trend. Main trend parameters may be-
- Product changes in the past
- Pricing of the product
- Changes in export market demand
- Entry of new competitors
- Expected variants in the products in future etc.
7.Right identification of “KSF” & Triggers and possible changes in future: – Identification of right KSF and trigger points is also required for setting up growth-oriented business plan. Over a period of time, these may change therefore, there should be the proper track of it.
To conclude, coming business ideas into the mind of an entrepreneur is very easy. Convincing the fund providers to lend/invest in it is also easy. But the work of entrepreneur does not end here. He has to go long way; sometimes smoothly or sometimes facing many barriers and speed breakers. In this case, sound business model and growth-oriented business plan come as a torchbearer.