Business plan and business model are two fundamental concepts that should not be confused. What is the difference between both ?
Difference between business plan and business model
The business model is the way the company generates a profit, while the business plan or business plan is a document outlining the company’s strategy and its financial implications for the future .
Thus, the business model is at the center of the business plan.
The business model describes how the company positions itself within the value chain of its sector and how it organizes its relationships with its customers, suppliers, and partners in order to generate a profit. The business plan translates this positioning into a series of strategic actions to be implemented and quantifies their impact.
The production business model
It is the simplest economic model, the company sells a product or a service that it produces.
For this economic model to be viable, the company must succeed in generating a sufficient margin on its sales to be able to cover its production, distribution, and possibly storage costs.
The advertising business model
Also well known, this business model consists of generating income by selling advertising space to advertisers.
On the Internet, this model is available in several variants depending on the remuneration method for advertising space:
- CPM (Cost Per Thousand): the advertiser pays a fixed amount per thousand impressions (display of its advertisement).
- CPC (Cost Per Click): the advertiser pays each time someone clicks on their advertisement. The amount paid can be fixed or determined at auction.
- CPA (Cost Per Action): The advertiser pays each time a predetermined action is taken, for example, a sale. The amount can be fixed or represent a percentage of the sale price.
This business model is already a little more complicated since the company must first invest in the creation of a large audience, purchase of advertising panels or creation of media content, before being able to interest advertisers.