How relevant is business plan/business model before starting up?


1

I have worked with some startups, and heard people saying,

they have bla...bla...bla business plan that is way better than their competitor, and for sucess you must have a good business model
I am not sure, how relevant is this before starting up (i think its more relevent when after starting up, we move to expand).

So my question is, how important is having a business model, before starting up? If its important much, what and how thorough analysis should be considered for starting up?

Business Model Business Plan Business

asked Apr 5 '13 at 19:09
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Ay89
113 points
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4 Answers


4

A business model and business plan are different things.

A business model is a (hopefully) validated method on which you have a clearly defined product based on multiple interactions with the different customer segments that you have identified. The goal of a startup is to search and find a workable business model (in other words, survive). A business model canvas is good example of a method used to document efforts towards finding a business model.

A business plan is a more detailed version of your business model - complete with market assumptions, budgeting expectations, and an execution timeline.

Many believe that once you have locked down your business model you have the perfect data upon which to draw out your business plan. Other argue that the model and plan are both works in progress, and shoudl be done in tandem.

I've won 1st place in the Palo alto business plan competition before, so one would think I would be biased towards business plans. I'm not. I believe that understanding the business model is most critical - and through validation one can then use business planning to determine whether such business model can support a business operation.

answered Apr 6 '13 at 03:15
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Jim Galley
9,952 points
  • so is the business model something explicit? isn't it the same thing that how we plan to implement the idea. is it just a documented way of procedure we r following or 've planned to do so? – Ay89 6 years ago
  • A business model is how your business makes money. A business plan is what resources / steps are necessary to build said model - and the expected financial outcome. – Jim Galley 6 years ago

2

The importance of a business plan is to help you organize your thoughts in a logical way, and have an initial sense of direction about your business. If you are seeking investors, they would usually want to see a business plan, so they could understand your business model, and know that you're serious about it.

If you're starting on your own, and not seeking external funding, I would suggest you write a business plan in order to question and clarify your own assumptions. After that, I would quickly develop a proof of concept to make sure what you're trying to do actually works. (This is important for investors as well.) . A great piece of software to help you write a business plan is Palo Alto's Business Plan Pro. Good Luck!

answered Apr 5 '13 at 20:16
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Samer Bechara
251 points
  • should that go before starting up? or when we are at the stage to expand or to get funding? – Ay89 6 years ago
  • I would write it before starting anything, but I wouldn't focus too much on "perfecting" it if it's for your own use. It should be clear enough for you. – Samer Bechara 6 years ago

2

A business model is the framework that gives structure to how your business is built. I see it as the foundation that allows you to encapsulate how your business will be set up to make money.

A business plan is a detailed living document that allows you to not only do your planning, but also identifies the current situation. There are many parts to a business plan. There are many templates out there. The SBA has a fairly detailed template that you can download. A business plan should be a living document that is revisited and revised so that you can determine if your assumptions were correct and if your business is on track.

Writing a business plan, really helps you think about your business in a comprehensive way.

answered Apr 6 '13 at 16:58
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Monique Hodgkinson
41 points
  • +1 u made it quite easy and understandable. – Ay89 6 years ago

0

Your business model describes how you will create, deliver, and capture value - how you will acquire service and retain your customers. Your business plan documents how you will execute your business model. Therefore, it is crucial to develop a solid business model before wasting time figuring out how you will execute it. I would also strongly recommend getting yourself a business mentor to help you develop a solid model and figure out the best way to implement it. This article has more information about a new non-profit, non-partisan organization that provides mentorship to aspiring entrepreneurs: http://www.forbes.com/sites/shawnoconnor/2013/04/02/forget-washington-its-time-to-create-our-own-economic-future/ Good luck!

answered Apr 9 '13 at 23:31
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Margaret Mo
11 points

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