A business plan is a formal statement of a set of business goals, the reasons why they are believed to be attainable, and the plan for reaching those goals. Business plans could also target changes in perception and branding (the usual length of this type of plan is 3 to 5 years). A usual business plan contains: an executive summary, business description, market research, operations plan, and a financial plan. Overall, a business plan helps entrepreneurs and managers get funding from investors or banks.
It is common for business plans to have three or four formats for the same material. The four formats are an elevator pitch, oral narrative, written presentation, and an internal operation plan. An elevator pitch is a three-minute summary of the executive summary that is used as a teaser to get the interest of potential investors. An oral narrative is a slide show and oral presentation to trigger discussion and convince possible investors to read the written presentation. The written presentation is for external stakeholders. It is well-written and carefully worded. Lastly, an internal operation plan is a detailed plan outlining planning details that are needed by managers but might not be of interest to external stakeholders.
A business plan is crucial to outlining the business model that will be undertaken. A few examples of a business model include a franchise model, advertising model, or a subscription business model. From this, one can see that a business model describes the rationale of how an organization creates, delivers, and captures value.¹ A business model also describes the purpose, offerings, strategies, infrastructure, organizational structures, trading practices, and operational processes and policies of an organization.
Over the years, business models have become more sophisticated. The razor and blades business model is a relatively new concept that emerged in recent times. This business model creates a bait (razor) that usually loses the company money and a hook (blades) to keep customers buying and revenues high. Another popular business model is online retailing with no brick-and-mortar stores. This type of business model emerged because of the advent and expansion of the Internet.
1. Osterwalder, A., Pigneur, Y. & Smith, A. (2010). Business Model Generation.