How Business Models Help Generate Business Plans

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by: Alexander Osterwalder

In this blogpost I explore the close relationship between business model and business plan. A business plan’s main role is to plan, outline and communicate a business (or not-for-profit) project and its implementation internally or externally.

The motivation for the business plan may be to “sell” a project to potential investors or internally to top management and also serves as a planning document.

In fact, when you have designed and thought through your business model you have the perfect basis for writing a good business plan. Structure your business plan into five main sections: The team, the business model, financial analysis, external environment, implementation roadmap, and risk analysis. 

The Team

One of the elements that particularly venture capitalists look at first is the management team of a project. Is the team experienced, knowledgeable and connected enough to pull-off what they propose? Highlight why your team is the right one to successfully build the business model you propose in the document.

The Business Model

In this section you showcase the attractiveness of your business model. Use the Business Model Canvas to give an immediate overview of your model. Ideally you sketch it out with drawings. Then describe the value proposition, outline why you believe potential customers need it and explain how you are going to reach the market. Use stories. Then highlight the attractiveness of your target markets to get the reader of the business plan interested. Finally, outline what key resources and activities are required to build and operate the business model.

Financial Analysis

This is traditionally an important part of the business plan that will attract a lot of attention. It contains the financial information that you can calculate based on your organization’s Business Model Canvas and a set of hypothesis of how many customers you can reach in a specific time period. This includes elements such as break-even analysis, sales scenarios and operating costs. The Canvas also helps you calculate capital spending and more generally how much it will cost you to implement the business model. Based on all these calculations you outline your funding requirements.

External Environment

In this section of the business plan you outline how your business model is positioned regarding the external environment. Outline market forces, industry forces, key trends, and macroeconomic situation. Summarizing, you need to stress what the competitive advantages of your business model are in this landscape.

Implementation Roadmap

This section gives the reader an idea of what it takes to implement your business model and how you will do it. It includes a summery of all projects and the overall milestones. A project roadmap, including Gantt charts, then outlines the implementation agenda. The projects can be directly derived from your organization’s Canvas.

Risk Analysis

At the end of the document you describe limiting factors and obstacles, as well as critical success factors. These can be easily derived from a SWOT analysis of your Business Model Canvas.

This is a brief excerpt of the "outlook part" of my Business Model Generation book.

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