Task 3- Business plans and models

What is a business plan?

A business plan is a very important document setting out a business's future objectives and strategies for achieving them. It is written in immense detail and usually includes an executive summary, products and services, marketing strategy and analysis, financial planning, and a budget.

• Executive summary: outline of the company, including its mission statement and information about the company's leadership, employees, operations and location
• Products and services: outline of the products and services offered, including information such as pricing, product lifespan, benefits to consumers and production and manufacturing processes
• Market analysis: outline of who the competition is, how it factors in the industry, its strengths and weaknesses, and expected consumer demand
• Marketing strategy: outlines how the company will attract and keep its customer base, how it intends to reach the consumer and marketing and advertising campaigns, including what media they will exist on
• Financial planning: includes financial statements, planning sheets, targets and estimates, and potential investors
• Budget: includes costs related to staffing, development, manufacturing, marketing and other expenses

They typically fall into two categories: traditional or learn startup. Traditional business plans are the most common with more detail. They tend to be longer and require more work to be put in. Learn startup plans use an abbreviated structure so the key elements are highlighted. 

What is a business model?

A business model is a plan for the successful operation of a business, identifying sources of revenue, the intended customer base, products, and details of financing. They are the foundation of a company, detailing the company's plan to profit. 

A key component of a business model is the value proposition, which will usually include the following elements:

• A description of the ideal customer
• The customer value (added benefits the products or services bring)
• The value chain position (what needs to be done to get the product/service from the business to the end consumer)
• The revenue sources and cost drivers (show all activities costs)
• The competitive advantage (show state when consumer perceives the product/service as better than the competition)

Examples of business models:

• The business model of production- relates to company sales of the products/services produced
• Advertising- focuses on creating content that people want and displaying it to them. It is split into 3 segments: CPM (cost per thousand), CPC (cost per click) and CPA (cost per action)
• Multilevel marketing- based on commission/distribution, as it involves businesses recommending others' products and taking a cut from every sale they generate
• Razor and blades- focuses on products that need to be replaced often
• Affiliate- relates to the advertising model but is mainly used online, using links that are embedded in content forms that act as advertising visuals
• Franchise- involves companies selling the rights to their business models in exchange for some percentage of the revenues 
• Subscription- company receives revenue from its subscribers at regular intervals 
• Freemium- two versions of the product/service are offered: a free version with limited features to entice consumers and a paid version with more features that are often more useful  
• Accessories- one product is offered for free or at a very cheap price and generates profit on the sale of accessories for it

What is meant by the term 'sustainable business model'?

A sustainable business model "describes, analyses, manages, and communicates a company's sustainable value proposition to all its stakeholders; how it creates and delivers this value; and how it captures economic value while maintaining or regenerating natural, social, and economic capital beyond its organisational boundaries". They describe how an organisation runs and and provides the expected outcomes for any suggested sustainable practices (specific things a business does that increases sustainability e.g. recycling). 

Companies that use sustainable business models are more likely to succeed because they will be able to identify risks in the supply and value chain, then combat them to ensure prosperity. It also creates a positive brand image, thus making consumers more likely to engage with a business, especially those who are more environmentally aware.

Websites used:

https://www.investopedia.com/terms/b/business-plan.asp

https://tms-outsource.com/blog/posts/business-model-vs-business-plan/

https://www.investopedia.com/terms/b/businessmodel.asp

https://www.thebusinessplanshop.com/blog/en/entry/business_model_vs_business_plan

https://www.investopedia.com/terms/b/businessmodel.asp

https://strive2thrive.earth/sustainable-business-models/