Objective
A student team building a start-up must find away to communicate the value proposition and how it plans to deliver this value. Although a business model may allow the team to use a short-hand to share the essence of how they will monetize the product/service and deliver value (e.g freemium, subscription, platform and others), it cannot communicate all the essential elements such as channels, relationships, cost structure and more. A business plan may help communicate these details. However, a business plan may be too lengthy and not allow opportunities for brainstorming and collaboration. A business model canvas fills this gap by providing a way to capture the critical elements in a structured manner. This page describes the business model canvas and how it can be beneficial with some examples.
Terminology
In the start-up ecosystem, you will hear different terms that you will need to differentiate and use, such as the following:
- Business Model: Appropriate for identifying how you will serve market needs, and engage with customers - communicated with a label to describe the monetization strategy (~2 pages).
- Business Model Canvas: Appropriate for explaining, graphically, several key elements such as channels, resources, activities - useful for discussion (~1 page, following the template).
- See also: Lean Canvas (Business Model Canvas tailored for Start-ups).
- Business Plan: Appropriate to describe several elements for stakeholders and investors, and align your team. A well-specified business plan will often run between 20 to 40 pages (a broad estimate) - this page.
- Business Plan: An Example
- 'Business Plan' Explained
- At Different Stages
- Business Plan vs. BMC
- Resources
Like the other concepts we have explored (Business Model, and Lean (business model) Canvas), we will start with a simple example: the Lemonade Stand. Here is a snapshot. Use the button to download an abbreviated version of the full business plan. You can then try to create different versions of the business plan for the variations we suggested as part of the discussion about business models).
Business Plan
A business plan is a written document that outlines the goals and strategies, and planned steps needed to achieve these goals. For a start-up, a business plan serves as a roadmap for the founders as well as a tool for communicating with stakeholders, such as investors, partners, and team members. Ideally, a start-up team would consider a business plan not as just a document but rather, as a living, evolving tool that adapts as the startup grows and learns more about its market, product, and customers. Here are some specific ways that a start-up team would consider the purposes and uses for a business plan:
- Clarify Vision: Clearly define the problem, solution, target audience, and value proposition
- Outline Operational Roadmap: Guide daily operations and long-term strategic goals.
- Attract Funding: Showcase plans to potential investors, banks, or grant providers.
- Mitigate Risks: Identify potential risks and create responses/mitigation strategies.
- Align Efforts: Align the founding team and stakeholders around a shared vision and milestones.
- Measure Progress: Set measurable goals to track progress.
Resources and References
- US Small Business Administration. 2024. Write your business plan. https://www.sba.gov/business-guide/plan-your-business/write-your-business-plan
- Rich, S., Gumpert, D. E. 1985. How to Write a Winning Business Plan. Harvard Business Review. https://hbr.org/1985/05/how-to-write-a-winning-business-plan
- Mass Challenge. 2022. 7 Steps to Create a Technology Startup Business Plan. https://masschallenge.org/articles/technology-startup-business-plan/
- Founders Network. Undated. How to Write a Business Plan for a Startup: A Comprehensive Guide. https://foundersnetwork.com/blog/how-to-write-a-business-plan-for-a-startup/
- Several examples of Business Plans for startups:
A start-up team is likely to create slightly different versions of business plans at different stages during their entrepreneurial journey, such as:
- Early Stage, when the team is focused on idea validation, e.g., still testing basic assumptions and market viability.
- Proof of Concept / MVP Stage, when the team is likely to have a validated problem statement and is building/testing an MVP.
- Early-Stage Investor Pitch Stage, when the team is preparing to secure investment by communicating clarity, confidence, and scalability.
Here is a suggested set of sections for a business plan at each stage and a comparison across these stages:
| Stage: Idea Validation | Stage: Proof of Concept / MVP | Stage: Early Stage Investor Pitch |
| Executive Summary: A one-page summary of the idea | Executive Summary: A one-page overview of the business. | Executive Summary: A compelling one-page snapshot of the business. |
| Problem Statement: What problem are you solving? | Problem & Opportunity: Refined problem statement and opportunity size. | Problem Statement: Why this problem is worth solving. |
| Solution: Describe your product/service. | Product Overview: Description of MVP, core features, and functionality. | Solution/Product: Clear explanation of the product/service. |
| Unique Value Proposition (UVP): Why is your solution better? | Competitors: What places your business in a competitive position (e.g. patent) | Competitive Analysis: Key competitors and differentiation strategy. |
| Customer Discovery Plan: How will you validate your assumptions? | ||
| Target Market: Who are your customers? | Market Analysis: Size, segmentation, trends, and competitive analysis. | Market Opportunity: Market size, growth trends, and target segments. |
| Business Model: Basic revenue streams and cost structure. | Business Model: Pricing strategy, revenue streams, cost breakdown. | Business Model: Revenue streams, pricing strategy, and profit potential. |
| Initial Hypotheses: Key assumptions to be tested. | Go-to-Market Strategy: Initial marketing and sales strategy. | Go-to-Market Strategy: Marketing, sales, and distribution plan. |
| Traction Metrics: Early adopters, user feedback, or MVP performance data. | Traction: Key milestones, revenue, user growth, or partnerships achieved. | |
| Team Overview: Who are the key team members? | Team & Advisors: Key team members and advisors. | Team Overview: Founders, key team members, and advisors. |
| Financial Projections: 3-5 year revenue forecasts, break-even analysis. | ||
| Next Steps: What happens after the MVP phase? | Risks and Mitigation: Key risks and how they’ll be addressed. | |
| Investment Ask: How much funding is needed, and how will it be used? | ||
| Outcome Sought: A clear understanding of whether the problem is real and worth solving. | Outcome Sought: Clear validation of the product's functionality and initial market traction. | Outcome Sought: Convincing investors of the startup's potential and securing funding. |
Business Plan vs. Business Model Canvas
A Business Plan provides several elements and details that a Business Model Canvas cannot, such as:
- Detailed Financial Projections: Income statements, balance sheets, cash flow forecasts.
- In-Depth Market Research: Extensive competitive analysis, industry trends, and customer segmentation data.
- Operational Roadmap: Clear milestones, KPIs, and timelines for execution.
- Risk Assessment: Identifies key risks and outlines mitigation strategies.
- Investor Communication: A professional, persuasive document tailored to investor needs.
- Strategic Alignment: A comprehensive plan aligning all stakeholders on long-term goals.
Here is a comparison between the two:
| Aspect | Business Model Canvas | Business Plan |
|---|---|---|
| Purpose | Provides a visual snapshot of the business model, highlighting key building blocks. | Offers a detailed, comprehensive document outlining strategy, execution, and financials. |
| Focus | Emphasis on experimentation, iteration, and hypothesis testing. | Emphasis on planning, milestones, and execution strategy. |
| Structure | One-page, visual framework with 9 building blocks. | Multi-page written document with detailed sections (e.g., market analysis, financial projections). |
| Speed | Quick to create and iterate. | May be time-intensive to create and update. |
| Flexibility | Encourages rapid changes based on customer feedback. | May be more rigid and formal, sometimes less adaptable. |
| Best For | Early-stage startups, hypothesis testing, idea validation. | Presenting to investors, securing funding, strategic long-term planning. |
So, a Business Model Canvas is great for brainstorming, team alignment, clarifying assumptions and iterations. On the other hand, a Business Plan is a much better choice for detailed operational and execution plans and communication with external stakeholders such as partners and investors.
Resources and References
- Pareira, D. 2024. What is the difference between Business Model and Business Plan? https://businessmodelanalyst.com/what-is-the-difference-between-business-model-and-business-plan/
Additional resources to be added
This page is a summary of important considerations and jump-off point for additional exploration, not a comprehensive reference.