Unit 1 Task 3

Business Plans and Models

When running a business, especially as a creative entrepreneur, it's absolutely vital that you have a defined idea in mind for what kind of a business you'll be running and how you're aiming to achieve that idea. In an attempt to better define what this idea is and how it'll be achieved, most business owners have formed two important aspects of a business - a Business Model and a Business Plan. Whilst the two sound almost interchangeable in their utility to a business, they actually have a variety of differences that set the two apart, making both of them necessary when running a creative business.

Business Model

To begin with, a Business Model is the way that you aim to make profit and create value within your business. It's not necessarily a tangible thing, like a document, but it's still absolutely vital for your business. The Business Model goes into detail about how your business is going to go about making money, how it'll be attracting customers and generally how it generates value to bring in your target demographic. A brilliant example of a business model would be the franchise model for a line of restaurants, such as McDonalds. McDonalds runs its restaurants under a franchise model, where it has a variety of different stores across the entire world, allowing it to generate a gigantic income from a wide variety of customers in a wide variety of locations. Similarly, a subscription plan for something like an online game or a mobile data plan is a business model as well. It details how the business is going to be making money, by having their customers paying a certain amount each month for the service/products.

Business Plan

On the other hand, a Business Plan is something that goes into far more detail than the Business Model, detailing almost every aspect of your business in the form of a tangible written document, often presented to important aides within the business (e.g. banks who can offer grants). The business plan will go into detail about the goals for your business, how you intend to achieve them and what sort of resources you'll require for the business to run smoothly: equipment, staff, products, materials, etc. It's a little harder to define an example of a business plan, but a good example would be an upcoming cupcake business. Their business plan would have to include what kind of confectionaries they're planning to sell, how they plan to obtain the resources to bake the cupcakes, what staff they have, what location they'll require for the business, potential prices and demographics, etc.

Comparisons

Comparing the two, a business model is focused much more on the potential value and money-making power of the business whereas the business plan is focused on the business as a whole; the resources, the staff, everything. The two supplement each-other, as you require the business plan to understand how you're going to achieve the values detailed within your business model. Whilst both the business model an the business plan can go into detail about financial details regarding the business, it's much more of a minor note within the business plan when compared to the business model's heavy focus on financial details. Something else to be considered between the model and the plan is a slightly superficial difference - the business plan is a physical document that is actually presented to those it regards, whereas a business model is a less tangible thing, more of an idea of how the business is going to make its money.

Sustainable Business Model

While it's obviously necessary for a business to have an effective business model, it's also important to consider exactly how sustainable the business model is as well. But what makes a good business model sustainable? According to sutainablebusinessmodel.org, what makes a business model sustainable is its ability to "[create, deliver and capture] value for all its stakeholders without depleting the natural, economic and social capital it relies on". Therefore, in order for a business model to be sustainable, it must be able to create value and achieve its goals and aspirations without depleting the resources that the business relies on. A good example of this for the creative industry would be a business that relies on a natural resource such as wood in order to run their business, whether it be for materials for their products or for paper. If the business was to just continuously cut down trees to sustain the business' need for wood, they'd eventually run out and find themselves without any resources to use (along with having contributed to global climate change). To make this process sustainable, the business would have to replant a good portion of the trees that they cut down in order to ensure that they never run out of the natural resources that they need to keep going. Without considering the limitations of a business' resources, they'll eventually use all of their capital up and find themselves lacking resources that they require.

Conclusion

In conclusion, the business plan is a document focused on the entirety of the business and how it will achieve the values detailed for the business model, which informs us how the business aims to make its money (e.g. through a franchise plan or a subscription model). Whilst the two both have quite a few differences, they both supplement and aid each-other and are essential when starting up your own business - without either, it'd be difficult to know where you stand as a business. With this in mind, it's also important to remember to keep your business model sustainable. Without sustainability, a business will eventually run out of the capital that it relies on, quickly failing without enough profits to continue.