The answer is yes.
Simply put, a Business Model is a document or plan that details the day-to-day operations of a business that are involved in making money. In comparison, a Business Plan has a lot more to do with the structure and context of a business. It will include information such as mission and vision statements, the market analysis, the business goals and objectives and the strategies the business will adopt to achieve those objectives.
I’m not going to discuss the specific details included in Business Plans and Business Models as there is a lot of information available for free on the internet from well-known information sources such as business.gov.au or entrepreneur.com. The information that goes into your documents will also widely vary based on the time of business you launch, so I recommend heading to google and clicking through the available links and finding some free templates to prompt your thinking to help you get started on your Business Plan and Business Model. What I want to convey is the importance of these documents.
These documents, while they don’t make you money in your business – because they are just pieces of paper – are valuable for numerous reasons.
The first reason is, in creating these documents, they force you to consider your day-to-day business operating needs and future growth. The Business Model helps you need to understand and make important decisions regarding your intended operating system so that you can ensure you have the correct resources, software, and information to carry out your business’s work. The Business Plan, in comparison forces you to consider what lies in your business’s future. It can help you identify any blind spots, bottle necks or challenges so that you can begin preparing for them before they start banging down your door. It will also allow you to anticipate business growth or set growth goals that you can intentionally work towards within your business. (For this reason, even if you don’t formally create these documents prior to launching your business, I highly recommend you still consider the information they demand so that you can launch from a strong foundation.)
The second reason is because you want your business value to grow. If you don’t work towards growing your business value, then all you’ve done is buy yourself an expensive and stressful job. That’s where the importance of an ‘exit strategy’ come in, and both the Business Model and Business Structure help you create value and work towards an ‘exit strategy’.
Let’s detour here for a second: what’s an exit strategy?
I first learnt about the concept at a business seminar when I was trying to help my parents launch a new business at the start of 2019 – right before COVID hit. An exit strategy is exactly that – the way you plan to exit your business. Even if you never act on it, it is important to work towards an exit strategy, whether it is selling your business when it reaches a certain value or when it achieves a certain revenue, having a strategy in mind allows you to work intentionally towards a specific goal so that your business is more than a stressful job. Because, if we’re going to invest our time and money launching and running a business with all the extra work and risk, we must aim for a better financial outcome than working a normal job – otherwise, what’s the point?
So, with ‘exit strategies’ in mind, if the result of the business is to eventually leave, having documents such as Business Plans and Business Models add to the sell-ability of a business, as they are formal documents that make it easier for someone to take over the day-to-day operations. It also allows potential buyers to see that there are formal plans and measurable targets set out to maintain business growth.
The third reason is simply for the fact: specific goals aid growth (this is true in business as much as it is in personal growth). Having a Business Plan and thorough understanding of your Business Model allow you to forecast future work demands, resources and finance needs, and create goals that keep you accountable and focused. Whether you meet those goals or not, having a plan that specifies Key Performance Indicators (KPIs) allows you to measure and analyse business progress and identify weakness or opportunities within your business to help you realign and achieve your business goals.
Despite all this, my advice is: if you’re ready to start, do not let these documents hold you back – you can always come back to them. They are important, but they will not exclusively make your business successful – good decisions, doing the work and ensuring profitability are the only things that will create a successful business. You can come back to these documents down the track and still get the same benefits. But I do recommend, at a minimum, you at least fill out a blank Business Model Canvas prior to starting.
I came across this form while researching for my own business and this document allows you to check for any blind spots in your business preparation so that your day-to-day activities can run smoothly while you begin the work and start driving business growth. It also allows you to look at how the money is going to flow in and out of your business so that you can ensure you are working towards profitability.
So, while I know will be plenty of businesses that have sold successfully without a Business Plan or Business Model, I highly recommend investing the time and energy into creating these documents and keeping them up to date as your business grows.
Google is my best friend and should be your best friend too! I can’t wait to see what you achieve.
Thanks for reading! Make sure to leave a comment and let me know what point stood out to you the most.
I look forward to seeing you here again!
Disclaimer: I am not a business advisor and have not provided specific business advice as business is a diverse field full of unique contexts and situations. I will show you where I sourced information and how I made my decision, but it is up to you to determine whether you need professional advice for your business situation.