Driving home from one of Startup Grind Lagos’s meetup we had a discussion with one of the participating entrepreneurs which evolved into an interesting argument and now, an Afropreneur topic: Business Model Canvas vs Business Plan.
Why do we need business plans?
Why not stick with a Business Model Canvas (BMC)?
When should Business plans be drafted?
Who needs to see the business plan?
So what is the difference between a BMC and a Business Plan? The difference is the level of detail!
A business plan can reach up to 70 pages (I seriously advise against this. Keep it to 35 max.) and a business model canvas can be completed in just 1 or 2 pages!
A business plan and BMC are both road maps to guide you through your business and give you a clear vision and mental representation of your business. We think both are necessary depending on the circumstance. They both prepare you for your industry, your market and future challenges.
We advise entrepreneurs to always write their business plans it take you through a journey of discovery. A discovery based on research and assumptions. While writing business plans you are forced to tinker the idea behind the business, the business model and other factors. This leads to some level of improvement and refinement on the original idea. Often times, investors would ask you for this document as it is a proof that you have thought through the business and if you did not get discouraged after writing it, it means you believe in the idea (It increases the chances of investment especially for entrepreneurs who do not have strong oratory skills to express their ideas).
The Business model canvas requires less time, it gives you the structure of a business plan but with more specific details and flexibility. A BMC is a Business plan summarized in one or two pages. It is easy to read, easier to write and understand. Investors may prefer this document at an elevator pitch as it is very brief yet informative. It is a great guide especially when writing business plans.
So what would we choose between the BMC and Business Plan? This will always depend on the audience. We would prefer to use the BMC to brainstorm through a business model, however, if we were to approach investors then we have to write a business plan.