Important Definitions

The following definitions will be helpful as you embark on your journey to achieve business modeling and business planning success.

Business Model

A business model describes the rationale of how an organization creates, delivers, and captures value, in economic, social, cultural or other contexts. The process of business model construction is part of business strategy….Business models are used to describe and classify businesses, especially in an entrepreneurial setting, but they are also used by managers inside companies to explore possibilities for future development. Well-known business models can operate as “recipes” for creative managers. Business models are also referred to in some instances within the context of accounting for purposes of public reporting. (courtesy of Wikipedia)

CBM comments: Business models have both a strategic component (how the organization creates value) as wells as a tactical component, describing the answer to questions such as:

  • What is the business problem or challenge we solve?
  • Who is our target customer?
  • How do we reach the target customer?
  • What is our marketing and sales model?
  • What is our revenue target and how will we achieve this?
  • What is our cost structure?
  • How much profit will we make, and when?
  • What is our operational model?

To sum this up in one sentence, the goal of the business model is to answer the question: How do we plan to make money?

Business Planning

Business Planning encompasses all the goals, strategies and actions that you envision taking to ensure your business’s survival and growth. Profit-making business planning is all the general business planning that must be done to start and run a successful business. The best known example of this type of business planning is the business plan. The business plan isn’t a do-it-and-forget-it exercise but a living document that needs to be updated throughout the lifecycle of your business. Once the business has officially started, business planning will center on setting and meeting goals and targets. While some businesses make business planning an annual event, business planning is most effective when it’s done frequently and consistently. The business planning process of reviewing progress on business goals and targets and setting new ones should take place at least monthly. (courtesy of About.com)

CBM comments: We agree that the business plan, and the practice of business planning, should not be a one-time or infrequent exercise. Smart companies re-visit and modify the business plan at least quarterly.

Sales Plan

A Sales Plan is a plan containing an assessment of current sales for a product in a given region or market, a statement of sales objectives, strategies for achieving the stated sales objectives, and resources available for achieving this goal. A sales plan may also assign particular sales representatives or other staff to specific roles or territories, and may include a breakdown of who will focus on improving sales for which product. (courtesy of BusinessDictionary.com)

CBM comments: We like this definition because it is both comprehensive and concise. Make sure your sales planning process includes the specific processes you will follow to achieve revenue. While sales planning is an extremely important discipline in making sure the overall revenue and profitability goals of the company are met – in the crush of ongoing business, companies sometimes pay scant attention to sales planning or ignore it altogether. Sometimes this is due to the desire to “do it the way we’ve always done it” but it can also be caused by a lack of understanding of the nuances of sales planning.

Sales and Marketing Models

A Sales and Marketing Model A sales and marketing model is the specific methods and processes that are used to generate revenue. A sales and marketing model can be as simple as a corner lemonade stand, or as complex as Amazon’s e-commerce engine. Major sales models include direct sales, telesales, channel sales, retail sales and ecommerce sales with many permutations and hybrid options. (courtesy of Winning B2B Marketing)

CBM comments: There are few decisions more important to the health of a business than the sales and marketing model. If you need more information on how to do this right, we have an excellent free resource available to you titled How to Choose the Best Marketing and Sales Model. You can view or download this in the Members Resource section.