January 28, 2023

Which Is Better: Business Plan or Canvas?

By DENNIS BLACK on Jan 8, 2023

When looking for information, you came across several recommendations on business plans and Canvas. What happens is that none of them clearly explains the purpose of the tool. This makes it difficult to find which one is right for your type of business.

If you don't know where to start to organize your ideas, keep reading to check out the comparison we've organized on these two tools. Here you will see the advantages, disadvantages, and applications of each one. Good reading! 

Business Plan or Canvas: Which to Choose?

If you are in doubt about between business plan or Canvas, you need to understand that:

· The business plan is recommended when you are opening your company and need to structure all sectors. 

· Canvas, on the other hand, is more suitable for finding quick solutions, in a well-structured way and also for getting to know a business that is already open.

One does not exclude the other. This means that the entrepreneur can choose to use just one or both. After all, the business plan is a good choice to have a deep understanding of the company. But because it gathers a lot of information, it's a time-consuming process. The Canvas, because it is less detailed, is an effective summary that makes it simpler to understand how the company will operate from now on. 

What Is a Business Plan?

The business plan is a document where you define how your business will work. It must contain:

·  Market analysis of the chosen field of activity.

·  Marketing, operational, and financial plans.

·  How the Investments will work.

·  The strategy.

·  The simulation of scenarios.

 This tool is the basis for a detailed diagnosis of your company's needs and objectives. The business plan must also include all operational and strategic details. 

Another important point of this tool is to facilitate the identification of the main operational bottlenecks. After all, one of the essential activities during the preparation of this document is the prediction of risk scenarios.

Thinking about it, the entrepreneur can already think of solutions, even before problems happen, which helps to avoid future losses. However, for a business plan to be successful, it is necessary to follow some steps. Learn about the structure of this tool in the next topic.

Business Plan Structure

The business plan is usually tailored to the needs of each company. However, there are some points that cannot be overlooked:

1.    Executive Summary: This is the summary of the plan. Usually, the information is the entrepreneurs' data, the enterprise summary, company mission, sector, social capital, source of funds, and tax framework. 

2.    Market analysis: a study of the target audience, analysis of competitors, research, suppliers, and any other relevant data that helps to understand the market.

3.    Marketing plan: an essential step to explore the possibilities for publicizing and communicating the business. This topic must contain a description of what the company sells, prices, promotion strategy, sales structure, disclosure, and communication channels.

4.    Operational plan: this includes physical structure, production capacity or service provision, and processes.

5.    Financial plan: essential step to understanding the viability of the business. Here are defined the total investments, working capital, estimated monthly invoicing, and labor costs, among others.

6.    Scenario simulation: this step serves to design responses to possible scenarios — positive and negative, such as the entry of competitors and lower-than-expected sales. 

7.    SWOT analysis: here, the entrepreneur must analyze the strengths, weaknesses, opportunities, and threats, evaluating the internal and external environments of his business. With this, you can formulate strategies to take advantage of your differentials, ward off market threats and neutralize your weaknesses.

Advantages and Disadvantages

The business plan allows you to analyze the company in great detail, which helps to create realistic projections of the future. For companies that want to avoid risks and make better use of resources, this tool identifies all the possibilities and serves as a starting point for more operational issues.

However, the disadvantage of this type of plan is that the process of organizing it is usually very time-consuming. This requires a lot of research into the company's internal and external landscape

When to Use It?

The business plan is often best suited for companies that are just starting out. It is a good choice for projecting business revenue, detailing activities in different sectors, setting goals, and creating action plans. 

If your company is already on the market, you can also use the business plan for restructuring or when you want to open a new branch. 

What is Canvas? 

Although some people confuse it, the business plan and Canvas are very different methodologies. The 

Business Model Canvas

(BMC) is a tool that allows you to objectively architect, design, and visualize your company's business model on just one sheet of paper.

It was developed by Swiss business model expert Alexander Oster alder. Due to its rapid application, it has been adopted by thousands of startups around the world. After all, they work in a scenario of uncertainty and need to adapt quickly — Canvas ends up being more “disposable”.

The difference between Canvas is that it is an extremely visual method. From nine integrated blocks, it is possible to form a complete and detailed overview of the essential aspects of the business. In addition, it is an excellent tool for later meetings and discussions, as it optimizes the visualization and understanding of information.

Unlike a business plan, Canvas makes it possible for all areas of your company to undergo strategic changes without the need to redo spreadsheets and other documents since everything is visual and practical. To populate a Canvas template, simply use topic lists. Discover the structure below.  

Canvas Template Structure

A sheet of paper (physical or digital) is divided into nine thematic blocks. Each of them must contain: 

1.    Customer Segments: Write down who your most important customers are and divide them among consumers with common needs and behaviors. For example: if they have special needs or different channels through which they are reached.

2.    Value propositions: here comes the package of products/services that motivate customers to choose your company over the competition. The main question, in this case, is: “What problems/needs of your customers are you helping to solve?”;

3.    Channels: answer the questions: through which means of advertising and sales do your customers want to be reached? How are they being reached at the moment? Which channels work best? Which are more cost-efficient? Do the channels serve to disseminate news, receive feedback, and offer products? What will the after-sales support look like?

4.    Customer relationship: define the type of relationship your company will have with users/consumers. This relationship does not follow standards and must be aligned with the company's identity.

5.    Revenue sources: Ask: “How much and how are your customers willing to pay for your service?” What are the value propositions that each consumer segment is willing to buy? Why do you currently pay? How do they currently pay?

6.    Key Resources: What is needed, in terms of financial and human resources, to offer and deliver the elements mentioned in the previous topics? Key resources can be divided into physical (office), financial (loans), intellectual (product patent), and human (sales team).

7.    Key Activities: What are the most important activities that your company must carry out in order for its business model to move forward? It is important that they offer a value proposition, reach markets, maintain customer relationships and generate revenue.

8.    Key partners: analyze which partnerships are interesting for the growth of your business. They are essential for the growth of your company, as they contribute to the reduction of costs and the fulfillment of needs.

9.    Cost structure: what are the expenses for your business to function? What are the most expensive resources and activities? Describe everything that involves the financial resources for which your company works.