Business Idea vs. Business Model, Which do I Need?

Like any other industry, the world of business has its own language, its own jargon.

Some of the words appear to lack clarity, are used interchangeably and frequently overlap with other concepts. The term business model belongs to this category.

You see, too many confuse business model with business idea or even business plan. The terms identify three distinct and different concepts, even though there is some overlap.

So, what does it matter? And should you care?

Well, the words we use are powerful. They allow us to express and share our thoughts, beliefs, and ideas with others.

But more than that, they help us gain clarity.

You see, you can’t formulate a concise idea and share it unless you have clearly formulated the idea in your own mind, and words help us do that.

So yes, words are important; so much so that it’s vital to use the right word for the corresponding concept.

But let’s get back to our earlier discussion.

When I think about the three concepts: business idea, business model, and business plan, I envision them along a continuum.

Let me explain…

Business Idea

Chances are you’re already in business or you’ve been thinking about starting one, right? Why else would you be here?

So, if you’ve already started your business, you must have had an idea for it, before setting up your company.

And if you’re starting out, you too will need to think of a business idea before moving forward.

Ask yourself:

  • What type of business do I want to start? What would I enjoy doing?
  • What kind of problems could my business solve?
  • Who are the people my business could serve?
  • What type of service or product could I offer and provide?

Be prepared to spend some time on this “ideation phase.

You see, business ideas tend to change and morph; rarely are they good to go from the start. And often, the final “product” is vastly different from the original idea.

For example, did you know that Twitter started out as a post casting platform called “Odeo” or that the original idea for Youtube was a dating site?

Your business idea is your starting point, your “jump off” point. All new businesses must have an idea.

Business Model

Next on the continuum is the business model.

After you’ve formulated the idea for your business, you need a model that further refines and defines your idea.

It will help you zoom in on:

  • What problems are you going to solve for your target market?
  • How will you deliver your solutions?
  • How is your solution different from the competition?
  • How will you generate revenue with your product or services?
  • How will you sustain your competitive advantage so that you can stay in business?

If you operate a traditional practice or want to start one, chances are your business model will follow established parameters.

  • You’ll be providing healthcare services to subscribers of insurance plans.
  • You’ll be providing services in your office.
  • Your clinic will be different from the competition because you offer, for example, evening and weekend hours.
  • And most likely, you’ll be generating the bulk of your revenue from insurance billing.

Simple and straightforward!

But if you want to start a business that doesn’t follow the traditional health care practice model or one that’s non-clinical, things might look a bit different.

Coaching Business Model

Let’s assume you want to leverage your clinical background and start a health coaching business. Here’s what your business model might look like.

We’ll start out with the core idea for your business, coaching.

“Providing health coaching to employees leads to reduced absenteeism or sick time. By making this benefit available, employees are helped to achieve their health goals, and businesses benefit by achieving greater productivity.”

And here is what your business model might look like:

  • Target market: companies with Human Resource departments
  • Delivery of solution: individual and group coaching sessions delivered to employees at the business location.
  • Competitive advantage: your clinic background and years of experience set you apart
  • Revenue model: you market your business to companies that are big enough so they can afford your services and who see the potential in offering this type of benefit to their employees.
  • Marketing: after researching your ideal customer you will utilize multiple channels to reach and stay in front of them.

As you can see, the business model builds on your business idea and refines it. 

Business Plan

At this point you might ask: “How is the business model different from a business plan; aren’t they pretty much the same?”

At first glance, it may seem that they are the same. However, that’s not the case.

After the business idea and model, the business plan is the last item on the continuum. Note, that the business idea and model form the foundation for your business plan.

The business plan simply outlines the steps your business will take to accomplish its goals. It details your marketing efforts, pricing structure, product or service offerings, projected income and expenses, just to name a few.

You might differentiate the business model from the plan by thinking of the business model as a 40,000ft view and the business plan as zooming in to learn the details.

So, here you have it, business idea vs. business model.

Now, which one do you need?

Hopefully, you’ll agree with me that need to have both.

You need an idea and a model that outlines how you’ll turn your idea into reality.


If you found the article helpful, let us know; but if not, let us know too.


By Johanna Hofmann, MBA, LAc; regular contributor to the NPBusiness blog and author of “Smart Business Planning for Clinicians.


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