A great business plan is not easy to compose, Sahlman acknowledges, largely because most entrepreneurs are wild-eyed optimists.But one that asks the right questions is a powerful tool.And even more important, When does cash flow turn positive? What information does a good business plan contain?
It does not provide the kind of “winning” formula touted by some current how-to books and software programs for entrepreneurs. Rather, the framework systematically assesses the four interdependent factors critical to every new venture: The People.
The men and women starting and running the venture, as well as the outside parties providing key services or important resources for it, such as its lawyers, accountants, and suppliers. A profile of the business itself—what it will sell and to whom, whether the business can grow and how fast, what its economics are, who and what stand in the way of success. The big picture—the regulatory environment, interest rates, demographic trends, inflation, and the like—basically, factors that inevitably change but cannot be controlled by the entrepreneur. An assessment of everything that can go wrong and right, and a discussion of how the entrepreneurial team can respond.
The answer to the first question is an emphatic yes; the answer to the second, an equally emphatic no.
All new ventures—whether they are funded by venture capitalists or, as is the case with intrapreneurial businesses, by shareholders—need to pass the same acid tests.
After all, the marketplace does not differentiate between products or services based on who is pouring money into them behind the scenes.
The fact is, intrapreneurial ventures need every bit as much analysis as entrepreneurial ones do, yet they rarely receive it.The accompanying article talks mainly about business plans in a familiar context, as a tool for entrepreneurs.But quite often, start-ups are launched within established companies. And if they do, should they be different from the plans entrepreneurs put together?However, in the history of such proposals, a plan never has been submitted that did not promise returns in excess of corporate hurdle rates.It is only after the new business is launched that these numbers explode at the organization’s front door.Investors know about the padding effect and therefore discount the figures in business plans.