Business plan framework

The planning/thinking process | the business plan framework | analyses | key factors | sustainable competitive advantage | strategy | plans | appendix - checklists. It is a reflection of all the thinking that goes into how a business will achieve financial success and long term objectives. Accordingly developing a business plan means investing time and energy in thinking through the fundamental issues of:What do you want to do? In many other aspects of business management the process matters more than the end product. The framework presented in this document facilitates a planning process as well as provides guidelines for developing the written plan. Developing the business plan is the means to an end rather than an end in itself. For that reason, thinking through the key aspects of the business venture in a logical way is the groundwork for writing a well thought out business plan that clearly communicates it can realistically achieve financial and strategic objectives. Well written business plan will bring the business venture to life by:Describing the proposal, the economic logic and the critical factors contributing to financial and strategic ing clear statements of the choices made and the direction the business is y describing how the plan will be g a business plan can be intimidating to many business owners. However, the specific content and detail will depend on the context in which the business plan is being developed. Business plan for the internal use of the business owners can provide a roadmap and yardsticks for measuring progress. The focus is on establishing a vision for the future, the desired outcomes for the business in the future and specific actions and expected levels of performance that are contribute these outcomes. Business plan intended for external use such as lenders would focus on how marketing and production performance would contribute to financial success in a particular industry and is no standard format for organizing business plans however there are a number of factors to guide the writing is important to find out the expectations reviewers might have for format and length in each context. They can be attached to the business plan as an appendix to demonstrate that the business owner has considered the uncertainties in the much detail or too little detail can reduce the ability of the document to communicate the cs without substance can get in the way of demonstrating the logical thinking that is the basis for a business overuse of jargon or technical language may get in the way of communicating the strength of the business tants can assist individuals in writing their business plan. However, only the business owners can do the planning and decision making that is necessary in developing a business aware of investing too much time and energy in producing an overly polished document rather than thinking through the focus, scope and direction of the business planning/thinking planning/thinking process becomes the basis for a business plan when business owners invest time and energy in reasoning through the following specific activities:1. Developing vision and mission statements to articulate why the business exists and what the business will look like in the future. Completing an internal analysis to identify strengths that give the business certain advantages as well as weaknesses, which are areas where the business is vulnerable and has to improve. Completing an external analysis of the industry, the market(s) and the competition in order to understand market dynamics as well as the resulting opportunities and threats that might affect the farm business. Looking for key success factors in provide a fit between opportunities in the external business environment and the strengths in which the business has a competitive edge. Looking for key risk factors which can make the business vulnerable to the forces of changes and threats from competitors. Developing a business strategy that allocates resources to those areas that realize economic opportunities, provide a basis for sustaining a competitive advantage and contribute to long term process is illustrated in 1. An integrated process of business planning and strategy business plan gh planning is a necessary part of writing a business plan it does not appear as a specific component in the final document. Illustrates the linkages between the planning components and the written components of a business plan. Ideally this framework will enable users to fine tune their business proposals in ways that makes the venture more viable and 2. Key components for developing a business planning and thinking the organizing and to create a strong first impressioncover y state the contact information for the key people (business owners) including address, phone numbers and e-mail ine the key points of the business venture that captures the reader’s attention so they take the time to read further. Executive e a concise summary of the key points of the business to ensure readers are able to quickly refer to specific sections of the business of e all section headings and subheadings within the body of the to ensure reviewers understand the business in terms of resources, production capabilities and the markets. General description of the t the business in terms of organization, resources, production, markets and past ish the basic model for making money and the amount of financing required to implement the model. The financing y state how much money is needed and the purpose of the to make the case that the management team has the balance of operational, marketing, technical, financial skills and experience required to realize the opportunity as well the leadership qualities needed to make good choices in difficult management t the core management team, their experiences and capabilities as well as any outside advisors that have a role in the management of the g ahead to the future think through what the business will be good at and the role will the business have in the future business t what the business owners want the business to look like in the planning and thinking the organizing and through why the business exists and the basic beliefs and values that the drive the n t the current circumstances of the farm business including what the farm business is doing now to be viable and ine objectives for the critical activities that affect the competitive position of the ine the critical areas of financial performance that affect the viability and sustainability of the ss t the strategic objectives which are business opportunities plus the performance targets for the critical activities affecting the competitive position of the t the financial objectives which are the critical areas of financial performance that affect the viability and sustainability of the er the factors in the external business environment that will impact on the ability of the farm business to fy and assess the internal strengths and weaknesses of the business fy the key success factors are necessary for the business to compete in the market and provide value to fy the key risk factors with the potential to impact on strategic and financial objectives of the business through the resources and capabilities that can give the business venture a competitive what is important for the business venture, how it will position itself in terms of products and market segments as well as how it might grow and develop to achieve strategic and financial objectives. The business t how the business venture will position itself in the industry and market as well as how it will focus on critical activities that will affect the competitive position of the business and contribute to financial success and long term objectives. Operations the operating plan component of the business plan describes the resources, the production processes, the key inputs required for production and the basic cost through how the labour force along with outside resources provide unique capabilities that support the business strategyorganization ts the organizational structure of the business venture along with details describing how the labour force and outside resources support the business through how to give potential lenders and investors the comfort of knowing that the key decisions are based on an understanding of financial management as well as reliable financial a ground up approach to developing profitability and cash flow ake to identify and build on the key drivers for ial plan. The financial management skills and capabilities of the business through how the business can increase the likelihood and consequences of success and to decrease the likelihood and implications of t an assessment of everything that could go wrong and right along with how the management team can respond. Present the ongoing processes for identifying, measuring and managing risk that might occur in the than focus on the “most likely” outcomes for profitability and cash flow performance develop ranges of possible outcomes from worst case to best case to demonstrate that the business has the ability to deal with multiple possible e realistic projections for cash flows, income statements and net worth t break-even prices and break–even sales levels to reveal the point at which the business venture will begin to make a t the point in the development of the business when cash inflows are greater than cash ists are provided in appendix a and appendix b that can be used to assess the content and organization of a completed business cover page should clearly state the business name, the contact information for the key people (business owners) including address, phone numbers and e-mail address. As well it should clearly indicate the date of the plan and the time period the plan the cover page to create a strong initial impression of the business and the executive summary provides a concise summary of the key points of the business venture.

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Business plan articles

People involved in the venture and their business environment in which the venture will opportunity available to the business? Financial requirements of the business profit potential of the business risk management strategies to be the executive summary to capture a reader’s attention so they take the time to read table of contents includes all section headings and subheadings within the body of the document. All pages in the business plan should be numbered in order for the table of contents to function as a handy e a properly organized table of contents that enables readers to quickly refer to specific sections of the business plan. General description of the business e a brief description of the business venture to ensure the reader understands the following:The type of business including the organizational and ownership structure (proprietorship, partnership, company, joint venture). The operation is located or to be resource base including land, facilities, livestock and the business owners are, their past experiences, qualifications including training & ptions of products, markets, customers and trends the business venture might build existing businesses provide a summary of the past history including what has been accomplished including successes and failures (along with appropriate discussion of failures). New entrants provide a summary of the start-up plan along with the reasons for starting the new business the general description enables reviewers to understand the business in terms of resources, production capabilities and the financing request (when the purpose is to gain financing). The purpose of a business plan is to gain financing this request can be presented as an individual component of the written plan. A request for financing should be positioned early in the document in order to set the context for the business plan and clarify the purpose. This component of the business plan should clearly state how much money is needed and the purpose of the funds. More detailed business plans could present current and pro-forma net worth statements to describe the financial position of the business venture before and after gaining the ers of a business plan will want to know who they are dealing with and will look for a balance of operational, marketing, technical, and financial capabilities and experience. The emphasis should be on the core management team as well as any outside advisors that have a role in the management of the business. This can be done by including a paragraph on each human element can be the most critical aspect of a business venture in the eyes of an investor or lender. That is the argument for placing the management team component prominently early in the written plan. However in developing the business plan the business owners need to complete the planning process in order to know the complete range of skills and capabilities that will be required to be successful and then to take steps to develop the appropriate management the case that the management team has the qualities needed to make good choices in multiple possible futures particularly in difficult and mission statements. Vision statement looks ahead to capture what the business owners want the business to look like in the future. 2011); economics of farm management in a global setting, john wiley & role will the business have in the future business environment? Mission statement focuses on the present circumstances of the farm business including what the farm business is doing now to be viable and sustainable. Business goals and g goals is a necessary when developing a meaningful business plan as they provide clear statements of what the business owners would like to achieve in the future and where they want the business to ss goals for an agricultural venture often reflect a blend of personal goals and related business achievements. These could include variations of the following:Develop a viable farm business that can be transitioned to the next e above average productivity farm business is recognized as an early adopter of new ownership of resources contributes to increases in net lling a large scale operation that achieves economies of scale and business is able to achieve economic and environmental business achieves a desired standard of ng the business is able to provide a desired level of leisure ng the business can enable business owners to contribute to the local ives are derived from the business goals to provide the farm business with more specific targets or yardsticks for measuring and tracking performance in key gh financial success is a common goal for farm businesses it is important to recognize that farm businesses will have multiple objectives linked to goals. The vision and mission statements crafted by the business owners can help determine and weigh the importance of multiple objectives. Consider the following example of a decision making approach that weighs multiple gic objectives reflect the business opportunity along with performance targets for the critical activities affecting the competitiveness of the business in realizing the opportunity. These could include:Continually achieve low cost e economies of scale through managing larger scale a preferred supplier to a particular market uously innovate to provide unique products or services to a particular market e products and services of superior quality and value that improve the well-being of the ually provide the best combination of desired attributes and low ial objectives focus on the critical areas of financial performance that affect the viability and sustainability of the e acceptable economic returns to the investment of land, labour, capital and e profitability that provides ongoing growth and e growth in owned e cash flow performance ensures a strong working capital e the financial strength to deal with the year to year variability in prices and costs as well as unplanned events emanating from the external business business strategy must consider the many factors in the external business environment that will impact on the ability of the farm business to compete. Assessing the industry, the market, customers and the competition enables business owners to identify and assess opportunities for growth and profitability as well as threats which in the future could adversely the business issues to consider in an external analysis include:What is the industry structure? Analyses undertake to identify and assess the internal strengths and weaknesses of a business venture. This can enable business owners to gain insights on the factors that might provide a competitive advantage for the business. Success factors are those activities and practices that the business must do to compete in the market and provide value to customers. They are the aspects of the business venture that are valued by the market and are necessary for the business to have competitive success and achieve long term success factors can be developed by considering the following questions:Who is the target market? Key risk factors have the potential to impact on the strategic and financial objectives of the business planning and thinking process should focus on risk events that if they occurred would affect specific objectives set for the business and on gaining and sustaining achieving a competitive advantage. For this reason it is important to describe how the business and its products compare to competitors. Competitive advantage exists when a business is able to provide a better value/cost equation for customers than do competitors. Accordingly, gaining a sustainable competitive advantage is a key factor in business strategy, financial performance and achieving long term objectives. Business plans should clearly present and describe the competitive edge they have in a particular industry, producing a particular commodity or product, dealing with a particular market segment or operating in a particular lly, sustainable competitive advantage is achieved when business owners are aware of which aspect of their business is most important to customers and develop strategies to provide a better value proposition for their customers than competitors do.

Competitive advantage relative to competing businesses can be from higher producing land, location advantage and having lower debt servicing costs which often results from lower capital costs for key productive assets such as land. Clearly describe how the business venture provides a superior value/cost equation to customers than do ng the business business strategy considers the issues and insights gained in developing the mission statement, completing the external and internal assessments and assessing competitive advantage to settle on the actions that will achieve financial success and contribute to long term objectives. The business strategy positions the venture in the industry and focuses on the critical activities that will affect the competitive position of the business and contribute to financial ss strategies focused on achieving financial success and long term objectives through commodity production could include the following:Leverage unique production capabilities and focus on developing efficient production ge detailed knowledge of cost drivers and cost control procedures to focus on low cost ge unique location advantage to deliver commodities to markets with higher ge ability to provide commodities with enhancing features such as delivery of large lots that lower transaction ge management capabilities to develop large scale operations that can capture cost advantages through economies of ge management and relationship skills to access rented land, custom operators and leased machinery and gain economies of ge superior knowledge of quality standards and grades to be a reliable supplier of quantity and quality through ge superior risk management capabilities to manage the higher risk in higher reward ss strategies focused on achieving financial success and long term objectives through value added production could include the following:Leverage detailed knowledge of consumer preferences to market products that provide added value to consumers that exceed added ge unique production capabilities to produce and market a differentiated product that competitors cannot ge detailed knowledge of how products are used to provide the best combination of value and ge production capabilities and knowledge of consumer preferences to further process products to achieve added revenues that exceeds added ge knowledge of market segmented and nimbleness to provide products to a niche ss strategies focused on growth and development to achieve strategic and financial objectives could include the growth through purchasing and owning land to gain economies of growth through relationship building and renting land to gain economies of growth through modernization of technology and intensification of production growth through replication of the current business in another growth and economics of scale through collaboration with other business any change in business development. Wait and see if opportunities might ze operations to gain better financial control and ng a business strategy requires making choices about what is important for the business venture and how it will position itself in terms of products, market segments and location as well as how it might grow and develop to achieve strategic and financial some ventures the marketing strategy is treated as a component of the business strategy. For other businesses the marketing strategy is treated as a separate component with linkages to the business strategy. Key issues to consider in crafting a marketing strategy for a value added product include:Determining a specific customer tanding why customers buy the product or tanding what attributes customers’ ining what resources or capabilities of the business provide a competitive ining what processes or procedures will best deliver value to the ining what attributes of the product or service can provide added value to customers greater than added be any legal protection that the business business plan will also need to demonstrate how the marketing strategy for a value added product will incorporate the following elements:Having the perseverance and financial resources need to build a market that may take time to reach ually engaging with the market to understand the value cost equation of customers. Innovating to develop high quality products with unique attributes that are valued by planning process should clarify:The basic model for making amount of financing required to implement the past financial decisions have led to the current expected financial performance will be shaped by implementing the business financial management skills and capabilities required to implement the business operating plan describes the resources, the production processes and the key inputs required for production. As well the operating plan makes the case that the operations are being managed efficiently and elements to present in the business plan include:Details of the current resources including owned land, rented land, facilities, equipment and machinery, livestock and marketing quota. Describe how the business has dealt with past operating d changes in the production resources, the production systems, technologies and practices. Link these to any financing proposals in the business cost and availability of key inputs, main suppliers and credit s of equipment/other items that are to be acquired or leased in the near future (such as purpose, costs and credit terms). Any regulatory or licensing requirements that would impact on production be operating practices including cost control measures, risk management, contracting and conservation the operating plan component of the business plan describes the resources, the production processes, the key inputs required for production and the basic cost structure. Specific details would include:The number of people employed whether they are full time or part time and any plans for changes in the work force. For proprietorships the expected draw to cover the living expenses of the owners(s) business should be presented along with some types of skills and/or experience that are needed in the business and the strategies for gaining there are planned changes in the operations of the business describe any training that would be required to bring the work forces up to be the incentives and other measures that are or will be adopted to retain key you own development and that of your management team as your business continues to organizational structure of the business should also be described. This would include:Whether the business operates as a proprietorship, partnership, corporation or joint key areas of operating and management responsibility and who is outside resources that are employed in the operations and management of the business venture. This could include technical advisors such as nutritionists, agronomists, veterinarians, marketing advisors and custom operators as well as book keepers, business advisors, accountants and lawyers. These resources could be presented in term of the unique skills they bring to the larger business organizations with more detailed business plans an organizational chart may provide the best means of describing the organizational structure of the the organizational structure of the business venture along with the labour force and outside resources provide the capabilities needed to support the strategies and capture the business financial plan should address the following key business model for making amount of financing being current financial position of the business along with details on past financial performance and past financial proposed changes in assets and debt along with the expected financial performance resulting from the proposed financial management skills and capabilities of the business business model for making money should reflect a ground up approach in which key assumptions and detailed estimates of key variables are developed into profitability and cash flow projections. These key elements could include:Details of start-up costs for a new ted production levels for each different potential sales levels of each product, market prices and sales es that are matched to the projected -even prices to demonstrate how the business venture will achieve acceptable levels of -even levels (for value added products) to indicate the level of sales at which the business venture will begin to make a point in the development of the business when cash inflows are greater than cash financing request may already be presented in the early portion of the business plan in order to set the context for the overall business plan. As suggested presenting current and pro-forma net worth statements to describe the financial position of the business venture before and after gaining the financing is appropriate when the purpose of the business plan is to request large sums of financing in more complex business proposals. Current and historical financial position of the business venture can be presented with current and historical net worth statements along with the recent profitability and cash flow performance of the business venture. These can be presented in the form of:Income and % return on assets (roa) could be presented to provide measures of the rate of return earned by the total assets invested in the ical cash flow summaries that reveal the history of the business in terms of its ability to generate cash to cover operating expenses, debt commitments and personal proposed changes to the business and the expected financial performance resulting from the proposed changes will demonstrate the expected financial performance with the new financing in place. Detailed projections could be included as an appendix and summarized in the body of the business than focus on the “most likely” outcomes for profitability and cash flow performance, ranges of possible outcomes from worst case to best case can be used to demonstrate that the business has the ability to deal with multiple possible financial management skills and capabilities of the business will be a critical element of the financial plan. A business plan can gain a lot of credibility by demonstrating an understanding of the key financial measures of liquidity, solvency, profitability and debt servicing capacity. Furthermore the finance plan can be enhanced by presenting:The financial information system that is implemented or will be financial reporting system that is in place or will be assessment of the strengths and limitations of financial business has dealt with past earnings planning process should clarify:The basic model for model amount of financing required to implement the past financial decisions have led to the current expected financial performance will be shaped by implementing the business financial management skills and capabilities required to implement the business can be defined as uncertainty that matters. So in the context of developing a business plan risks are those events both positive and negative that if they were to occur might impact on the achievement of production, marketing and financial performance as well as the achievement of strategic objectives. In other words the plan needs to clearly present an assessment of everything that could go wrong and right along with how the management team can respond. The emphasis should be on the specific steps the business has taken to increase the likelihood and consequences of success and to decrease the likelihood and implications of issues to consider in the risk management component of a business plan include:The key risk factors in the business strategy focusing on the people, the business opportunity and the context of the business understanding of the depth and duration of negative cash flows that is likely to occur when launching a new understanding of the probabilities attached to achieving various levels of risk events that might impact on profitability and cash flow performance and the strategies that the management team can implement to manage range of possible outcomes (financial and cash flow) that might occur in the implementation of the business culture, management structures and ongoing processes for acting under conditions of ongoing processes for identifying, measuring and managing risk that might occur in the how the business can take steps to increase the likelihood and consequences of success and to decrease the likelihood and implications of ix a - a checklist for the thinking and planning in developing a business planthinking and planning: ensure the final plan... The case that the management team has the right people to implement the business trates that the business owners have thought through the key drivers of success or ts a business strategy that aligns with the mission trates how a value added product provides a superior value/cost equation for trates how a commodity incorporates services that deliver unique sources value to the customer that are not replicated by ns the sustainable competitive advantage buttressing the business bes the key elements in the marketing and production plans and how they link to financial a financial plan that is integrated with the business and marketing strategy and makes financial financial projections that recognize a range of possible izes and has strategies for managing negative and positive risk trates effective decision making and provides comfort ix b - a checklist for the writing and organization in developing a business g and organizing: ensure the final plan... Write about entrepreneurism: the good, the bad & everything ns expressed by forbes contributors are their ss plans are critical to the success of any new venture. Business plans serve as the framework for your company and provide benchmarks to see if you’re reaching your goals. In my experience, they are key to helping you think through your business and keep you on i’ve learned as an entrepreneur and investor is that it’s important to outline your business plan carefully. Consider all the variables so you don’t rush into anything and test your should take some time to work with mentors, business partners, and colleagues on your plan. Seeking input is a great way to get an objective view, so don’t forget this step; it’s way too with most things in the business world, the size and scope of your business plan depend on your specific goals.

Be sure to keep in mind that potential investors might not be as familiar with your industry so you have to clearly explain your concept and where it fits you’re just developing the plan for you and/or business partners, it doesn’t have to be as detailed, but you should still outline your goals and how you want to reach se, if your product or service is not overly complex, your plan doesn’t have to be very lengthy. For example, a business plan for a hair salon is not going to look anything like a plan for a biotech research some help creating the right business plan for your company? Take a look at the small business administration, which has great resources for creating a plan for any gh the exact structure of business plans vary, my personal requirements for plans that i create and plans that i review for potential investments include the following 10 components:Mission statement and/or vision statement so you articulate what you’re trying to create;. Projections; y/conclusion that wraps everything together (this also could be an executive summary at the beginning of the plan). These are just my minimum components for reviewing a business plan, but they should give you a good guide. If you’re looking for more insight, vc firm sequoia capital has a nice breakdown of what its partners look for in business how important this topic is, let’s revisit it next time and i’ll cover some additional business plan tips that i’ve found helpful in my own tuned for the next post and in the meantime, let me know your thoughts on how to best structure a business reneur live ise 500 ss opportunities iption on the next to articles to add them to your ss plans: a step-by-step guide to writing a business plan will outline the most important parts and what should be included in an effective reneurs aren't risk-seekers -- they just handle risk _studio | getty images. Business plan is a written description of your business's future, a document that tells what you plan to do and how you plan to do it. If you jot down a paragraph on the back of an envelope describing your business strategy, you've written a plan, or at least the germ of a ss plans are inherently strategic. You want to get to a there, a point in the future (usually three to five years out) at which time your business will have a different set of resources and abilities as well as greater profitability and increased assets. Your plan shows how you will get from here to d: 7 steps to a perfectly written business planyou can visit our small business encyclopedia to learn more about business plans or our formnet area to get the necessary forms to get writing your planhow long should your plan be? Your goals and objectivesoutline your financing needsplan what you'll do with your plan don't forget about marketingwriting your business planhow to write a business planhow to start a businessthe ingredients of a marketing planupdating your business planenhancing your business planbusiness plan toolsbusiness plan softwarebooks and how-to manualsbusiness plan templatessample business plansbusiness planning videos what investors really think about your business planat our entrepreneur magazine roundtable, financial pros offer tough talk about the business plans of first-time d: how to start a business with (almost) no money how can i hire someone to help write my business plan? Responds to a reader seeking advice on finding a low-cost writer to help with a business d: more business plan ad will close in 15 seconds... 3 free articles article is available only to harvard business review magazine read the free executive summary of this article, simply close this you are already a magazine subscriber, please sign in to get to write a great business the july–august 1997 –august 1997 seasoned investor knows that detailed financial projections for a new company are an act of imagination. Nevertheless, most business plans pour far too much ink on the numbers–and far too little on the information that really matters. William sahlman suggests that a great business plan is one that focuses on a series of questions. As for opportunity, the plan should focus on two questions: is the market for the venture’s product or service large or rapidly growing (or preferably both)? Finally, the plan should look unflinchingly at the risks the new venture faces, giving would-be backers a realistic idea of what magnitude of reward they can expect and when they can expect it. A great business plan is not easy to compose, sahlman acknowledges, largely because most entrepreneurs are wild-eyed optimists. A better deal, not to mention a better shot at success, awaits entrepreneurs who use areas of business attract as much attention as new ventures, and few aspects of new-venture creation attract as much attention as the business plan. A growing number of annual business-plan contests are springing up across the united states and, increasingly, in other countries. Indeed, judging by all the hoopla surrounding business plans, you would think that the only things standing between a would-be entrepreneur and spectacular success are glossy five-color charts, a bundle of meticulous-looking spreadsheets, and a decade of month-by-month financial g could be further from the truth. In my experience with hundreds of entrepreneurial startups, business plans rank no higher than 2—on a scale from 1 to 10—as a predictor of a new venture’s success. And sometimes, in fact, the more elaborately crafted the document, the more likely the venture is to, well, flop, for lack of a more euphemistic ’s wrong with most business plans? These maneuvers create a vicious circle of inaccuracy that benefits no ’t misunderstand me: business plans should include some numbers. But those numbers should appear mainly in the form of a business model that shows the entrepreneurial team has thought through the key drivers of the venture’s success or failure. The model should also address the break-even issue: at what level of sales does the business begin to make a profit? You want to speak the language of investors—and also make sure you have asked yourself the right questions before setting out on the most daunting journey of a businessperson’s career—i recommend basing your business plan on the framework that follows. Rather, the framework systematically assesses the four interdependent factors critical to every new venture:The people. 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 context. An assessment of everything that can go wrong and right, and a discussion of how the entrepreneurial team can ss plans: for entrepreneurs only? Accompanying article talks mainly about business plans in a familiar context, as a tool for entrepreneurs. 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.

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 problem could be avoided in large part if intrapreneurial ventures followed the guidelines set out in the accompanying article. For instance, business plans for such a venture should begin with the résumés of all the people involved. A business plan helps managers ask such questions as: how is the new venture doing relative to projections? Perhaps useful lessons can be learned by studying the world of independent ventures, one lesson being: write a great business assumption behind the framework is that great businesses have attributes that are easy to identify but hard to assemble. The opportunity has an attractive, sustainable business model; it is possible to create a competitive edge and defend it. Many options exist for expanding the scale and scope of the business, and these options are unique to the enterprise and its team. Value can be extracted from the business in a number of ways either through a positive harvest event—a sale—or by scaling down or liquidating. If only reality were so i receive a business plan, i always read the résumé section first. A business plan should candidly describe each team member’s knowledge of the new venture’s type of product or service; its production processes; and the market itself, from competitors to customers. The surprise element of working with a start-up is somewhat y, the people part of a business plan should receive special care because, simply stated, that’s where most intelligent investors focus their attention. These plans are filled with tantalizing ideas for new products and services that will change the world and reap billions in the process—or so they say. And if there is nothing solid about their experience and abilities to herald, then the entrepreneurial team should think again about launching the it comes to the opportunity itself, a good business plan begins by focusing on two questions: is the total market for the venture’s product or service large, rapidly growing, or both? And, indeed, many will not invest in a company that cannot reach a significant scale (that is, $50 million in annual revenues) within five guide to building your business case ebook + sheen with amy for attractiveness, investors are obviously looking for markets that actually allow businesses to make some money. The profit margins of bloomberg and first call put the disk drive business to opportunity of a lifetime—or is it? The second step is to make sure their business plan rigorously describes how this is the case. And if it isn’t the case, their business plan needs to specify how the venture will still manage to make enough of a profit that investors (or potential employees or suppliers, for that matter) will want to it examines the new venture’s industry, a business plan must describe in detail how the company will build and launch its product or service into the marketplace. Economically viable access to customers is the key to business, yet many entrepreneurs take the field of dreams approach to this notion: build it, and they will come. He made his pitch to a prospective venture-capital investor who rejected the plan, stating, “i just don’t think the dogs will eat the dog food. It is tough to guess how much people will pay for something, but a business plan must address that topic. A business plan must demonstrate that careful consideration has been given to the new venture’s pricing list of questions about the new venture’s opportunity focuses on the direct revenues and the costs of producing and marketing a product. A sensible proposal, however, also involves assessing the business model from a perspective that takes into account the investment required—that is, the balance sheet side of the equation. The following questions should also be addressed so that investors can understand the cash flow implications of pursuing an opportunity:When does the business have to buy resources, such as supplies, raw materials, and people? Of course, are looking for businesses in which management can buy low, sell high, collect early, and pay late. The business plan needs to spell out how close to that ideal the new venture is expected to come. Even if the answer is “not very”—and it usually is—at least the truth is out there to opportunity section of a business plan must also bring a few other issues to the surface. Similarly, building on the success of its personal-finance software program quicken, intuit now sells software for electronic banking, small-business accounting, and tax preparation, as well as personal-printing supplies and on-line information services—to name just a few of its highly profitable ancillary , lots of business plans runneth over on the subject of the new venture’s potential for growth and expansion. Over the past 15 years, i have seen scores of individuals who have devised a better mousetrap—newfangled creations from inflatable pillows for use on airplanes to automated car-parking systems. Sometimes, the inventor refuses to spend the money required by or share the rewards sufficiently with the business side of the company. Whatever the reason, better-mousetrap businesses have an uncanny way of r opportunity trap that business plans—and entrepreneurs in general—need to pay attention to is the tricky business of arbitrage. Some of the industry consolidations going on today reflect a different kind of arbitrage—the ability to buy small businesses at a wholesale price, roll them up together into a larger package, and take them public at a retail price, all without necessarily adding value in the er the reason, better-mousetrap businesses have an uncanny way of advantage of arbitrage opportunities is a viable and potentially profitable way to enter a business. The trick in these businesses is to use the arbitrage profits to build a more enduring business model, and business plans must explain how and when that will for competition, it probably goes without saying that all business plans should carefully and thoroughly cover this territory, yet some don’t.

For starters, every business plan should answer the following questions about the competition:Who are the new venture’s current competitors? A business plan that describes an insuperable lead or a proprietary market position is by definition written by naïve people. That goes not just for the competition section of the business plan but for the entire discussion of the opportunity. And at yet another level are factors like technology that define the limits of what a business or its competitors can t often has a tremendous impact on every aspect of the entrepreneurial process, from identification of opportunity to harvest. A shift in context turns an unattractive business into an attractive one, and vice versa. Tax reforms enacted in 1986 created havoc for companies in the real estate business, eliminating almost every positive incentive to invest. Many previously successful operations went out of business soon after the new rules were put in business plan should contain certain pieces of evidence related to context. Second, and more important, they should demonstrate that they know the venture’s context will inevitably change and describe how those changes might affect the business. Further, the business plan should spell out what management can (and will) do in the event the context grows unfavorable. Finally, the business plan should explain the ways (if any) in which management can affect context in a positive way. For example, management might be able to have an impact on regulations or on industry standards through lobbying concept that context is fluid leads directly to the fourth leg of the framework i propose: a discussion of risk and how to manage it. I’ve come to think of a good business plan as a snapshot of an event in the future. But the best business plans go beyond that; they are like movies of the future. They unfold possibilities of action and business plans, in other words, discuss people, opportunity, and context as a moving target. Therefore, any business plan worth the time it takes to write or read needs to focus attention on the dynamic aspects of the entrepreneurial izing risk and it comes to the matter of risk and reward in a new venture, a business plan benefits enormously from the inclusion of two graphs. But to be honest, even that kind of picture belongs in the business plan because it is a fair warning to investors that the new venture’s team is completely out of touch with reality and should be avoided at all second picture complements the first. And finally, there is a small chance that the initial outlay of cash will spawn a 200% internal rate of return, which might have occurred if you had happened to invest in microsoft when it was a private lly, this picture helps investors determine what class of investment the business plan is presenting. It’s then up to the investors to decide how much risk they want to live with against what kind of , the people who write business plans might be inclined to skew the picture to make it look as if the probability of a significant return is downright huge and the possibility of loss is negligible. As harvard business school professor (and venture capitalist) howard stevenson says, true entrepreneurs want to capture all the reward and give all the risk to others. The best business is a post office box to which people send cashier’s checks. Means that the plan must unflinchingly confront the risks ahead—in terms of people, opportunity, and context. Its business plan would benefit enormously by stating that management intends to hedge its exposure through the financial-futures market by purchasing a contract that does well when interest rates go up. Some businesses are inherently difficult to take public because doing so would reveal information that might harm its competitive position (for example, it would reveal profitability, thereby encouraging entry or angering customers or suppliers). All sane people want to avoid ore, the business plan should talk candidly about the end of the process. How will the investor eventually get money out of the business, assuming it is successful, even if only marginally so? A business plan should be the place where that map is drawn, for, as every traveler knows, a journey is a lot less risky when you have a business plan is written, of course, the goal is to land a deal. Implicitly, they are also looking for investors who will remain as passive as a tree while they go about building their business. Such an exercise reveals the true economics of the business and can help enormously in determining how much money the new venture actually requires and in what stages. I consider it a prerequisite of putting together a winning the many sins committed by business plan writers is arrogance. Business plan must not be an albatross that hangs around the neck of the entrepreneurial team, dragging it into oblivion. Instead, a business plan must be a call for action, one that recognizes management’s responsibility to fix what is broken proactively and in real time. Plan must demonstrate mastery of the entire entrepreneurial process, from identification of opportunity to harvest.

But there is little doubt that crafting a business plan so that it thoroughly and candidly addresses the ingredients of success—people, opportunity, context, and the risk/reward picture—is vitally important. In the absence of a crystal ball, in fact, a business plan built of the right information and analysis can only be called indispensable. Version of this article appeared in the july–august 1997 issue of harvard business m a. D’arbeloff-mba class of 1955 professor of business administration at the harvard business article is about strategic reneurial reneurial management.