Launch a company

I found a really good chapter in the book ‘ Harvard Business Review on Entrepreneurship’, which talks about how to write a great business plan.

This chapter highlights that most business plans focus on providing financial projections which are crafted out of thin air with no real analysis or backing.

This chapter talks about a framework for writing good business plans which states that every good business plan should include details related to the following 4 aspects:

a) The People: A great business plan talks about who the founders are, where they have worked, been educated, what skills and abilities they have that is directly relevant to the opportunity being pursued.

b) The Opportunity: In addition to some of the previous inputs on identifying the viability of a potential business, its important that entrepreneurs make sure that they are entering an industry that is large and or growing and detail how the company will build and launch its product or service in the marketplace. A great business plan also highlights how an opportunity can grow i.e expand its range of products or services, customer or geographic base. Bottomline, entrepreneurs need to understand that investors are looking for businesses in which management can buy low,sell high, collect early and pay late and a great business plan, highlights how the opportunity in question provides just this.

c)The Context: The big picture/macro economic environment such as regulatory environment, interest rates etc. This can have tremendous impact on opportunities, either create opportunities or make it difficult to convert the opportunity into a viable business. A great business plan should acknowledge the context in which it plans to operate and how the context helps or hinders the business. The business plan should clearly highlight how the management can handle an unfavorable context or how management can influence the context in a positive way.

d) Risk And Reward: Risk is part of every entrepreneurs life. Entrepreneurs need to acknowledge in the business plan how they can deal with moving targets such as people, context and opportunity. Similar to a well executed project, a good business plan is one which analyzes and identifies potential risks upfront and details its risk mitigation plan. As far as reward (for the investor) is concerned, multiple exit options should be presented.