Description
In such a detailed file in relation to how to write a great business plan by william a. sahlman harvard business review.
!"#$%&'( ln 8esources LlsL 12.14.12.docx
12/18/2012 9:29 ÞM 1 of 14
*"+ (" ,-.(& / 0-&/( 1$2.'&22 34/'
by William A. Sahlman - Parvard 8uslness 8evlewhttp://hbr.org/1997/07/how-to-write-a-great-business-plan/ar/1
lew areas of buslness aLLracL as much aLLenLlon as new venLures, and few aspecLs of new-venLure
creaLlon aLLracL as much aLLenLlon as Lhe buslness plan. CounLless books and arLlcles ln Lhe popular
press dlssecL Lhe Loplc. A growlng number of annual buslness-plan conLesLs are sprlnglng up across Lhe
unlLed SLaLes and, lncreaslngly, ln oLher counLrles. 8oLh graduaLe and undergraduaLe schools devoLe
enLlre courses Lo Lhe sub[ecL. lndeed, [udglng by all Lhe hoopla surroundlng buslness plans, you would
Lhlnk LhaL Lhe only Lhlngs sLandlng beLween a would-be enLrepreneur and specLacular success are glossy
flve-color charLs, a bundle of meLlculous-looklng spreadsheeLs, and a decade of monLh-by-monLh
flnanclal pro[ecLlons.
noLhlng could be furLher from Lhe LruLh. ln my experlence wlLh hundreds of enLrepreneurlal sLarLups,
buslness plans rank no hlgher Lhan 2-on a scale from 1 Lo 10-as a predlcLor of a new venLure's
success. And someLlmes, ln facL, Lhe more elaboraLely crafLed Lhe documenL, Lhe more llkely Lhe
venLure ls Lo, well, flop, for lack of a more euphemlsLlc word.
WhaL's wrong wlLh mosL buslness plans? 1he answer ls relaLlvely sLralghLforward. MosL wasLe Loo much
lnk on numbers and devoLe Loo llLLle Lo Lhe lnformaLlon LhaL really maLLers Lo lnLelllgenL lnvesLors. As
every seasoned lnvesLor knows, flnanclal pro[ecLlons for a new company-especlally deLalled, monLh-
by-monLh pro[ecLlons LhaL sLreLch ouL for more Lhan a year-are an acL of lmaglnaLlon. An
enLrepreneurlal venLure faces far Loo many unknowns Lo predlcL revenues, leL alone proflLs. Moreover,
few lf any enLrepreneurs correcLly anLlclpaLe how much caplLal and Llme wlll be requlred Lo accompllsh
Lhelr ob[ecLlves. 1yplcally, Lhey are wlldly opLlmlsLlc, paddlng Lhelr pro[ecLlons. lnvesLors know abouL Lhe
paddlng effecL and Lherefore dlscounL Lhe flgures ln buslness plans. 1hese maneuvers creaLe a vlclous
clrcle of lnaccuracy LhaL beneflLs no one.
uon'L mlsundersLand me: buslness plans should lnclude some numbers. 8uL Lhose numbers should
appear malnly ln Lhe form of a buslness model LhaL shows Lhe enLrepreneurlal Leam has LhoughL
Lhrough Lhe !"# %&'("&) *+ ,-" (".,/&"0) )/11")) *& +2'3/&". ln manufacLurlng, such a drlver mlghL be Lhe
yleld on a producLlon process, ln magazlne publlshlng, Lhe anLlclpaLed renewal raLe, or ln sofLware, Lhe
lmpacL of uslng varlous dlsLrlbuLlon channels. 1he model should also address Lhe break-even lssue: AL
4-2, 3"("3 *+ )23") %*") ,-" 5/)'.")) 5"6'. ,* 72!" 2 8&*+',? And even more lmporLanL, 9-". %*") 12)-
+3*4 ,/&. 8*)','("? WlLhouL a doubL, Lhese quesLlons deserve a few pages ln any buslness plan. near Lhe
back.
,5/( 6"&2 /( (5& 7-"'(8 WhaL lnformaLlon does a good buslness plan conLaln?
lf you wanL Lo speak Lhe language of lnvesLors-and also make sure you have asked yourself Lhe rlghL
quesLlons before seLLlng ouL on Lhe mosL daunLlng [ourney of a buslnessperson's career-l recommend
baslng your buslness plan on Lhe framework LhaL follows. lL does noL provlde Lhe klnd of ºwlnnlng"
formula LouLed by some currenL how-Lo books and sofLware programs for enLrepreneurs. nor ls lL a
gulde Lo braln surgery. 8aLher, Lhe framework sysLemaLlcally assesses Lhe four lnLerdependenL facLors
crlLlcal Lo every new venLure:
!"#$%&'( ln 8esources LlsL 12.14.12.docx
12/18/2012 9:29 ÞM 2 of 14
The People. 1he men and women sLarLlng and runnlng Lhe venLure, as well as Lhe ouLslde parLles
provldlng key servlces or lmporLanL resources for lL, such as lLs lawyers, accounLanLs, and suppllers.
The Opportunity. A proflle of Lhe buslness lLself-whaL lL wlll sell and Lo whom, wheLher Lhe buslness
can grow and how fasL, whaL lLs economlcs are, who and whaL sLand ln Lhe way of success.
The Context. 1he blg plcLure-Lhe regulaLory envlronmenL, lnLeresL raLes, demographlc Lrends,
lnflaLlon, and Lhe llke-baslcally, facLors LhaL lnevlLably change buL cannoL be conLrolled by Lhe
enLrepreneur.
Risk and Reward. An assessmenL of everyLhlng LhaL can go wrong and rlghL, and a dlscusslon of how
Lhe enLrepreneurlal Leam can respond.
Business Plans: For Entrepreneurs Only?
1he accompanylng arLlcle Lalks malnly abouL buslness plans ln a famlllar conLexL, as a Lool for
enLrepreneurs. 8uL qulLe ofLen, sLarL-ups are launched wlLhln esLabllshed companles. uo Lhose
new venLures requlre buslness plans? And lf Lhey do, should Lhey be dlfferenL from Lhe plans
enLrepreneurs puL LogeLher?
1he answer Lo Lhe flrsL quesLlon ls an emphaLlc yes, Lhe answer Lo Lhe second, an equally
emphaLlc no. All new venLures-wheLher Lhey are funded by venLure caplLallsLs or, as ls Lhe case
wlLh lnLrapreneurlal buslnesses, by shareholders-need Lo pass Lhe same acld LesLs. AfLer all,
Lhe markeLplace does noL dlfferenLlaLe beLween producLs or servlces based on who ls pourlng
money lnLo Lhem behlnd Lhe scenes.
1he facL ls, lnLrapreneurlal venLures need every blL as much analysls as enLrepreneurlal ones do,
yeL Lhey rarely recelve lL. lnsLead, lnslde blg companles, new buslnesses geL proposed ln Lhe
form of caplLal-budgeLlng requesLs. 1hese faceless documenLs are sub[ecL Lo deLalled flnanclal
scruLlny and a consensus-bulldlng process, as Lhe pro[ecL wends lLs way Lhrough Lhe chaln of
command, whaL l call Lhe ºneuLron bomb" model of pro[ecL governance. Powever, ln Lhe hlsLory
of such proposals, a plan never has been submlLLed LhaL dld noL promlse reLurns ln excess of
corporaLe hurdle raLes. lL ls only afLer Lhe new buslness ls launched LhaL Lhese numbers explode
aL Lhe organlzaLlon's fronL door.
1haL problem could be avolded ln large parL lf lnLrapreneurlal venLures followed Lhe guldellnes
seL ouL ln Lhe accompanylng arLlcle. lor lnsLance, buslness plans for such a venLure should begln
wlLh Lhe resumes of all Lhe people lnvolved. WhaL has Lhe Leam done ln Lhe pasL LhaL would
suggesL lL would be successful ln Lhe fuLure, and so on? ln addlLlon, Lhe new venLure's producL
or servlce should be fully analyzed ln Lerms of lLs opporLunlLy and conLexL. Colng Lhrough Lhe
process forces a klnd of dlsclpllne LhaL ldenLlfles weaknesses and sLrengLhs early on and helps
managers address boLh.
lL also helps enormously lf such dlsclpllne conLlnues afLer Lhe lnLrapreneurlal venLure llfLs off.
When professlonal venLure caplLallsLs lnvesL ln new companles, Lhey Lrack performance as a
maLLer of course. 8uL ln large companles, scruLlny of a new venLure ls ofLen lnconslsLenL. 1haL
shouldn'L or needn'L be Lhe case. A buslness plan helps managers ask such quesLlons as: Pow ls
Lhe new venLure dolng relaLlve Lo pro[ecLlons? WhaL declslons has Lhe Leam made ln response
Lo new lnformaLlon? Pave changes ln Lhe conLexL made addlLlonal fundlng necessary? Pow
could Lhe Leam have predlcLed Lhose changes? Such quesLlons noL only keep a new venLure
runnlng smooLhly buL also help an organlzaLlon learn from lLs mlsLakes and Lrlumphs.
!"#$%&'( ln 8esources LlsL 12.14.12.docx
12/18/2012 9:29 ÞM 3 of 14
Many successful companles have been bullL wlLh Lhe help of venLure caplLallsLs. Many of Lhe
underlylng opporLunlLles could have been explolLed by large companles. Why weren'L Lhey?
Þerhaps useful lessons can be learned by sLudylng Lhe world of lndependenL venLures, one
lesson belng: WrlLe a greaL buslness plan.
1he assumpLlon behlnd Lhe framework ls LhaL !"#$% '()*+#))#) ,$-# $%%"*'(%#) %,$% $"# #$). %/ *0#+%*1.
'(% ,$"0 %/ $))#2'3#. 1hey have an experlenced, energeLlc managerlal Leam from Lhe Lop Lo Lhe
boLLom. 1he Leam's members have skllls and experlences dlrecLly relevanL Lo Lhe opporLunlLy Lhey are
pursulng. ldeally, Lhey wlll have worked successfully LogeLher ln Lhe pasL. 1he opporLunlLy has an
aLLracLlve, susLalnable buslness model, lL ls posslble Lo creaLe a compeLlLlve edge and defend lL. Many
opLlons exlsL for expandlng Lhe scale and scope of Lhe buslness, and Lhese opLlons are unlque Lo Lhe
enLerprlse and lLs Leam. value can be exLracLed from Lhe buslness ln a number of ways elLher Lhrough a
poslLlve harvesL evenL-a sale-or by scallng down or llquldaLlng. 1he conLexL ls favorable wlLh respecL
Lo boLh Lhe regulaLory and Lhe macro-economlc envlronmenLs. 8lsk ls undersLood, and Lhe Leam has
consldered ways Lo mlLlgaLe Lhe lmpacL of dlfflculL evenLs. ln shorL, greaL buslnesses have Lhe four parLs
of Lhe framework compleLely covered. lf only reallLy were so neaL.
The People
When l recelve a buslness plan, l always read Lhe resume secLlon flrsL. noL because Lhe people parL of
Lhe new venLure ls Lhe mosL lmporLanL, buL because wlLhouL Lhe rlghL Leam, none of Lhe oLher parLs
really maLLers.
l read Lhe resumes of Lhe venLure's Leam wlLh a llsL of quesLlons ln mlnd. (See Lhe lnserL ºWho Are 1hese
Þeople, Anyway?") All Lhese quesLlons geL aL Lhe same Lhree lssues abouL Lhe venLure's Leam members:
WhaL do Lhey know? Whom do Lhey know? and Pow well are Lhey known?
Who Are These People, Anyway?
Fourteen “Personal” Questions Every Business Plan Should Answer
1. Where are the founders from?
2. Where have they been educated?
3. Where have they worked—and for whom?
4. What have they accomplished—professionally and personally—in the past?
5. What is their reputation within the business community?
6. What experience do they have that is directly relevant to the opportunity they are
pursuing?
7. What skills, abilities, and knowledge do they have?
8. How realistic are they about the venture’s chances for success and the tribulations it will
face?
!"#$%&'( ln 8esources LlsL 12.14.12.docx
12/18/2012 9:29 ÞM 4 of 14
9. Who else needs to be on the team?
10. Are they prepared to recruit high-quality people?
11. How will they respond to adversity?
12. Do they have the mettle to make the inevitable hard choices that have to be made?
13. How committed are they to this venture?
14. What are their motivations?
WhaL and whom Lhey know are maLLers of lnslghL and experlence. Pow famlllar are Lhe Leam members
wlLh lndusLry players and dynamlcs? lnvesLors, noL surprlslngly, value managers who have been around
Lhe block a few Llmes. A buslness plan should candldly descrlbe each Leam member's knowledge of Lhe
new venLure's Lype of producL or servlce, lLs producLlon processes, and Lhe markeL lLself, from
compeLlLors Lo cusLomers. lL also helps Lo lndlcaLe wheLher Lhe Leam members have worked LogeLher
before. noL played-as ln roomed LogeLher ln college-buL worked.
lnvesLors also look favorably on a Leam LhaL ls known because Lhe real world ofLen prefers noL Lo deal
wlLh sLarL-ups. 1hey're Loo unpredlcLable. 1haL changes, however, when Lhe new company ls run by
people well known Lo suppllers, cusLomers, and employees. 1helr enLerprlse may be brand new, buL
Lhey aren'L. 1he surprlse elemenL of worklng wlLh a sLarL-up ls somewhaL amelloraLed.
llnally, Lhe people parL of a buslness plan should recelve speclal care because, slmply sLaLed, LhaL's
where mosL lnLelllgenL lnvesLors focus Lhelr aLLenLlon. A Lyplcal professlonal venLure-caplLal flrm
recelves approxlmaLely 2,000 buslness plans per year. 1hese plans are fllled wlLh LanLallzlng ldeas for
new producLs and servlces LhaL wlll change Lhe world and reap bllllons ln Lhe process-or so Lhey say.
8uL Lhe facL ls, mosL venLure caplLallsLs belleve LhaL '%"2) 2&" 2 %'7" 2 %*:".; *.3# "
In such a detailed file in relation to how to write a great business plan by william a. sahlman harvard business review.
!"#$%&'( ln 8esources LlsL 12.14.12.docx
12/18/2012 9:29 ÞM 1 of 14
*"+ (" ,-.(& / 0-&/( 1$2.'&22 34/'
by William A. Sahlman - Parvard 8uslness 8evlewhttp://hbr.org/1997/07/how-to-write-a-great-business-plan/ar/1
lew areas of buslness aLLracL as much aLLenLlon as new venLures, and few aspecLs of new-venLure
creaLlon aLLracL as much aLLenLlon as Lhe buslness plan. CounLless books and arLlcles ln Lhe popular
press dlssecL Lhe Loplc. A growlng number of annual buslness-plan conLesLs are sprlnglng up across Lhe
unlLed SLaLes and, lncreaslngly, ln oLher counLrles. 8oLh graduaLe and undergraduaLe schools devoLe
enLlre courses Lo Lhe sub[ecL. lndeed, [udglng by all Lhe hoopla surroundlng buslness plans, you would
Lhlnk LhaL Lhe only Lhlngs sLandlng beLween a would-be enLrepreneur and specLacular success are glossy
flve-color charLs, a bundle of meLlculous-looklng spreadsheeLs, and a decade of monLh-by-monLh
flnanclal pro[ecLlons.
noLhlng could be furLher from Lhe LruLh. ln my experlence wlLh hundreds of enLrepreneurlal sLarLups,
buslness plans rank no hlgher Lhan 2-on a scale from 1 Lo 10-as a predlcLor of a new venLure's
success. And someLlmes, ln facL, Lhe more elaboraLely crafLed Lhe documenL, Lhe more llkely Lhe
venLure ls Lo, well, flop, for lack of a more euphemlsLlc word.
WhaL's wrong wlLh mosL buslness plans? 1he answer ls relaLlvely sLralghLforward. MosL wasLe Loo much
lnk on numbers and devoLe Loo llLLle Lo Lhe lnformaLlon LhaL really maLLers Lo lnLelllgenL lnvesLors. As
every seasoned lnvesLor knows, flnanclal pro[ecLlons for a new company-especlally deLalled, monLh-
by-monLh pro[ecLlons LhaL sLreLch ouL for more Lhan a year-are an acL of lmaglnaLlon. An
enLrepreneurlal venLure faces far Loo many unknowns Lo predlcL revenues, leL alone proflLs. Moreover,
few lf any enLrepreneurs correcLly anLlclpaLe how much caplLal and Llme wlll be requlred Lo accompllsh
Lhelr ob[ecLlves. 1yplcally, Lhey are wlldly opLlmlsLlc, paddlng Lhelr pro[ecLlons. lnvesLors know abouL Lhe
paddlng effecL and Lherefore dlscounL Lhe flgures ln buslness plans. 1hese maneuvers creaLe a vlclous
clrcle of lnaccuracy LhaL beneflLs no one.
uon'L mlsundersLand me: buslness plans should lnclude some numbers. 8uL Lhose numbers should
appear malnly ln Lhe form of a buslness model LhaL shows Lhe enLrepreneurlal Leam has LhoughL
Lhrough Lhe !"# %&'("&) *+ ,-" (".,/&"0) )/11")) *& +2'3/&". ln manufacLurlng, such a drlver mlghL be Lhe
yleld on a producLlon process, ln magazlne publlshlng, Lhe anLlclpaLed renewal raLe, or ln sofLware, Lhe
lmpacL of uslng varlous dlsLrlbuLlon channels. 1he model should also address Lhe break-even lssue: AL
4-2, 3"("3 *+ )23") %*") ,-" 5/)'.")) 5"6'. ,* 72!" 2 8&*+',? And even more lmporLanL, 9-". %*") 12)-
+3*4 ,/&. 8*)','("? WlLhouL a doubL, Lhese quesLlons deserve a few pages ln any buslness plan. near Lhe
back.
,5/( 6"&2 /( (5& 7-"'(8 WhaL lnformaLlon does a good buslness plan conLaln?
lf you wanL Lo speak Lhe language of lnvesLors-and also make sure you have asked yourself Lhe rlghL
quesLlons before seLLlng ouL on Lhe mosL daunLlng [ourney of a buslnessperson's career-l recommend
baslng your buslness plan on Lhe framework LhaL follows. lL does noL provlde Lhe klnd of ºwlnnlng"
formula LouLed by some currenL how-Lo books and sofLware programs for enLrepreneurs. nor ls lL a
gulde Lo braln surgery. 8aLher, Lhe framework sysLemaLlcally assesses Lhe four lnLerdependenL facLors
crlLlcal Lo every new venLure:
!"#$%&'( ln 8esources LlsL 12.14.12.docx
12/18/2012 9:29 ÞM 2 of 14
The People. 1he men and women sLarLlng and runnlng Lhe venLure, as well as Lhe ouLslde parLles
provldlng key servlces or lmporLanL resources for lL, such as lLs lawyers, accounLanLs, and suppllers.
The Opportunity. A proflle of Lhe buslness lLself-whaL lL wlll sell and Lo whom, wheLher Lhe buslness
can grow and how fasL, whaL lLs economlcs are, who and whaL sLand ln Lhe way of success.
The Context. 1he blg plcLure-Lhe regulaLory envlronmenL, lnLeresL raLes, demographlc Lrends,
lnflaLlon, and Lhe llke-baslcally, facLors LhaL lnevlLably change buL cannoL be conLrolled by Lhe
enLrepreneur.
Risk and Reward. An assessmenL of everyLhlng LhaL can go wrong and rlghL, and a dlscusslon of how
Lhe enLrepreneurlal Leam can respond.
Business Plans: For Entrepreneurs Only?
1he accompanylng arLlcle Lalks malnly abouL buslness plans ln a famlllar conLexL, as a Lool for
enLrepreneurs. 8uL qulLe ofLen, sLarL-ups are launched wlLhln esLabllshed companles. uo Lhose
new venLures requlre buslness plans? And lf Lhey do, should Lhey be dlfferenL from Lhe plans
enLrepreneurs puL LogeLher?
1he answer Lo Lhe flrsL quesLlon ls an emphaLlc yes, Lhe answer Lo Lhe second, an equally
emphaLlc no. All new venLures-wheLher Lhey are funded by venLure caplLallsLs or, as ls Lhe case
wlLh lnLrapreneurlal buslnesses, by shareholders-need Lo pass Lhe same acld LesLs. AfLer all,
Lhe markeLplace does noL dlfferenLlaLe beLween producLs or servlces based on who ls pourlng
money lnLo Lhem behlnd Lhe scenes.
1he facL ls, lnLrapreneurlal venLures need every blL as much analysls as enLrepreneurlal ones do,
yeL Lhey rarely recelve lL. lnsLead, lnslde blg companles, new buslnesses geL proposed ln Lhe
form of caplLal-budgeLlng requesLs. 1hese faceless documenLs are sub[ecL Lo deLalled flnanclal
scruLlny and a consensus-bulldlng process, as Lhe pro[ecL wends lLs way Lhrough Lhe chaln of
command, whaL l call Lhe ºneuLron bomb" model of pro[ecL governance. Powever, ln Lhe hlsLory
of such proposals, a plan never has been submlLLed LhaL dld noL promlse reLurns ln excess of
corporaLe hurdle raLes. lL ls only afLer Lhe new buslness ls launched LhaL Lhese numbers explode
aL Lhe organlzaLlon's fronL door.
1haL problem could be avolded ln large parL lf lnLrapreneurlal venLures followed Lhe guldellnes
seL ouL ln Lhe accompanylng arLlcle. lor lnsLance, buslness plans for such a venLure should begln
wlLh Lhe resumes of all Lhe people lnvolved. WhaL has Lhe Leam done ln Lhe pasL LhaL would
suggesL lL would be successful ln Lhe fuLure, and so on? ln addlLlon, Lhe new venLure's producL
or servlce should be fully analyzed ln Lerms of lLs opporLunlLy and conLexL. Colng Lhrough Lhe
process forces a klnd of dlsclpllne LhaL ldenLlfles weaknesses and sLrengLhs early on and helps
managers address boLh.
lL also helps enormously lf such dlsclpllne conLlnues afLer Lhe lnLrapreneurlal venLure llfLs off.
When professlonal venLure caplLallsLs lnvesL ln new companles, Lhey Lrack performance as a
maLLer of course. 8uL ln large companles, scruLlny of a new venLure ls ofLen lnconslsLenL. 1haL
shouldn'L or needn'L be Lhe case. A buslness plan helps managers ask such quesLlons as: Pow ls
Lhe new venLure dolng relaLlve Lo pro[ecLlons? WhaL declslons has Lhe Leam made ln response
Lo new lnformaLlon? Pave changes ln Lhe conLexL made addlLlonal fundlng necessary? Pow
could Lhe Leam have predlcLed Lhose changes? Such quesLlons noL only keep a new venLure
runnlng smooLhly buL also help an organlzaLlon learn from lLs mlsLakes and Lrlumphs.
!"#$%&'( ln 8esources LlsL 12.14.12.docx
12/18/2012 9:29 ÞM 3 of 14
Many successful companles have been bullL wlLh Lhe help of venLure caplLallsLs. Many of Lhe
underlylng opporLunlLles could have been explolLed by large companles. Why weren'L Lhey?
Þerhaps useful lessons can be learned by sLudylng Lhe world of lndependenL venLures, one
lesson belng: WrlLe a greaL buslness plan.
1he assumpLlon behlnd Lhe framework ls LhaL !"#$% '()*+#))#) ,$-# $%%"*'(%#) %,$% $"# #$). %/ *0#+%*1.
'(% ,$"0 %/ $))#2'3#. 1hey have an experlenced, energeLlc managerlal Leam from Lhe Lop Lo Lhe
boLLom. 1he Leam's members have skllls and experlences dlrecLly relevanL Lo Lhe opporLunlLy Lhey are
pursulng. ldeally, Lhey wlll have worked successfully LogeLher ln Lhe pasL. 1he opporLunlLy has an
aLLracLlve, susLalnable buslness model, lL ls posslble Lo creaLe a compeLlLlve edge and defend lL. Many
opLlons exlsL for expandlng Lhe scale and scope of Lhe buslness, and Lhese opLlons are unlque Lo Lhe
enLerprlse and lLs Leam. value can be exLracLed from Lhe buslness ln a number of ways elLher Lhrough a
poslLlve harvesL evenL-a sale-or by scallng down or llquldaLlng. 1he conLexL ls favorable wlLh respecL
Lo boLh Lhe regulaLory and Lhe macro-economlc envlronmenLs. 8lsk ls undersLood, and Lhe Leam has
consldered ways Lo mlLlgaLe Lhe lmpacL of dlfflculL evenLs. ln shorL, greaL buslnesses have Lhe four parLs
of Lhe framework compleLely covered. lf only reallLy were so neaL.
The People
When l recelve a buslness plan, l always read Lhe resume secLlon flrsL. noL because Lhe people parL of
Lhe new venLure ls Lhe mosL lmporLanL, buL because wlLhouL Lhe rlghL Leam, none of Lhe oLher parLs
really maLLers.
l read Lhe resumes of Lhe venLure's Leam wlLh a llsL of quesLlons ln mlnd. (See Lhe lnserL ºWho Are 1hese
Þeople, Anyway?") All Lhese quesLlons geL aL Lhe same Lhree lssues abouL Lhe venLure's Leam members:
WhaL do Lhey know? Whom do Lhey know? and Pow well are Lhey known?
Who Are These People, Anyway?
Fourteen “Personal” Questions Every Business Plan Should Answer
1. Where are the founders from?
2. Where have they been educated?
3. Where have they worked—and for whom?
4. What have they accomplished—professionally and personally—in the past?
5. What is their reputation within the business community?
6. What experience do they have that is directly relevant to the opportunity they are
pursuing?
7. What skills, abilities, and knowledge do they have?
8. How realistic are they about the venture’s chances for success and the tribulations it will
face?
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12/18/2012 9:29 ÞM 4 of 14
9. Who else needs to be on the team?
10. Are they prepared to recruit high-quality people?
11. How will they respond to adversity?
12. Do they have the mettle to make the inevitable hard choices that have to be made?
13. How committed are they to this venture?
14. What are their motivations?
WhaL and whom Lhey know are maLLers of lnslghL and experlence. Pow famlllar are Lhe Leam members
wlLh lndusLry players and dynamlcs? lnvesLors, noL surprlslngly, value managers who have been around
Lhe block a few Llmes. A buslness plan should candldly descrlbe each Leam member's knowledge of Lhe
new venLure's Lype of producL or servlce, lLs producLlon processes, and Lhe markeL lLself, from
compeLlLors Lo cusLomers. lL also helps Lo lndlcaLe wheLher Lhe Leam members have worked LogeLher
before. noL played-as ln roomed LogeLher ln college-buL worked.
lnvesLors also look favorably on a Leam LhaL ls known because Lhe real world ofLen prefers noL Lo deal
wlLh sLarL-ups. 1hey're Loo unpredlcLable. 1haL changes, however, when Lhe new company ls run by
people well known Lo suppllers, cusLomers, and employees. 1helr enLerprlse may be brand new, buL
Lhey aren'L. 1he surprlse elemenL of worklng wlLh a sLarL-up ls somewhaL amelloraLed.
llnally, Lhe people parL of a buslness plan should recelve speclal care because, slmply sLaLed, LhaL's
where mosL lnLelllgenL lnvesLors focus Lhelr aLLenLlon. A Lyplcal professlonal venLure-caplLal flrm
recelves approxlmaLely 2,000 buslness plans per year. 1hese plans are fllled wlLh LanLallzlng ldeas for
new producLs and servlces LhaL wlll change Lhe world and reap bllllons ln Lhe process-or so Lhey say.
8uL Lhe facL ls, mosL venLure caplLallsLs belleve LhaL '%"2) 2&" 2 %'7" 2 %*:".; *.3# "