how to create a great business plan
TRANSCRIPT
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By:
Jorge L Sanchez
1629024
06/17/13
How to Create a Great Business Plan!
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How to Create a Great Business Plan!
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Executive Summary
This document will go about explaining to you how, in a few short steps, you can create a professional, attractive
Business Plan that you can share with investors to gain funding for your startup. This is by no means a definitive
guide, and should be used as a framework for how to go about creating and structuring your Business Plan. But
by following some basic tips and ideas, you should be half way to creating a great Business Plan!
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Table of Contents
Executive Summary ......................................................................................................................................................2
Introduction .................................................................................................................................................................4
Step One: The Beginnings ............................................................................................................................................4
Step Two: Your Team ...................................................................................................................................................4
Step Three: Your Chance ..............................................................................................................................................5
Step Four: Identifying Resources .................................................................................................................................5
Step Five: The Competition ..........................................................................................................................................5
Step Six: The Risks ........................................................................................................................................................5
Step Seven: The Deal ....................................................................................................................................................6
Step Eight: The Albatross .............................................................................................................................................6 Conclusion ....................................................................................................................................................................6
References....................................................................................................................................................................7
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Introduction
This document will hope to prepare you in creating a successful business plan for your business. It is however, by no means,
an exhaustive guide of everything you must do, but more an overview of specific strategies and ideas that you should
implement into your business plan. This document is based on “How to Write a Great Business Plan” by William A. Sahlman,
a Professor of Business Administration at the Harvard Business School. In it, he gives several tips and advice that I will
attempt to condense into an easy to read format so that you can create the best business plan for your startup.
Step One: The Beginnings
The first thing you should do when creating a business plan is deciding what your business should do! This may seem like a
trivial thing to say, but many people start business plans without formulating what their business will do differently then
their competitors and why this will set them apart. In fact, at this point it is trivial to perform market research and compile
numbers and statistics, rather it is more important to focus on who you are, and if relevant, who is running this new venture
along with you. What is your experience? What makes your knowledge in this area better then someone else’s? This isn’t to
say that you should not have any numbers in your plan, but the bulk of it should focus on what problem you have found, and
how your product or service aims to fix or alleviate that problem and what makes it better or more likely to succeed then
competing products or services.
Step Two: Your Team
In the article, Professor Sahlman explains, “When I receive a business plan, I always read the résumé section first. Not
because the people part of the new venture is the most important, but because without the right team, not of the other parts
really matters.” (Sahlman, 1997) Thus it is important for you to answer several key questions about yourself and your team
when providing your resume in the business plan. He provides 14 “personal” questions each business plan should offer,
which I will show here now:
Where are the founders from?
Where have they been educated?
Where have the worked – and for whom?
What have they accomplished – professionally and personally – in the past?
What is their reputation within the business community?
What experience do they have that is directly relevant to the opportunity they are pursuing?
What skills, abilities, and knowledge do they have?
How realistic are that about the venture’s chances for success and the tribulations it will face?
Who else needs to be on the team?
Are they prepared to recruit high-quality people?
How will they respond to adversity?
Do they have the mettle to make the inevitable hard choices that have to be made?
How committed are they to this venture?
What are their motivations?
(Sahlman, 1997)
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Step Three: Your Chance
The next part you should work on is identifying what problem you are trying to solve. The most important thing to find out is
who is the potential customer for your companies business. From there, it is of paramount importance to find out how this
customer shops for this particular product or service and what features or items make this a persuasive purchase for the
customer. From there, you should determine at what price point your product or service should be priced to not only be
competitive in the marketplace, but to make money for your investors. After this is identified, the next step is to find out
how you will reach out to all your potential customers and convince them that your product is the right one for them and
make sure you have the knowledge of their needs to keep them as a customer after they have committed to you.
Step Four: Identifying Resources
After identifying and planning how to reach customers, you must find out what resources are needed to get this product or
service in the customer’s hand. Shopping around for suppliers that will give you the best rate may not necessarily be the best
thing, since it may take longer for those materials to reach you. Instead, you should find what gives you the best bang for
your buck, not overly expensive but reasonably fast in order to stay on schedule. You also should consider how these
suppliers will accept payment and what terms are the best for your venture. After this, you should look at other resources,
besides the material things, office space, employees; these are all important things you should find out in order to proceed
to the next step.
Step Five: The Competition
At this point you should gather some information on current competitors and potential competitors. You should find out
who they are and what do they control? Do they have special deals granting them access to raw materials at lower then
market prices? Do they have any strengths or weaknesses that you should be aware of? How can or will they respond to your
new product or service? Are there any other potential competitors who can exploit this opportunity? Are any of these
potential competitors open to forming alliances?
Step Six: The Risks
This is perhaps the most daunting of the steps in creating a successful business plan to achieve. Here, you must confront any
and all possible risks that lie ahead for your venture and address them, head on. You should look at the previous five steps
and identify what risks lay there and perhaps elsewhere, and tackle what you’d do if they were to happen. What if one of
your suppliers shuts down? Or your business partner leaves? Or you loose a contract? These are all things that must be
identified and dealt with in order for you business plan to stand on its own. It is hard for many entrepreneurs to think so
negatively and think of these what-if scenarios, but the rewards are much better if potential investors are well aware that
you have been pragmatic and thought of these possibilities and thought of steps that can be taken should they ever occur.
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Step Seven: The Deal
You’re almost done! All that’s left is to get a deal with potential investors. Here is where many business plans fail. It is
important to reach a sensible deal that is equitable to both parties. Here, Professor Sahlman provides six characteristics that
result in sensible deals:
They are simple.
They are fair.
They emphasize trust rather than legal ties.
They do not blow apart if actual differs slightly from plan.
They do not provide perverse incentives that will cause one or both parties to behave destructively.
They are written on a pile of papers no greater than one-quarter inch thick.
(Sahlman, 1997) It is important to follow these steps and to treat the ventures as what the author describes “as a series of
experiments.” You should ensure that each step of the experiment is properly funded and successful before moving on to
the next one. This way you avoid calamity and can ensure that your venture is successful.
Step Eight: The Albatross
The author uses the metaphor of an albatross as a curse to show you that this plan, no matter how well planned, thought
out and detailed is by no means concrete. Things change, the consumer’s tastes and wants are fluid and nothing can be
taken for granted. You must be proactive in seeing changes on the horizon and implementing necessary corrections before it
is too late, and not hide behind the business plan while the venture flounders.
Conclusion
A successful business plan must marry many elements together to create a recipe ripe for investment and prosperity. In
business, risk is expected but not unavoidable. Your plan should show proficiency of the entire process and professionalism.Your plan should exude confidence, but not to the level of being arrogant. You should have clearly identified your problem
and your team, found the resources and team that you need, and identifying what competition is probable and the
associated risks with your plan. Finally, you should create an equitable deal for potential investors and come to the
realization that this plan is not a blueprint, but a guide that can be amended and updated. Only then can you create a great
business plan!
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References
Sahlman, W. (1997, July-August). How to write a great business plan. Harvard Business Review , Retrieved from
http://hbr.org/1997/07/how-to-write-a-great-business-plan