2292 Midterm (4/7)
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The framework for a business plan should assess the four interdependent factors critical to every new venture:
- The people: the men and women starting and running the venture
- The opportunity: a profile of the business itself-- what it will sell and to whom
- The context: the big picture-- the regulatory environment, interest rates-- factors that inevitably change but cannot be controlled by the entrepreneur
- Risk and Reward: assessment of everything that can go wrong and right, and a discussion of how the entrepreneurial tema can respond
Does the market differentiate between products or services based on who is pouring money into them behind the scenes?
Intrapreneurial ventures need every bit as much analysis as entrepreneurial ones do, yet they rarely receive it.
- Instead, inside big companies, new businesses get proposed in the form of capital-budgeting- requests
- In the history of such proposals, a plan has never submitted that did not promise returns in excess of corporate hurdles
Guidelines that intrapreneurial ventures should follow to avoid the analysis problem
- Business plans for such a venture should begin with the resumes of all the people involved
- The new venture's product or service should be fully analyzed in terms of its opportunity and context
When professional venture capitalists invest in new companies, they track performance as a matter of course
- In large companies, scrutiny of a new venture is often inconsistent
- A business plan helps managers ask such questions as: How is the new venture doing relative to projections
- Many successful companies have been built with the help of venture capitalists
- 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
- The people part of a business plan should receive special care because that's where most intelligent investors focus their attention.
- 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
- Smart investors try hard to identify high-growth-potential markets early in their evolution
- As for attractiveness, investors are looking for markets that actually allow businesses to make some money
Steps for determining the opportunity for a business plan
- Make sure they are entering an industry that is large and/or growing, and one that is structurally attractive
- Make sure their business plan rigorously describes how this is the case
- Once 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
- A business plan must demonstrate that careful consideration has been given to the new venture's pricing scheme
The tricky business of arbitrage
This opportunity trap is that
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