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It does not provide the kind of “winning” formula touted by some current how-to books and software programs for entrepreneurs. Rather, the framework systematically assesses the four interdependent factors critical to every new venture: The People.
The men and women starting and running the venture, as well as the outside parties providing key services or important resources for it, such as its lawyers, accountants, and suppliers. 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 success. The big picture—the regulatory environment, interest rates, demographic trends, inflation, and the like—basically, factors that inevitably change but cannot be controlled by the entrepreneur. An assessment of everything that can go wrong and right, and a discussion of how the entrepreneurial team can respond.
The answer to the first question is an emphatic yes; the answer to the second, an equally emphatic no.
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 door.
Both graduate and undergraduate schools devote entire courses to the subject.
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 projections. 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. Most waste too much ink on numbers and devote too little to the information that really matters to intelligent investors.
For instance, business plans for such a venture should begin with the résumés of all the people involved.Investors know about the padding effect and therefore discount the figures in business plans.These maneuvers create a vicious circle of inaccuracy that benefits no one.After all, the marketplace does not differentiate between products or services based on who is pouring money into them behind the scenes.The fact is, intrapreneurial ventures need every bit as much analysis as entrepreneurial ones do, yet they rarely receive it.
What has the team done in the past that would suggest it would be successful in the future, and so on?