Most business plans are to big on the numbers and far too small on the information that really matters. William Sahlman suggests that a great business plan is one that focuses on a series of questions. These questions relate to the four factors critical to the success of every new venture:
2. the opportunity,
3. the context,
4. and the possibilities for both risk and reward.
The questions about people revolve around three issues: What do they know? Whom do they know? and How well are they known? As for opportunity, the plan should focus on two questions: Is the market ready for the trades product or service large or rapidly growing (or preferably both)? and Is the market structurally attractive? Then, in addition to demonstrating an understanding of the context in which their venture will operate, trades business owners should make clear how they will respond when that context inevitably changes. Finally, the plan should look unflinchingly at the risks the new venture faces, giving would-be backers a realistic idea of what magnitude of reward they can expect and when they can expect it. A great business plan is not easy to compose, Sahlman acknowledges, largely because most entrepreneurs are wild-eyed optimists. But one that asks the right questions is a powerful tool. A better business, not to mention a better shot at success, awaits entrepreneurs who use it. HBR Aug 1997 Sahlman