Describe the five key planning elements used in developing the best business plans.

Question

What will be an ideal response?

Answer 1

In addition to the numbers, the best plans convey-and make certain that the entrepreneurs have carefully thought through-five key factors:

1.    The people: The new organization's people should be energetic and have skills and expertise directly relevant to the venture. For many astute investors, the people are the most important element, more important even than the idea. Venture capital firms often receive 2,000 business plans per year; many believe that ideas are a dime a dozen and what counts is the ability to execute.
2.    The opportunity: One needs a competitive advantage that can be defended. The focus should be on customers. Who is the customer? How does the customer make decisions?
3.    The competition: The plan must identify current competitors and their strengths and weaknesses, predict how they will respond to the new venture, indicate how the new venture will respond to the competitors' responses, identify future potential competitors, and consider how to collaborate with or face off against actual or potential competitors.
4.    The context: The environment should be favorable from regulatory and economic perspectives. Such factors as tax policies, rules about raising capital, interest rates, inflation, and exchange rates will affect the viability of the new venture. The context can make it easier or harder to get backing. Importantly, the plan should make clear that one knows that the context inevitably will change, forecast how the changes will affect the business, and describe how one will deal with the changes.
5.    Risk and reward: The risk must be understood and addressed as fully as possible. The future is uncertain, and the elements described in the plan will change. Although one cannot predict the future, one must contemplate head-on the possibilities of key people resigning, interest rates changing, a key customer leaving, or a powerful competitor responding ferociously. Then describe what one will do to prevent, avoid, or cope with such possibilities. One should also speak to the end of the process: how to get money out of the business eventually. Will one go public? Will one sell or liquidate? What are the various possibilities for investors to realize their ultimate gains?