Notes 551
- “Full material disclosure” is a legal concept. It
means that people who rely on the document
for information regarding the business’s
prospects are entitled to the full facts as they
are known to the entrepreneur, or as they
should be known to a reasonable person.
- C. Bamford, T. Dean, and P. McDougall,
“Initial Strategies and New Venture Growth:
An Examination of the Effectiveness of Broad
Versus Narrow Breadth Strategies.” Frontiers
of Entrepreneurship Research, 1997 edition,
Babson College, Arthur M. Blank Center for
Entrepreneurship, Wellesley, MA.
Retrieved from the Web, http://
http://www.babson.edu/entrep/fer/papers97/bam-
ford/bam.htm; G. Hills and R. Schrader,
“Successful Entrepreneurial Insights into
Opportunity Recognition.” In Frontiers of
Entrepreneurial Research. Retrieved from the
Web 1998, http://www.babson.edu/
entrep/fer.
- J. Bailey, “Successful Start-Ups and Other
Problems,” New York Times, February 21,
- Retrieved from the Web February 25,
- Bailey, 2006.
- C. Schwenk, and C. Shrader, “The Effects of
Formal Strategic Planning on Financial Per-
formance in Small Firms: A Meta-Analysis,”
Entrepreneurship: Theory and Practice 17,
1993: 53–64. A meta-analysis is a statistical
analysis of a group of other research
reports—a study of studies. Another recent
study showed that for young firms, planning
that involves financial projections is positive-
ly related to both profits and financial
strength. G. Hills, G. Lumpkin, and R.
Schrader, “Does Formal Planning Enhance
the Performance of New Ventures?” In
Frontiers of Entrepreneurial Research, 1998.
Retrieved from the Web, http://www.bab-
son.edu/entrep/fer.
- K. Vesper, New Venture Mechanics (Upper
Saddle River, NJ: Prentice Hall, 1993): 330.
- D. Shepard, “New Venture Entry Strategy:
An Analysis of Venture Capital Decision
Making,” Frontiers of Entrepreneurial Re-
search, 1997. Retrieved from the Web
http://www.babson.edu/entrep/fer.
- W. Sahlman, “How to Write a Great Business
Plan,” Harvard Business Review,July/August
1997: 98-108.
- For a book-length treatment of the essentials
of the business plan, see D. Gumpert and S.
Rich, Business Plans That Win $$$. (New
York: Harper and Row, 1987); and D.
Gladstone, Venture Capital Handbook(Upper
Saddle River, NJ: Prentice Hall, 1988). For a
detailed outline in article form, see W. K.
Schilit, “How to Write a Winning Business
Plan,” Business Horizons(July–August, 1987):
13–22.
- See chapter 10 of Vesper, 1993.
- Vesper, 1993.
- The summary outline presented here is adapt-
ed from Gladstone, 1988: 26–27.
- When talking about an accounting concept
like gross margin, remember that the terms
high and low are relative to what is achieved
(and achievable) by other firms in the indus-
try.
- Total quality management is an organizing
system that emphasizes benchmarking (deter-
mining the ideal levels of achievable quality),
teamwork and participation, and the dedica-
tion of the company to continuous and cease-
less improvement of product and service
quality. It is embodied in the work of W.
Edwards Deming, the American productivity
expert who introduced the system to
Japanese industry after World War II. See
chapter 4.
- Some venture capitalists believe that the deal
structure is their field of expertise and that the
business plan should not contain a specific
structure because venture capitalists who are
interested in the proposal will offer the deal
they want. On the other hand, it can be
argued that the entrepreneur is the one with
something to sell (equity in the new venture)
and has the obligation to set the initial price.
- The term unit is used because sometimes
shares are combined with various other
rights, such as warrants or options.
25.Dilutionrefers to the phenomenon that oc-
curs immediately after the financing. The
new investor’s shares are diluted after the
offering when the new investor has paid
more than the average price paid by the
founders. This is the usual case. Dilution will
be covered in chapter 8.
- Adapted from Schilit, 1987: 13–22.
- See chapter 4 of Gladstone, 1988
- Rich and Gumpert, 1987.
- Vesper, 1993.
- Excerpted from E. Roberts, “Business Plan-
ning in the Start-up High-Tech Enterprise.”
In R. Hornaday (ed.), Frontiers of Entre-
