176 ENTREPRENEURSHIP
applicable.” This alerts the reader that nothing is missing, and that that topic is not
essential to the plan.- Analysis: The plan needs to go beyond descriptions and use the salient and inform-
ative tools of analysis. Resource, industry, competitor and product analyses are typ-
ical. Financial projections should include models analyzing percentages, returns, and
comparisons with established businesses and industry benchmarks. - Reasonableness: Assumptions will be questioned by readers. Reasonable assump-
tions can be compared with benchmarks and facts. They lie within established
ranges and experiences. Reasonableness, however is ultmately in the eye of the
beholder, and no one would have reasonably forecast the success of companies like
Google or Youtube. Knowing the audience helps a company determine how to
frame its assumptions. - Writing and presentation: The document needs to be well written, organized, and
presented. This is covered in the sections below.
Specific Criteria
Four specific criteria frequently appear in critiques of business plans. These concern the
management, the resources, the projections and returns, and the exit or harvest of the
venture.Management. Repeatedly, entrepreneurs and the top management teams are asked,
“Who are you?” The reader must find a way to assess the entrepreneur’s honesty. The
business plan has been read and analyzed, but no written document can answer ques-
tions about the character and integrity of the entrepreneur. His or her background will
be researched and any inconsistencies must be dealt with. Everyone has inconsistencies
of some sort. Even presidential candidates who have lived most of their lives in the pub-
lic spotlight must deal with this issue.
If there is any doubt about the character of the entrepreneur, the financing will fall
through. Entrepreneurs must present their professional histories, answer questions
about their motivation, and discuss what they believe they can achieve.
Some entrepreneurs have been preparing for the new venture all their lives, and their
previous careers are perfect matches for their intended new businesses. Student entrepre-
neurs sometimes have the chance to practice defending their management teams and
other business plan issues before seasoned entrepreneurs.Resources. Investors continually review proposals for financing, and one way to spot a
business with high potential is by carefully scrutinizing the resource base of the firm.
What rare, valuable, hard to copy, and nonsubstitutable resources does the firm have, can
it control, or will it produce? Uniqueness is crucial. Also, the firm will need to demon-
strate how it can keep the profits and rents generated by its resources. The entrepreneur
should be prepared for dozens of “what if ” questions describing scenarios in which the
resource-based strategy of the firm is attacked or undermined.Projections and Returns. The firm’s top management team will be asked to justify the
assumptions underlying the sales forecasts, cost estimates, administrative costs, and net